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global information and early warning system on food and agricultureGIEWS

November 2012

Food OutlookGlobal Market Analysis

TABLE OF CONTENTS

FAO Commodity Price Indices(October 2011 - October 2012)

120

190

260

330

400

2011 2012

2002-2004=100

Dairy

Oils & Fats

Cereals

Sugar

Meat

OSAJJMAMFJDNO

Market summaries 1-10

Market assessments 11-69Wheat 11Coarse grains 15Rice 24Cassava 34Oilseeds, oils and meals 39Sugar 46Meat and meat products 49

Milk and milk products 57Fish and shery products 64

Major policy developmentsGrains 22-23Rice 31-33Meat 54-56Dairy 62-63

Special features 70-75AMIS: Celebrating its rst birthday 70Stocks-to-use ratios and prices as indicators

of vulnerability in global cereal markets 71

Statistical tables 76-111

Market indicators 112-129Investor participation in the CME

futures and options markets 112Evaluating recent trends in futures

markets 115Ocean freight rates 119Food import bills 121The FAO price indices 122Other market indicators 125

Food prices have averaged 8 percent lower during the rst ten months of 2012 compared tothe same period last year. Considerably lower international prices and freights, together withless cereal purchases are predicted to reduce global expenditures on imported foodstuffs. The2012 forecast for global food import bills is set at USD 1.14 trillion, 10 percent lower than therecord which was set last year.

CEREALSGlobal cereal supply and demand balance is forecast to tighten considerably in 2012/13, duemainly to declines in wheat and maize production. World cereal production is forecast to fall by 2.7percent from previous years record crop, leading to a 25 million tonne contraction in world stocks.

WHEAT

A tightening in world supply and demand balance is keeping wheat prices above the 2011levels. Latest information conrms a smaller wheat crop in 2012 and, with projected utilizationexceeding production, stocks are expected to be drawn down sharply, especially majorexporters stocks. World trade in 2012/13 is forecast to fall below the previous seasons peak.

COARSE GRAINS

World coarse grains supply and demand balance in 2012/13 is extremely tight with FAOs latestforecast for production in 2012 pointing to a 2.5 percent decline from the 2011 record andstocks falling to historic lows, a factor which continues to underpin international prices.

RICE

World rice production in 2012 may surpass last seasons record, supported by favourablegrowing conditions. Steadfast import demand together with very ample export availabilitiesare sustaining an expansion of trade in 2012, with a further, albeit small, increase foreseen in2013.

CASSAVA

World cassava output is expected to increase vigorously in 2012 and may continue to do soin 2013, sustained by growth in Africa, where cassava remains a strategic crop for both foodsecurity and poverty alleviation. Prospects are more uncertain in Asia, where the sector expan-sion next year will largely depend the competiveness of cassava in the production of ethanolrelative to other feedstocks. In 2012, world trade in cassava products is set to undergo a markedincrease, entirely sustained by industrial demand.

OILSEEDS

The 2012/13 oilcrop season is opening under the legacy of a tight 2011/12 balance and adisappointing soybean crop in the United States. Current supply and demand forecasts for thenew season provide limited scope for a relaxation in prices at least until prospects for recordSouth American soy crops are conrmed.

SUGAR

World sugar production is forecast to reach a new record, more than sufcient to coverprojected global sugar consumption. Large export availabilities in key supplying countries,along with a rebuilding of sugar inventories in major importing countries, are expected toboost trade in 2012/13.

MEAT

Global meat markets are challenged by high feed prices, stagnating consumption, and fallingprotability, with growth in total output slowing down to 2 percent. With international pricesclose to record highs, growth in world trade is also decelerating.

MILK

International prices of dairy products are rising in the face of limited export supplies. Milk

production continues to grow in many countries, especially in Asia, Oceania and South America. FISH

Weakening import demand caused international sh prices to drop in the rst half of 2012. Thedip mainly affected farmed species, while quotations for wild sh, such as tuna, fared better.

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AcknowledgementsThe Food Outlook report is a product of the FAO Trade and Markets Division. It is writtenby a team of economists, whose names and email contacts appear under their respectivemarket summary contributions. The report beneted from research support by manystaff, namely, David Bedford, Claudio Cerquiglini, Julie Claro, Berardina Forzinetti, GraceKarumathy, David Mancini, Patrizia Mascian, Marco Milo, Fiorella Picchioni, TuranRahimzadeh, Barbara Senfter and Stefania Vannuccini.

Special thanks go to Rita Ashton for compiling the report and overall administrativesupport, as well as to Claudio Cerquiglini, for preparing the charts and statistical tables.Additionally, the team is grateful to Nancy Hart for her editorial assistance.

For enquiries or further information contact:

Abdolreza Abbassian

Trade and market Division

Food and Agriculture Organization of the United Nations

Via delle Terme di Caracalla

00153 Rome - Italy

Telephone: 0039-06-5705-3264

Facsimile: 0039-06-5705-4495E-mail: [email protected] or [email protected]

Disclaimer

The designations employed and the presentation of material in this report do

not imply the expression of any opinion whatsoever on the part of the Food and

Agriculture Organization of the United Nations concerning the legal status of any

country, territory, city or area or of its authorities, or concerning the delimitation of

its frontiers or boundaries.

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Market summaries

Novem ber 2012 1

Cerea l ma rket summ a ry

Cereal production, utilization and stocks

200

400

600

800

1800

2000

2200

2400

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Million tonnes Million tonnes

fcast

Stocks (right axis)

Production (left axis) Utilization (left axis)Contact persons:[email protected]@fao.org

World cereal market at a glance 1

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %

WORLD BALANCE

Production 2 258.8 2 348.0 2 284.0 -2.7

Trade 2 285.0 315.2 293.5 -6.9

Total utilization 2 278.8 2 327.0 2 313.9 -0.6

Food 1 058.1 1 071.2 1 082.3 1.0Feed 765.1 792.9 787.7 -0.7

Other uses 455.6 463.0 443.9 -4.1Ending stocks 505.8 522.6 497.4 -4.8

SUPPLY AND DEMAND INDICATORS

Per caput food consumption:

World (kg/year) 153.1 153.2 152.9 -0.2LIFDC3 (kg/year) 159.3 159.5 159.0 -0.3

World stock-to-use ratio (%) 21.7 22.6 20.6

Major exporters stock-to-disappearance ratio (%) 17.3 18.2 16.6

FAO CEREAL PRICE INDEX(2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %183 247 239 -5.2

1 Rice in milled equivalent.2 Trade refers to exports based on a July/June marketing season for wheatand coarse grains and on a January/December marketing season for rice.3 Low-Income Food-Decit countries.

