World foodgrain output to rise 4.8 per cent in FY08

World foodgrain production is likely to grow by 4.8 per cent in 2007-08 to touch a new high of 2,095 million tonnes, showing a sharp recovery after a significant downturn in two consecutive previous years. But with carry-over stocks being at their lowest level since the early 1980s, even the improved production will be barely enough to meet the anticipated demand for food, feed and bio-fuel. As a result, the export supplies are likely to remain tight and the international prices of most cereals, barring possibly wheat, may remain high in 2007-08.

This has been indicated in the latest report released by the UN Food and Agriculture Organisation (FAO) in Rome yesterday. The report reckons the global cereal trade to drop by 2.6 per cent to 242 million tonnes in 2007-08 on account of anticipated lower wheat and coarse grains exports. World trade in rice may decline only marginally.

The global trade in wheat is forecast to decline by about 3.5 million tonnes to 106 million tonnes in 2007-08. "Overall, smaller wheat purchases by Brazil, the European Union and India from international markets would more than offset increased imports expected by China, Bangladesh, Morocco and South Africa", the report said.

Indian wheat imports are anticipated to decline substantially due to higher production and increased local procurement by the government following 30 per cent hike in the procurement price. On the prices front, the FAO analysis points to a general firm trend in 2007-08 in all cereals, except wheat, which may be subjected to some downwards pressure in the coming months due to improved supply prospects. The international prices of all cereals increased markedly in 2006-07 due to decline in the output and rise in utilisation.

Global prices of wheat also rose in 2006-07 due to lower harvests in several major wheat producing countries. Besides, imposition of export restrictions in several exporting countries and the steadily surging maize prices also contributed to firming up of international wheat prices last year.

But in 2007-08, factors such as improved supply prospects, recent drop in maize values and nearing of harvesting period in major wheat growing countries are likely to put downward pressure on wheat prices in the next few months.

"However, the outlook could change significantly, should planting conditions prove unfavourable in Australia, the only major exporter yet to plant the bulk of its 2007 crop, and where the outcome will depend wholly on good rains in May and June", the FAO report cautions.

The report anticipates the output of wheat to rise by 4 per cent to 621 million tonnes and that of rice only marginally to touch 422 million tonnes, matching the 2005 level. The coarse cereal output is projected to rise to an all-time high of 1,051 million tonnes, up 7 per cent from the previous year's record.

However, cereal utilisation is also reckoned to swell by 1.3 per cent to touch a high of 2,097 million tonnes, resulting in further tightening of the demand-supply scenario.

Much of the increase in consumption is expected in coarse grains which are now increasingly being diverted to biofuel production.

Consequently, the global end-of-season cereal stocks by the close of 2007-08 cropping year are forecast to remain virtually unchanged from their low opening level of just 401 million tonnes.

The total wheat inventories by the close of 2007-08 year are predicted to drop by 6 million tonnes to 142 million tonnes.

Significantly, the wheat stocks held by major exporters are estimated to be only around 40.5 million tonnes, only marginally higher than their low opening level.