World cereal production to remain elevated in 2016: FAO

This, due to a recovery in output in China and India

Despite an adverse climatic condition in parts of Africa and the European Union, world cereal production is estimated to have been at almost the previous year's level in 2016, due to a recovery in output in China and India.

A study by the Food and Agricultural Organisation (FAO) of the United Nations estimates world production at 2,521 million tonnes, a marginal 0.2 per cent or four mt less from a year before, and third highest ever.

Large inventory levels and relatively sluggish demand mean market conditions for staple foodgrain appear stable for at least another season. This would put pressure on grain prices across the world, especially from large exporting countries, including India.

“Most of the decline stems from expectation of lower world wheat production, revised downward by almost 10 mt since last month to 712.7 mt. At this level, it would be 2.8 per cent or 20 mt less than in 2015. The year-on-year decrease is mainly the result of expected declines in the Russian Federation and Ukraine, where plantings were trimmed because of dry weather. Production is also forecast lower in drought-stricken Morocco and in the European Union, where yields are set to decline to near-average levels from last year’s highs. Offsetting part of these declines, China is anticipated to harvest a slightly larger crop in 2016, sustained by higher yields, while India might see output recover from last year’s drought-reduced level, despite recent negative revisions from earlier expectations,” said the report.

In 2015-16 (July–June), FAO estimates India’s cereal production at 228.4 mt, about seven per cent less from the 244.4 mt the previous year. The estimate reflects deficient monsoon rain which damaged crop last year. FAO said preliminary forecasts point to a recovery in wheat production in India from the weather-reduced output in 2015, mainly resting on a return to average yields.

Low import demand put downward pressure on prices in the Americas, with export quotations decreasing in the US but also in Argentina, Uruguay and Brazil. Consequently, the FAO Food Price Index rose one per cent in March from February, as soaring sugar prices and continued increase in palm oil quotations more than offset plunging dairy product prices. The Index averaged 151 in March, highest level in 2016 but still 12 per cent below its level of a year before.

The small decline in 2016-17 world cereal production portended by FAO would largely result from lower worldwide wheat output, as explained earlier.

Global output of coarse grain is projected at 1,313 mt, up about 11 mt from 2015, with expected increases in maize production more than offsetting declines for barley and sorghum. Maize output is seen growing by 1.1 per cent to 1,014 mt, driven by recovering yields in the EU and expanding plantings in the US. It is expected to fall in Southern Africa and Brazil, due to drought and adverse growing conditions associated with the El Niño weather condition.

World rice production at 495 mt is predicted to recover, with a return to normal weather conditions in northern hemispheric Asia, where erratic rain affected planting for the past two seasons.

“International trade in cereals in 2016-17, however, is poised to decline for a consecutive season, by 1.4 per cent to 365 mt, due to ample stockpiles and modest demand growth in many importing countries,” FAO said.

Global cereal utilisation in 2016-17 is foreseen to grow only modestly, rising one per cent to 2,547 mt, according to very preliminary estimates.

As utilisation is anticipated to exceed production, cereal reserves would need to be drawn down. FAO's first forecast for world cereal stocks at the close of season in 2017 points to a likely 3.9 per cent annual decline to 611 mt.