This seasons world cereal supply and demand balance

is proving much tighter than in 2011/12 with globalproduction falling short of the projected demandand cereal stocks declining sharply. However, thetightening is not uniform across all cereals. While thisseasons maize and wheat supplies are compromised bydisappointing harvests, supplies of rice are ample, whichis prompting a further build-up of inventories.

Global cereal production in 2012 is expected to fallby 2.7 percent from previous years record crop, butalmost match the second best performance of 2008.The overall decrease reects a 5.5 percent reductionin wheat, and a 2.5 percent decline in coarse grains,while the global rice crop is seen to grow by 0.7 percentabove last season record. Severe droughts this year inthe United States and across a large part of Europeand into central Asia have been the main cause of thereduced wheat and coarse grains crops.

World cereal utilization in 2012/13 is projectedto decline slightly from the previous season, but stillanticipated to exceed production. Wheat utilization isset to decline by 1.4 percent, mostly on lower feed useafter the previous seasons record. Total utilization ofcoarse grains is forecast to drop nearly 1 percent, largely

because of reduced industrial maize use for ethanolproduction in the United States. By contrast, world riceutilization could increase by 1.5 percent, helping cerealconsumption to remain stable.

Based on the latest forecasts for global productionand utilization, world cereal stocks at the close of cropseasons ending in 2013 could fall to 497 million tonnes,4.8 percent (25 million tonnes) less than their openinglevel. The decline would also reduce the world cerealstock-to-use ratio from 22.6 percent in 2012 to 20.6percent in 2013, which compares with the low of 19.2percent registered in 2007/08.

This seasons shrinking supplies have tended tolift international prices. In October, the FAO CerealPrice Index averaged 259 points, down slightly fromSeptember, but 12.0 percent higher than in Octoberlast year. Reduced export supplies and more expensivegrains are forecast to result in a 6.9 percent contractionin cereal trade in 2012/13.

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Foo d Outlook

Novem ber 20122

Whea t m a rket summ a ry

FAOs latest forecast for global wheat production in

2012 points to a 5.5 percent decline from last yearsrecord level to 661 million tonnes. This forecast, which isconsiderably below expectations earlier in the year, largelyreects the impact of severe drought in eastern Europeand central Asia, but also the reduced prospects in thesouthern hemisphere. Biggest declines are expected inthe CIS countries, where production by the three largestwheat producers, Kazakhstan, the Russian Federation andUkraine, is forecast to fall by 36 million tonnes.

Global wheat utilization in 2012/13 is projected todrop slightly to 687 million tonnes. At this level, totalutilization would exceed production for the secondconsecutive season. Feed use of wheat, which peakedin 2011/12, is likely to decline but still remain aboveaverage, due to the very tight maize supply. However,world wheat trade is likely to contract sharply by 8.2percent from the record volume registered in 2011/12 to only 135 million tonnes. This fall reects largersupplies in several wheat importing countries but alsosome reduction in feed wheat import demand andtighter exportable supplies.

Against this backdrop, world wheat stocks could becut by 11.9 percent from their opening level, to 167

million tonnes by the close of the crop seasons endingin 2013. At this level, the world wheat stock-to-useratio could drop to 24.0 percent, from 27.4 percentin 2011/12, but still remain above the 22 percentlow registered in 2007/08. The ratio of major wheatexporters closing stocks to their total disappearance dened as domestic utilization plus exports isalso expected to fall sharply, to 13.9 percent from18.2 percent in the previous season. This conrms asignicant tightening of the global wheat supply-and-demand balance in 2012/13.

FAOs early outlook points to a rebound in worldwheat production in 2013. Current prices are higherthan a year ago and, given demand prospects, wheatremains an attractive option for producers. Thus,weather permitting, plantings in most major producingcountries are expected at least to match those oflast year or even to increase, especially in those areasaffected by drought in 2012. International wheat pricesare unlikely to retreat to lower levels without a strongrebound in world production in 2013.

Wheat production, utilization and stocks

100

150

200

250

300

500

550

600

650

700

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fcast

Stocks (right axis)


World wheat market at a glance

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %

WORLD BALANCE

Production 655.3 699.4 661.2 -5.5

Trade 1 125.3 147.0 135.0 -8.2

Total utilization 663.0 697.6 687.5 -1.4

Food 468.2 473.8 479.1 1.1Feed 120.3 146.3 136.1 -7.0Other uses 74.4 77.6 72.2 -7.0

Ending stocks 192.7 189.2 166.7 -11.9



World (kg/year) 67.7 67.7 67.7 0.0LIFDC (kg/year) 49.8 50.0 50.2 0.4


Major exporters stock-todisappearance ratio 2 (%) 20.1 18.2 13.9

FAO WHEAT PRICE INDEX3

(2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

over

Jan-Oct 2011 Jan-Oct %

169 222 208 -9.2

1 Trade refers to exports based on a common July/June marketing season.2 Major exporters include Argentina, Australia, Canada, EU, Kazakhstan,Russian Fed., Ukraine and the United States.3 Derived from International Grains Council (IGC) wheat index.

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Market summaries

Novem ber 2012 3

Coa rse gra in ma rket summ a ry

The latest forecast for world production of coarse

grains in 2012 stands at about 1 137 million tonnes,sharply down from earlier forecasts and 2.5 percentbelow 2011s record crop. The devastating summerdrought in the United States reversed an otherwisepositive outlook for the 2012/13 marketing season.The reduced US maize crop is largely behind a 3.2percent decline in global maize output in 2012, toaround 856 million tonnes. World barley productionalso fell this year, by 3.4 percent, to 130 milliontonnes, mainly due to a decrease in the CIS countries.One positive outcome has been the expansion insorghum production, which is forecast to increase by9 percent in 2012, to nearly 61 million tonnes, mostlydue to good prospects in Africa, the largest producingregion.

