The global cereal market was characterised by soaring prices and volatility during much of the 2007-08. Some relief may be in sight for the new 2008-09. But given the supply and demand imbalances globally, cereal markets are unlikely to regain their stability any time soon.
Among the major cereals, the tight wheat supply condition is likely to improve the most in 2008, given the prospects of more bountiful harvests. This should pave the way for a gradual easing of export restrictions, not only on wheat but also on other cereals.
With harvest already underway in the country, this year's crop yield could turn out to be a record 77 million tonnes.
The stockpile is also likely to increase. The Food Corporation of India (FCI), the government's foodgrains procurement agency, procured over 17 million tonnes of wheat by early May, up almost 9 million tonnes from the same period last year.
The increase in the minimum procurement price and anticipation of a bumper crop this year are boosting government's wheat purchases. The high wheat prices have encouraged many countries to reconsider their policies with regard to stocks.
However, rice markets are undergoing an exceptionally difficult period, despite the relatively abundant global supplies.
India imposed a ban on exports of non-basmati rice and levied customs duty of $200 a tonne on exports. This may impact the global price sentiment as India is one of the largest players in this space.
The outlook for coarse grains is not as favourable. The maize situation is of concern as this year's output is unlikely to exceed last year's record and the demand for ethanol does not show any signs of abating.
The latest estimates forecast the world cereal output to set yet another record at 2192 million tonnes this year, a rise of 3.8 per cent from last year. But the rising demand from under-developed and developing countries is expected to compensate the additional output.
The world wheat output stands at a record 658 million tonnes this year, representing a significant 8.7 per cent increase from 2007. The bulk of the increase is expected to stem from the major exporting countries.
The outlook for world paddy production in 2008 is also buoyant, with FAO making a preliminary forecast of 667 million tonnes (445 million tonnes, milled rice equivalent), corresponding to a growth of 2 per cent. The global production for 2007 is estimated at a record 652 million tonnes (435 million tonnes, milled rice equivalent).
Positive return expectations are seen to drive much of the increase, which could even be more pronounced if recent appeals and incentives to grow rice translate into a larger-than-anticipated expansion of plantings.
The consumption of edible oil should continue to rise in India and other countries in Asia, albeit at a reduced rate, as consumers struggle with the rising domestic prices. Palm oil should account for about two-thirds of this season's global consumption expansion, and its share in total oil utilization is expected to rise to 26 per cent.
