FAO: significant increase in world cereal production forecast for 2008, but prices remain high

Early prospects point to the possibility of a significant increase in world cereal production in 2008, but international prices of most cereals remain at record high levels and some are still on the increase, the UN's Food and Agriculture Organisation (FAO) said in a new outlook. Farmers are responding to higher prices by planting more. High prices are caused by high oil prices, adverse weather last year, first-generation biofuels and low stocks. To monitor the global food market, the FAO also launched a new web portal: World Food Situation.

The FAO forecasts a significant increase in production, which follows expansion of winter grain plantings and good weather among major producers in Europe and in the United States, coupled with a generally satisfactory outlook elsewhere, according to FAO’s latest Crop Prospects and Food Situation report.

With dwindling stocks, continuing strong demand for cereals is keeping upward pressure on international prices, despite a record world harvest last season, the report said. International wheat prices in January 2008 were 83 percent up from a year earlier (graph, click to enlarge).

Although prices are high, total world trade in cereals is expected to peak in 2007/08, driven in great part by a sharp rise in demand for coarse grains, especially for feed use in the European Union, according the report.

Imports down, food bill up for poorest countries
Cereal imports for all Low-Income Food-Deficit countries in 2007/08 are forecast to decline by about 2 percent in volume, but as a result of soaring international cereal prices and freight rates, their cereal import bill is projected to rise by 35 percent for the second consecutive year. An even higher increase is anticipated for Africa. Prices of basic foods have also increased in many countries worldwide, affecting the vulnerable populations most, the report said.

In order to limit the impact of rising cereal prices on domestic food consumption, governments from both cereal importing and exporting countries have taken a range of policy measures, including lowering import tariffs, raising food subsidies, and banning or imposing duties on basic food exports:
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New portal
“High food prices and market uncertainties have become major global concerns, and wide access to up-to-date information and analysis is becoming critical,” said Henri Josserand of FAO’s Global Information and Early Warning system. To address this need for information and facilitate analysis on current developments in world food markets, FAO also announced the launch of a new web portal bringing together relevant FAO studies and data on the world food situation.

2008 cereal prospects
In North Africa, early prospects for the 2008 winter cereal crops are mixed, but in Southern Africa the overall outlook is satisfactory, despite severe localized floods. In several countries of Eastern Africa, another bumper cereal crop was gathered in 2007, but poor secondary crops are expected in Kenya and Somalia, according to the report.

In Asia, early indications point to a 2008 aggregate wheat crop around last year’s record level.

Overall prospects for the 2008 maize crop are satisfactory in South America, although the outlook remains uncertain in Argentina.

Flooding in southern Africa and South America
Heavy rains have caused severe flooding in Mozambique, Zimbabwe, Zambia and Malawi. Farmers in affected areas are in urgent need of seeds and other inputs for replanting during what is left of the main cropping season, which runs from October to April, and to prepare for the next planting season.

FAO and its humanitarian partners yesterday launched an appeal for $87 million for emergency assistance to flood-affected populations in the four countries. Of this, over $9 million will support FAO’s agricultural relief activities aimed at improving food security in flood-hit regions.

In Bolivia, severe floods have adversely affected over 42 000 families, who are in need of emergency humanitarian assistance, with numbers on the increase. Large cropped areas have been partially or totally lost.

Extreme cold weather in central Asia
Exceptionally low temperatures in several central Asian countries, in particular China, Mongolia, Afghanistan and Tajikistan, have caused human casualties and resulted in crop and livestock losses.

Worldwide, 36 countries are currently facing food crises, according to the report. Civil strife, war, political instability, refugees, internally displaced people, and adverse weather are the main causes of these crises (table, click to enlarge).

References:
FAO - Global Information and Early Warning System on Food and Agriculture: "Crop Prospects and Food Situation", N° 1, February 2008.

World Food Situation portal.