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World grain stocks to drop 18%, but 2004-05 output to rise
Global cereal stocks are expected to fall sharply again by the end of the 2003-2004 season, with closing inventories down by 89 million tonnes or 18% from their opening levels, according to the latest UN Food and Agriculture Organization's "Food Outlook" report.

The anticipated sharp decline in cereal stocks from the previous season would be mainly based on China, FAO said. Substantial reductions are also anticipated in India, Russia, Ukraine and the European Union, mostly driven by the reductions in their 2003 cereal production, the report says.

However, the report says world cereal production in 2004 is forecast to increase to 2.130 billion tonnes, some 2% up on last year and 3% above the average of the past five years. If realized, the increase could help alleviate the tight global supply situation in the new 2004-2005 season.

The bulk of the cereals increase is expected in wheat, although rice output is also seen to rise significantly. By contrast, coarse grains production could decrease marginally.

FAO stressed that this first forecast, especially for rice and coarse grains, was tentative and assumed normal weather conditions.

According to the report, "The increase in global cereal output forecast for 2004 would come as a very welcome development for global food supply. The continued tightening of global cereal supplies for four successive years since 1999-2000 has brought international cereal prices under significant upward pressure in the past months."

Export prices for wheat, maize and rice all have registered strong gains, reflecting tight market conditions, the report noted. Because early prospects for wheat crops are favorable, some easing of wheat prices could be anticipated as the harvest approaches in the Northern Hemisphere in the coming months, FAO said.

But the report predicts that export prices for coarse grains and rice are unlikely to recede any time soon based on current supply and demand prospects.

World cereal utilization in 2003-2004 is forecast at 1.971 billion tonnes, up 1% from the previous year, but still slightly below the 10-year trend. In spite of a significant increase in international cereal prices and major animal disease outbreaks in the second half of the season, global cereal use is expected to rise above the previous season because of strong demand for feed and industrial use, especially in the United States.

The report anticipates an increase in food aid costs per unit in view of generally tighter world cereal supplies, strong international prices and soaring ocean freight rates for 2003-2004. It notes that total food aid shipments during this period could decline slightly.

The report adds that although world imports of cereals are forecast to decline by around 10 million tonnes in 2003-2004, higher prices and freight rates and smaller food aid shipments are expected to push up the overall cost of cereal imports by 2% from the previous year.
MGR Archive 8.4.2004
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Russia Rapan $ 700
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EU Prices Baldo €660
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