Tight supply and high prices are likely to result ina slightly smaller world utilization of coarse grainsto 1 152 million tonnes in 2012/13, the rst declineafter nearly ten years of undisrupted expansion.The anticipated decrease reects a fall in maize-based ethanol production in the United States, by

as much as 10 percent from the previous year. Feedutilization is expected to contract by almost 1 percent,with declines in the developed countries offsettingincreases in the developing countries, especially inAsia.

In spite of lower projected use, world utilizationwould still exceed this years production, resulting ina drawdown of stocks and a sharp drop in the globalstocks-to-use ratio as well as the major exportersstock-to-disappearance ratio. The tightening of thesupply-and-demand balance has pushed up pricesof major coarse grains to very high levels, which arein part responsible for the forecast of an 8 percentcontraction in world trade in 2012/13, to 121 milliontonnes. International maize prices surged to recordlevels in early September and, while they haveretreated somewhat in recent weeks, the marketremains vulnerable given the run-down stock levels inthe United States, the worlds largest exporter.

Coarse grain production, utilization and stocks

100

150

200

250

300

800

900

1000

1100

1200

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fcast

Stocks (right axis)


World coarse grain market at a glance

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %

WORLD BALANCE

Production 1 135.0 1 165.9 1 136.9 -2.5

Trade 1 123.3 131.0 121.0 -7.6


Food 200.7 201.6 201.7 0.0Feed 633.0 634.6 639.0 0.7

Other uses 322.1 325.2 311.1 -4.3

Ending stocks 169.5 174.0 161.0 -7.5



World (kg/year) 29.1 28.9 28.5 -1.4LIFDC (kg/year) 40.8 40.0 39.3 -1.8



FAO COARSE GRAIN PRICEINDEX (2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

176 277 279 -0.8

1 Trade refers to exports based on a common July/June marketing season.2 Major exporters include Argentina, Australia, Brazil, Canada, EU, RussianFed., Ukraine and the United States.

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Foo d Outlook

Novem ber 20124

Rice ma rket summ a ryThe 2012 rice season is unfolding positively in most

regions, as a revival of the monsoon rains has allayedfears of a repeat of the 2009 drought in India. As aresult, global production is forecast to exceed lastyears record by about 1 percent and reach 486 milliontonnes (milled rice basis), a level more than sufcientto cover world consumption in 2012/13 and enablecountries to increase their end-of-season inventories.

Import demand was particularly strong in 2012,supported by a decline in export prices from thehigh 2011 levels, as large export availabilitiesintensied competition among several of the worldsuppliers. Consequently, international trade in riceis anticipated to grow by 2.5 percent in calendar2012 to a new high of 37.3 million tonnes. Earlyprospects for 2013 are also positive, with tradeforecast even higher, at 37.5 million tonnes. Amongthe major developments driving trade in rice this yearand probably next are the very large size of Chinasimports, contrasting with subdued purchases bytraditional importers, such as Bangladesh, Indonesiaand the Philippines. As regards exports, India isexpected to displace Thailand as the worlds majorrice exporter in 2012.

Global rice utilization in 2012/13 is predicted toincrease by 1.4 percent to 475 million tonnes, ofwhich 402 million tonnes are destined for humanconsumption, with only small amounts diverted tofeed or industrial uses. Per capita food consumptionis expected to reach an estimated average of 56.8 kgper year, up from 56.7 kg in 2011/12.

While international prices were rather subdued inthe rst four months of the year, they resumed anupward trend in May 2012, sustained by the highprice policy implemented by Thailand and, in recentmonths, by pressure from other cereal markets.Thus, although prospects for increasingly abundantrice supplies would call for a retrenchment of ricequotations in 2013, their future direction will be verymuch inuenced by the policies of the major countryplayers, in particular Thailand, and developments inthe wheat and maize markets.

Rice production, utilization and stocks

50

100

150

200

350

400

450

500

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Million tonnes, milled eq. Million tonnes, milled eq.

fcast

Stocks (right axis)

Production (left axis) Utilization (left axis)

Contact persons:

[email protected]@fao.org

World rice market at a glance

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %

WORLD BALANCE

Production 468.5 482.7 485.9 0.7

Trade 1 36.4 37.3 37.5 0.5

Total utilization 460.1 467.9 474.7 1.5

Food 389.1 395.8 401.5 1.4

Ending stocks 143.7 159.3 169.8 6.6



World (kg/year) 56.3 56.6 56.7 0.2LIFDC (kg/year) 68.7 69.4 69.5 0.1



FAO RICE PRICE INDEX(2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

229 251 238 -5.5

1 Calendar year exports (second year shown).2 Major exporters include India, Pakistan, Thailand, the United States andViet Nam.

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Market summaries

Novem ber 2012 5

Cassa va ma rket summ a ry

World cassava output in 2012 is expected to reach

282 million tonnes, an increase of 7 percent fromthe level of 2011, and the fourteenth annual risein succession. The expansion, which has beenparticularly prominent in recent years, is being drivenby increasing industrial applications of cassava in Eastand Southeast Asia, especially for ethanol, and risingdemand for food in the African continent.

World trade in cassava products, entirely sustainedby industrial demand, is set to undergo a markedexpansion by 2012. This is the result of the pricecompetitiveness that cassava has gained over maizethanks, by and large, to policies in Thailand, theworlds leading international supplier of cassavaproducts. International prices of chips and starch havebeen remarkably stable and low in spite of very strongdemand and highly volatile grain markets.

