Cereals trade may dip on low imports

The international trade in cereals is anticipated to decline by about 2.6 per cent in 2007-08 partly due to lower wheat imports by India, the European Union (EU) and Brazil. The trade in rice may also contract marginally.

This has been indicated by the United Nations Food and Agriculture Organisation (FAO) in its latest report on crop prospects and food situation. It projects the total international cereal trade in 2007-08 at around 242 million tonnes, including around 106 million tonnes wheat, 30 million tonnes rice and 106 million tonnes of coarse cereals.

"Early indications for world trade in wheat in 2007-08 (July to June) point to a sharp decline of nearly 3.5 million tonnes to 106 million tonnes. Overall, smaller wheat purchases by Brazil, the EU and India from the international markets would more than offset increased imports expected by China, Bangladesh, Morocco and South Africa," the report points out.

It projects India's wheat imports to drop to around 2 million tonnes in 2007-08, about 4.5 million tonnes lower than in the previous season. This is attributed to increase in production and higher domestic procurement by the government following 30 per cent hike in purchase price.

In contrast, shortfall in wheat output in Bangladesh and Morocco is expected to lead to much larger imports by these countries. In Bangladesh, the import duty of 5 per cent has already been waived. In Morocco, too, import tariffs for soft wheat have been lowered to stem rise in domestic wheat prices following decline in output.

The FAO views the anticipated reduction in global wheat imports as a welcome development, given the likelihood of overall export availabilities in major exporting countries to again remain tight in 2007-08. Argentina and Canada, in particular, are expected to export less wheat in 2007-08 due to a likely decline in their supplies. Argentina, another major wheat exporter, has suspended wheat exports since March to contain domestic price rise.

However, slightly higher exports are forecast from the EU and the US besides a number of other non-traditional exporters, such as the Russian Federation, Ukraine and also Pakistan, where the government has lifted ban on exports in December last to allow the sale of 8 lakh tonnes of wheat to other countries. International rice trade may fall slightly in 2007-08, after rising in 2006-07, by 1.2 million tonnes to 29.8 million tonnes, close to the previous year's record. This level may not be sustained in 2007-08.

The increase in rice trade in 2006-07 reflects higher import needs of countries such as Bangladesh, Indonesia, Nepal, the Philippines and Vietnam. African countries, on the other hand, have cut down their imports due to good domestic production.

Among the rice exporters, only Thailand and Cambodia appear to be in a position to respond to the growing import demand by stepping up supplies. "Attractive world prices may also foster a small increase of exports from India and Egypt, but most of the other major suppliers, including Australia, Pakistan, the US and Vietnam are now foreseen to cut their exports," the FAO report says.

For coarse grains, the demand-supply scenario is uncertain at this stage as key harvests in the northern hemisphere are still months away. Based on the current indications, the FAO reckons the world trade in coarse grains to reach 106.5 million tonnes in 2007-08, down nearly 3 million tonnes from 2006-07 marketing season.