The outlook for 2013 points to a continuedexpansion of production in Africa, where cassavaremains a strategic crop for both food security andpoverty alleviation. In Asia, prospects remain far fromcertain, depending on how the price relation between

maize and cassava evolves and on the competivenessof cassava in the production of ethanol relative toother feedstocks. These outcomes will be heavilyinuenced by Thailands price pledging schemeand in particular, the degree of price discounting insales from ofcial stockpiles. The regions uncertaintyhas been compounded by the recent weakness ofdomestic root prices in major producing countries thatdo not administer domestic price supports. The extentof these price falls cast doubt on the degree of marketincentive for producers to plant cassava for the newseason.

International cassava prices(October 2009 - October 2012)

0

200

400

600

2012201120102009

USD per tonne

Flour/Starch(Super High Grade f.o.b Bangkok)

Chips to China(f.o.b Bangkok)

Contact person:[email protected]

World cassava market at a glance

2010 2011 2012Change: 2012

over 2011 estim. f'cast

million tonnes, fresh root eq. %

WORLD BALANCE

Production 242.0 263.3 281.7 7.0

Trade 21.8 25.3 33.3 31.7



World (kg/year) 17.1 18.6 19.9 7.0Developing (kg/year) 21.5 23.3 25.0 7.0LDC (kg/year) 69.3 72.7 75.0 3.3Sub-Saharan Africa (kg/year) 111.1 123.5 130.9 6.0

Trade share of prod. (%) 9.3 8.3 9.0 8.2

FAO CASSAVA PRICES 1 (USD/tonne) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

Chips to China (f.o.b. Bangkok) 208 263 235 -11.6

Starch (f.o.b. Bangkok) 507 489 435 -13.1Thai domestic root prices 79 80 78 -2.6

1 Source: Thai Tapioca Trade Association.

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Foo d Outlook

Novem ber 20126

Oilseeds market summary

The 2012/13 oilcrop season is opening underthe legacy of a tight 2011/12 balance and with adisappointing soybean crop in the United States.Last seasons tightness mainly resulted from shortglobal soybean supplies which, combined with rmsoy demand, led to a signicant drawdown in worldstocks. With global stock-to-use ratios falling tocritically low levels, international prices embarkedon a new upward trend in 2012. Oilseed and mealquotations, in particular, climbed virtually withoutinterruption until August, setting new records. Onlyoils/fats prices departed from this tendency as thearrival of abundant palm oil supplies on the worldmarket coincided with a weak demand for theproduct.

The 2012/13 season started with very lowopening stocks, but also with disappointing rstharvests, especially in the United States, where thenew soybean crop (the harvest of which is nearingcompletion) was hit by severe drought. The USproduction shortfall is likely to limit global exportavailabilities over the rst half of the current season.Although record-high soy prices are expected to

strongly stimulate plantings in South America (wherethe season is about to start), harvests in the regionare several months away, meaning that favourableweather conditions throughout the growing seasonwill be required for current forecasts of a record cropto materialize.

Overall, the current 2012/13 outlook points toan improvement in the global supply and demandbalance for oilcrop products, in particular oilmeals.Built into this forecast are expectations thatpersistently high prices are going to ration demandfor oilmeals and that growth in the demand foroils/fats could be contained by a lower uptake ofvegetable oils by the biodiesel industry.

Considering that only a partial recovery in globalstock levels and stock-to-use ratios appears possible,international markets are expected to remainvulnerable, leaving limited room for a relaxation inprices, at least until prospects for record soy crops inSouth America are conrmed.

50

100

150

200

250

300

20122011201020092008200720062005

Meals/cakes

Oils/fats

Oilseeds

FAO monthly international price indices foroilseeds, oils/fats and meals/cakes (2002-2004=100)


World oilseed and product market at a glance

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %

TOTAL OILSEEDS

Production 468.0 452.3 474.3 4.9

OILS AND FATS

Production 181.3 181.2 186.7 3.0Supply 208.7 211.8 215.9 1.9

Utilization 177.0 183.9 186.1 1.2Trade 92.4 96.6 98.6 2.1Stock-to-utilization ratio (%) 17.3 15.9 16.0

MEALS AND CAKES

Production 118.4 111.0 119.8 7.9Supply 137.1 131.6 136.3 3.6

Utilization 114.4 116.9 117.7 0.7Trade 69.9 71.7 73.8 2.9Stock-to-utilization ratio (%) 18.0 14.1 15.0

FAO PRICE INDICES (Jan-Dec)(2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

Oilseeds 165 216 223 3.2Meals/cakes 216 218 239 9.6

Oils/fats 182 256 231 -9.8

Note: Refer to table 14 for further explanation regarding denitions andcoverage.

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Market summaries

Novem ber 2012 7

Suga r ma rket summ a ry

According to FAO initial forecasts for 2012/13season, world sugar production is set to increase by3.8 million tonnes, or 2.2 percent, from 2011/12. Forthe third consecutive year, production is anticipatedto surpass consumption, with the surplus expectedto hover around 5.4 million tonnes, contributing toa rebuilding of sugar stocks to relatively comfortablelevels. The growth in sugar output is attributedto an expansion in area and input use, sustainedby remunerative international sugar prices and areturn to more normal weather patterns. Fallingsugar outputs in India, the EU and Thailand areanticipated to be offset mainly by expansions inBrazil, the worlds largest producer, and Australia.World sugar consumption is set to grow by about2 percent in 2012/13, reecting increases in severaldeveloping countries that beneted from incomegains and falling domestic sugar prices. Largeexport availabilities in key supplying countries willbe balanced, to some extent, by a rebounding ofpurchases by traditional importers aiming to beef up

stocks as a protection against future price instability,which could lessen the possibility of price dips in thecoming months.

International Sugar Agreement (ISA)

10

15

20

25

30

20092010

2012

2011

US cents per lb.

DNOSAJJMAMFJ


World sugar market at a glance

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %

WORLD BALANCE

Production 165.6 173.5 177.3 2.2

Trade 54.8 52.1 52.9 1.6

Total utilization 160.9 168.6 171.9 1.9

Ending stocks 56.3 59.3 62.2 4.8SUPPLY AND DEMAND INDICATORS


World (kg/year) 23.4 24.1 24.3 0.8

LIFDC (kg/year) 15.4 16.4 16.6 1.3


ISA DAILY PRICE AVERAGE(US cents/lb.) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

21.3 26.0 22.0 -17.0

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Foo d Outlook

Novem ber 20128

Mea t a nd mea t pro ducts m a rket summa ry

Struggling with high feed prices and stagnatingconsumption, global meat production in 2012 isforecast to grow by less than 2 percent to 302 milliontonnes. As falling industry protability has translatedinto modest output gains in the developed countries,most of the world expansion is likely to take place inthe developing countries, which now account for 60percent of world output. Virtually all of the sectorgrowth in 2012 is forecast to stem from the feed-dependent poultry and pigmeat sectors, as gains inboth bovine and sheep meat outputs are anticipatedto be modest.

Concerns about the protability of the meatsector have been compounded by a weakening ofthe growth of export markets, with trade expansionanticipated to slow down to 2 percent from 8 percentin 2011. Global meat exports are expected to edgeup by about 600 000 tonnes to 29.4 million tonnes in2012, mainly sustained by increased poultry and pigmeat ows and with much of the market expansionlikely to be captured by developing countries, in

particular Brazil and India.Escalating feed prices and slowing meat

production growth have pushed up internationalmeat prices in late 2012, to levels approaching thehighs attained in 2011. Accordingly, the FAO meatprice index, which has jumped by 5 percent sinceJuly 2012, averaged 174 points between Januaryand October, which compares with 176 for the sameperiod last year. Most of the recent increase in themeat price index reect price gains for poultry andpigmeat, which have soared by 9 percent and 12percent respectively since July.

FAO international meat price indices(2002-2004 = 100)

70

100

130

160

190

220

20122011201020092008

Bovine

Poultry

Ovine

Total meat

Pigmeat


World meat market at a glance

2010 2011 2012Change: 2012


million tonnes %

WORLD BALANCE

Production 294.2 297.1 301.8 1.6

Bovine meat 66.7 66.6 66.8 0.4Poultry meat 98.9 102.3 104.5 2.2Pigmeat 109.3 108.8 110.8 1.9

Ovine meat 13.7 13.8 13.9 0.9

Trade 26.7 28.8 29.4 2.2Bovine meat 7.7 8.0 8.0 1.0Poultry meat 11.7 12.7 13.0 2.4Pigmeat 6.2 7.1 7.4 3.0

Ovine meat 0.8 0.7 0.8 1.9



World (kg/year) 42.5 42.4 42.5 0.4Developed (kg/year) 79.2 78.9 79.0 0.0

Developing (kg/year) 32.4 32.4 32.7 1.0

FAO MEAT PRICE INDEX

(2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

over


152 157 174 -1.0

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Market summaries

Novem ber 2012 9

Dairy market summary

International prices of dairy products began tostrengthen in mid-2012, reversing the steady declinethat had characterized the previous twelve months. Thechange in trend resulted from a tightening of suppliesto the world market. Availabilities are anticipated tobe nely balanced until at least the end of the year, asoutput in the Northern Hemisphere is now trendingseasonally downwards and only a limited increase isanticipated during the new production year in theSouthern Hemisphere. The absence of substantialgrowth in milk output in the principal exportingcountries is likely to mean a further upward movementin prices.

World milk production in 2012 is forecast to growby 3.0 percent to 760 million tonnes a higher ratethan the average for recent years. Asia is expectedto account for most of the increase, with output alsogrowing in Oceania and South America.

World trade in dairy products is expected tocontinue expanding in 2012. Demand remains rm,with imports anticipated to reach 52.9 million tonnes

of milk equivalent, up 4.6 percent from 2011. Most ofthe growth in demand will come from Asia, followedby Africa.

FAO international dairy price index(2002-2004=100)

50

150

250

350

201220102008200620042002200019981996

The index is derived from a trade-weighted average of a selectionof representative internationally traded dairy products.


World dairy market at a glance

2010 2011 2012Change: 2012


million tonnes, milk equiv. %

WORLD BALANCE

Total milk production 722.9 737.9 759.6 3.0

Total trade 47.8 50.5 52.9 4.6



World (kg/year) 104.6 105.6 107.5 1.8Developed (kg/year) 234.1 234.9 238.1 1.4Developing (kg/year) 69.4 70.8 72.7 2.8

Trade share of prod. (%) 6.6 6.8 7.0 1.6

FAO DAIRY PRICE INDEX(2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

200 221 187 -16.6

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Foo d Outlook

Novem ber 201210

Fish a nd fishery pro ducts ma rket summa ry

International prices of sh and sh products have beenunder downward pressure in 2012, in particular farmedspecies, while prices of captured sh have fared better.The price dip was the result of a reduced consumerdemand, the effect of which was contained in thecaptured sh sector by a downsizing of production.These tendencies were reected in the FAO sh priceindex, which shows international sh prices sliding byalmost 7 percent in the rst ten months of the yearcompared with the same period in 2011.

World production of sh is forecast to rise by 1.3percent to 157.5 million tonnes in 2012, less than halfthe 5 percent expansion rate registered in 2011. Theincrease this year would be entirely due to aquaculture,while supplies from capture sheries may declinesomewhat, as rising fuel costs and difculty to passthem down to customers limit the activity of the sheryeet.

International trade in sh and shery products isforeseen to expand by 2.5 percent to 59.9 milliontonnes, live weight, as importers are expected to

take advantage of falling prices to step up purchases.However, demand by the EU, the worlds largestsh import market, has been weak due to economicdownturns in some southern European markets.

World sh consumption as food is now anticipatedto increase by 2.6 percent in the course of the year,prompting a 1.5 percent gain in per capita foodconsumption to 19.2 kg per year. All of the increasewould correspond to aquaculture sh, as intake of wildsh is expected to decline somewhat, consistent withthe changes in the relative prices.

FAO sh price index (2002-2004 = 100)

80

105

130

155

180

201220102008200620042002200019981996

Data source: Norwegian Seafood Council

FAO total sh price index

Capture totalAquaculture TotalContact person:

[email protected]

World sh market at a glance

2010 2011 2012Change: 2012


million tonnes %

WORLD BALANCE

Production 148.5 155.5 157.5 1.3

Capture sheries 88.6 91.9 90.2 -1.8Aquaculture 59.9 63.6 67.3 5.8

Trade value (exports USD billion) 109.1 127.1 130.5 2.6

Trade volume (live weight) 56.7 58.5 59.9 2.5Total utilization 148.5 155.5 157.5 1.3

Food 128.3 132.0 135.4 2.6Feed 15.0 18.3 16.6 -9.4

Other uses 5.1 5.2 5.5 5.8



Food sh (kg/year) 18.6 18.9 19.2 1.5From capture sheries (kg/year) 9.9 9.8 9.7 -1.5From aquaculture (kg/year) 8.7 9.1 9.5 4.6

FAO FISH PRICE INDEX1

(2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

over


137 154 143 -6.7

1 Data source: Norwegian Seafood Council

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Figure 1. Wheat export price (US No. 2 H.W. Gulf)

100

200

300

400

2010/11

2009/10

2012/13

2011/12

USD per tonne

JMAMFJDNOSAJ

Figure 2. CBOT wheat futures for December

200

250

300

350

400

USD per tonne

D J F M A M J J A S O

2011 values 2012 values

Ma rket a ssessme ntsWHEAT

PRICES

International prices are up sharply from theprevious year 1

This years decline in world wheat production and atightening supply-and-demand balance have pushed upinternational wheat prices since the start of the 2012/13marketing season in July. The worsening crop prospects,especially in the CIS countries, coupled with an even tightermaize situation that is encouraging more wheat feeding,continued to underpin wheat prices.

In October, weaker pace in trade activity, combined withgenerally favourable winter wheat planting conditions in theNorthern Hemisphere countries, exerted some downwardpressure on prices, but wheat markets received supportfrom the expectation of export restrictions being imposedin Ukraine. In addition, concerns over the quality as wellas the size of this years wheat crop in Australia (which isbeginning to be harvested) contributed to the price strengthduring the second half of October. Overall, the benchmarkUS wheat (No.2 Hard Red Winter, f.o.b. Gulf) values

averaged USD 373 per tonne in October, nearly unchangedfrom September but up 6 percent from July and as muchas 24 percent higher than in the same period last year. The

1 Additional price analysis is included in the Market Indicators section of thisreport.

October average would still be 23 percent below March2008, the month when wheat prices peaked at an all-time high. Wheat futures have also strengthened since thestart of the season. In October, futures drifted to 4-monthlows before reverting to higher levels, mostly on signs

of tightening export supplies from the Black Sea. By lateOctober, wheat futures for December delivery on theChicago Board of Trade (CBOT) were priced at around USD318 per tonne, up 38 percent from the values quoted for thecorresponding period last year.

PRODUCTION

Latest information conrms a smaller worldwheat production in 2012FAOs latest forecast for global wheat production in 2012stands at 661 million tonnes, 5.5 percent below last yearslevel, but close to the average of the past ve years. Thislevel is considerably below expectations earlier in theyear, largely reecting the impact of severe drought ineastern Europe and central Asia, but also weather and, insome cases, policy factors in the key southern hemisphereproducing countries, which have reduced prospects for the2012 crop.

Most of the contraction in global wheat productionreects the negative effects of drought in the major

producing CIS countries. Wheat output in the RussianFederation is estimated 30 percent down from 2011. Asimilar decline in percentage terms is estimated in Ukraine ,while in Kazakhstan , output is reported to be less thanhalf last years bumper crop. All combined, output in thesethree countries is estimated to have fallen by about 36

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Table 1. World wheat market at a glance

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %WORLD BALANCE

Production 655.3 699.4 661.2 -5.5

Trade 1 125.3 147.0 135.0 -8.2

Total utilization 663.0 697.6 687.5 -1.4

Food 468.2 473.8 479.1 1.1Feed 120.3 146.3 136.1 -7.0Other uses 74.4 77.6 72.2 -7.0

Ending stocks 192.7 189.2 166.7 -11.9



World (kg/year) 67.7 67.7 67.7 -LIFDC (kg/year) 49.8 50.0 50.2 0.4



FAO WHEAT PRICE INDEX3 (2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

169 222 208 -9.2

1 Trade refers to exports based on a common July/June marketing season.2 Major exporters include Argentina, Australia, Canada, EU, Kazakhstan,Russian Fed., Ukraine and the United States.

3 Derived from International Grains Council (IGC) wheat index.

Table 2. Wheat production: leading producers 1

2011 2012Change: 2012

over 2011estim. f'cast

million tonnes %

European Union 137.5 130.8 -4.9China (Mainland) 117.4 119.0 1.4India 86.9 93.9 8.1

United States 54.4 61.8 13.6Russian Federation 56.2 39.0 -30.6Australia 29.5 22.5 -23.7Canada 25.3 26.7 5.5Pakistan 24.3 24.0 -1.2Turkey 21.8 20.1 -7.8Ukraine 22.3 15.5 -30.5Kazakhstan 22.7 10.8 -52.4Iran Islamic Rep. of 13.5 13.8 2.2Argentina 13.7 11.5 -16.1Egypt 8.4 8.7 3.6Uzbekistan 6.3 6.7 6.3Other countries 59.2 56.4 -4.7

World 699.4 661.2 -5.51 Countries listed according to their position in global production (average2010-2012).

million tonnes. In other parts of Europe, wheat output alsodeclined, particularly in some central and southeasterncountries, where conditions during the growing season wereunfavourably dry. Following recent downward revisionsfor some northern countries, which are among the last to

complete harvesting (the United Kingdom in particular), theEUs aggregate wheat output is estimated to drop by 4.9percent in 2012.

In the Asian Far East sub-region, record 2012 crops weregathered in the key producers, namely China and India ,while in the Near East, results have been mixed: good cropswere gathered in Afghanistan and the Islamic Republicof Iran but outputs were down elsewhere, reecting dryconditions and/or the negative impact of civil disturbances.The 2012 harvest results were also mixed in North Africa,where production recovered in Algeria but was sharplyreduced in Morocco due to dry conditions. In North America,wheat production in the United States is estimated to haveincreased by 13.5 percent to an above-average level of 61.8million tonnes, while in Canada , output is expected to beabove average and 5.8 percent higher than in 2011.

In the Southern Hemisphere, the 2012 aggregate wheatproduction in South America is forecast to decline bysome 12 percent compared with 2011, mainly reecting areduced output expected in Argentina , the sub-regionsmain producing country. The decline follows a signicant

contraction in the area planted due to diversion of landto more protable crops, mainly barley, in addition to dryweather at sowing time. In Oceania, prospects for the wheatcrop in Australia are mixed, reecting varied winter rainfalland moisture conditions. The countrys output is forecastto contract by about 24 percent from last years record dueto lower yields expected in some major producing areasaffected by dry conditions, particularly Western Australia. InSouthern Africa, provisional estimates point to a 10 percentdecline in the sub-regions 2012 wheat production to 2.1million tonnes, largely reecting a smaller crop expected inSouth Africa , the major producer, due to reduced plantings.

Wheat planting for 2013In many parts of the Northern Hemisphere, the winter wheatcrops for harvest in 2013 are already being planted or aredue to be sown in the next few weeks. With current wheatprices higher than a year ago and utilization expected tooutstrip production for the second year in succession in2012/13, wheat remains an attractive option for producers.Thus, weather permitting, plantings in most major producing

countries are expected to at least match those of last year, orto increase, especially in those areas affected by drought in2012.

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Figure 4. Wheat imports by region

0

20

40

60

80

2011/12 estimate

2012/13 forecast

Million tonnes

Asia Africa EuropeSouthAmerica

CentralAmerica

Figure 3. Black sea (Kazakhstan, Russian Federationand Ukraine) wheat production and exports

0

30

60

90

120

OctSeptAugJulyJuneMay20110

10

20

30

40Million tonnes Million tonnes

Kazakhstan production(left axis)

2012 Production forecasts

Exports (right axis)

Russia production(left axis)

Ukraine production(left axis)

In the United States , some 80 percent of the expectedwinter wheat crop was sown by late October, on par withthe average pace of planting. However, soil conditions aretoo dry in some main producing parts of the Great Plains,adversely affecting germination and emergence. In Europe,

conditions for planting in the EU have been generallyfavourable with the exception of some parts of Bulgaria ,Hungary and Romania , where soil moisture is limited.Early indications point to some area expansion, particularlyin Germany and Poland after reductions last year. In theRussian Federation , winter wheat planting was largelycompleted under satisfactory weather conditions, with theexception of some key southern growing areas where soilmoisture levels remained low after the summer drought. In

Ukraine , winter wheat planting has been completed underwarm weather and satisfactory moisture conditions. The areasown is reported to match that of last year, but the rate ofgermination should be much improved. In Asia, the 2013wheat crop planting is virtually complete in China on an area

estimated to be similar to that of the previous year. Plantingwas underway in India and Pakistan as of October and willcontinue until mid-December. In India the area under wheatis expected to remain similar to last years high level. TRADE

Wheat trade in 2012/13 markedly below the2011/12 recordWorld wheat trade (exports) in 2012/13 (July/June), whichincludes wheat our in grain equivalent, is forecast toreach 135 million tonnes, down as much as 8 percent, or12 million tonnes, from the record volume registered in2011/12. The contraction mainly reects higher suppliesin several wheat importing countries and reduced importdemand for feed wheat compared with the previousseasons exceptionally high level. The forecast for 2012/13world trade has been cut by a further 500 000 tonnes sinceOctober, 2 following downward revisions to wheatimports in Asia and Europe.

Total wheat imports by Asia are currently forecast to

reach 61.7 million tonnes, down 9 percent, or 6 milliontonnes, from the 2011/12 record. Most of the decreaseis expected: in Uzbekistan (-1.2 mt) and Afghanistan (- 1 mt), reecting this years bumper crops; in thePhilippines (-0.8mt), due to large wheat stocks and goodrice supplies; in China (-1mt), because of the increase indomestic production; and in the Republic of Korea andThailand , mostly due to reduced demand for feed wheat.In Africa, aggregate wheat imports are put at 39 milliontonnes, down 1.3 million tonnes from 2011/12. Most of thereduction is forecast for North Africa, while total importsby countries in sub-Saharan Africa are expected to remainclose to the previous seasons level. Increases in domesticproduction in Algeria and Egypt are expected to result insmaller wheat purchases by the two countries (by -1.1mtand -1.7mt respectively) while imports by Morocco couldrise signicantly (by 1.7mt) because of the unfavourable dryweather conditions that delayed planting and resulted in a36 percent cut in wheat production this year. Given the tightdomestic supply situation, Morocco recently suspended its17 percent import duty on soft wheat, effective from the

2 FAO Cereal Supply and Demand Brief - October 2012: http://www.fao.org/ worldfoodsituation/wfs-home/en/

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November 201214

beginning of October 2012 until the end of this year. InLatin America and the Caribbean, total imports in 2012/13are forecast to approach 22 million tonnes, down slightlyfrom the previous season. While wheat imports by Brazil ,the regions largest wheat importer, are set to increaseby 300 000 tonnes to compensate for a reduction in thisyears harvest, purchases by Mexico , the second largestwheat importer in the region, may drop by 700 000 tonnes,notwithstanding a fall in production. Lower wheat imports

by Mexico reect a cut in wheat utilization in the livestocksector, given the prospect for larger supplies of alternativefeed grains such as sorghum. Imports in Europe are forecastto dip to 8.2 million tonnes, down 14 percent from theprevious season. The EU accounts for all of this anticipateddecrease, with total imports by the EU falling to 6 milliontonnes from an exceptionally high level of 7.5 million tonnesregistered in 2011/12. The decrease reects this yearsreduction in feed use and tighter export supplies from theBlack Sea.

Based on the current trade prospects for 2012/13, whichpoint to a signicant decline from the previous season,global wheat export supplies are likely to be sufcient inspite of production shortfalls in a number of major exportingcountries. Shipments from the Russian Federation andKazakhstan are forecast to be heavily constrained by thedrop in their wheat outputs in 2012. Wheat exports bythe Russian Federation could plunge to 8.5 million tonnesfrom nearly 22 million tonnes in 2011/12, while sales fromKazakhstan may drop by one-third, to 7 million tonnes.Wheat shipments from Argentina and Australia are also

expected to be curtailed signicantly this season by 35percent and 13 percent, respectively because of theforecast decline in this years wheat harvests. Smaller exports

also are anticipated from Brazil , amid rising domestic pricesof wheat and wheat our. Given the fall in Ukraines wheatproduction this year, its wheat exports in 2012/13 is forecastto decline to 5.7 million tonnes, with nearly 4 million tonnesalready delivered since the start of the season. Wheat sales

from the United States are forecast to increase by 19percent, to 33 million tonnes, following a strong recoveryin this years production. Exports from Canada and the EU are also envisaged to rebound, by at least 9 percent each,to 19 million tonnes and 17.5 million tonnes respectively in2012/13.

UTILIZATIO N

Wheat utilization falling below the 2011/12peakWorld wheat utilization in 2012/13 is forecast to reach 687million tonnes, down 1.5 percent from the exceptionallyhigh level in the previous season, but still slightly above the10-year average trend. The projected decline in total wheatutilization in 2012/13 would be mostly on account of alower feed usage of wheat by the animal sector, which hadreached an all-time high in the previous season amid verytight supplies of alternative feed. World feed utilizationof wheat is currently forecast at 136 million tonnes, down7 percent from 2011/12. In terms of volume, the bulk of

the reduction from the previous season is expected in Chinafollowing a surge in 2011/12 to a record 26 million tonnes,and in the EU, where feed use is projected down 2 milliontonnes from the previous season, reaching 53 million tonnes.By contrast, feed utilization of wheat in the United States isforecast at a record 8.6 million tonnes, almost double theprevious seasons level, driven by the high priced and tightmaize supply.

Global food consumption of wheat is likely to reach479 million tonnes, up 1.1 percent from the previous season.At this pace, world per capita consumption of wheat isexpected to remain steady at around 67.7 kg per annum,with the per capita consumption remaining at 60.4 kg inthe developing countries and at 97.4 kg in the developedcountries. While year-to year consumption variations atcountry level are generally small, this often masks variationswithin a country and differences among income groups. InNorth Africa and the Near East, where wheat consumptionis among the highest in the world, high wheat prices areraising concern amid political instability and tensions.

The other uses of wheat which include industrial use,

seeds and post-harvest losses are expected to total 72million tonnes, down 5.4 percent from the previous season.Most of the decrease would be in wastage, which tends to

Figure 5. Major wheat exporters

0 10 20 30

2011/12 estimate 2012/13 forecast

Million tonnes

UnitedStates

EU

Canada

Argentina

Ukraine

Kazakhstan

Australia

RussianFederation

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Figure 6. Wheat stocks and ratios

0

100

200

300

2012/132011/122010/112009/102008/095

15

25

35Million tonnes Percent

Major Exporters Rest of the World

World Stock-to-use ratioStock-to-disappearance ratio of Major Exporters

estim. fcast

vary proportionally with world production. Thus, this yearsanticipated 5 percent drop in world wheat production wouldresult in some declines also in post-harvest loss. However,industrial use of wheat in 2011/12 is forecast to rise, albeitmodestly, to 20 million tonnes, according to the International

Grains Council. Most of the expansion is expected in theEU, where wheat used for ethanol production (excludingnon-fuel use) is projected at 4.8 million tonnes, up 1 milliontonnes from 2011/12.

STOCKS

Lower wheat inventories and stock-to-useratiosWorld wheat stocks by the close of the crop seasonsending in 2013 are forecast to fall to 167 million tonnes,12 percent, or 23 million tonnes lower than their openinglevel and down 5 million tonnes from the previous forecastpublished (on-line) in October. 3 The sharp decline from theprevious season reects the drop in this years world wheatproduction, which will necessitate drawing on inventories inorder to meet anticipated utilization in 2012/13.

The downward adjustment since October reectsrevisions to stock estimates in China, which have beenlowered by 3 million tonnes. A surge in Chinas feed use ofwheat in 2011/12 resulted in smaller carry-over stocks into

2012/13 marketing season than had been anticipated. Inspite of wheat production being up 2 million tonnes this yearand expectation of a 7 million tonne cut in wheat feed use in2012/13, Chinas ending stocks are now expected to fall to39 million tonnes, down 2.3 million tonnes from their revisedopening level, which is the lowest in over a decade. Theforecast for wheat inventories in the United States also hasbeen lowered since October, by 1.2 million tonnes, a declinethat takes into account the expected increase in wheatexports and record feed usage in 2012/13.

The bulk of the decline in world wheat stocks this seasonis likely to occur in countries where production fell, mostnotably in Australia (-2.5 mt), EU (- 1.4mt), Kazakhstan (-4 mt), Turkey (- 1 mt), the Russian Federation (-5.2mt)and Ukraine (-3.4 mt). Lower stocks are also forecast forthe United States (-2.4mt) and China (-2.3mt), which morethan offsets the inventory build-ups in India (+2.6mt), the Islamic Republic of Iran (+500 000 tonnes) and Indonesia (+500 000 tonnes),

Based on the latest forecast for ending stocks andglobal utilization, the world wheat stock-to-use ratio could


drop to 24.0 percent, from the 27.5 percent estimated in2011/12. At this level, the ratio would stand as the secondlowest since the FAO records began (in 1980). The lowestratio, 22 percent, was registered in 2007/08. In addition,the ratio of major wheat exporters closing stocks to theirtotal disappearance dened as domestic utilization plusexports is also expected to fall sharply, to 13.9 percentfrom 18.2 percent in the previous season. This ratio is still

higher than the 12.9 percent low registered in 2007/08, butwell below the 18.6 percent projected at the start of thecurrent season, thus pointing to a signicant tightening ofglobal wheat supply-and-demand balance in 2012/13.

COARSE GRAINS

PRICES

Tight supplies push up international prices tonear record levels 4In spite of some declines in recent weeks, international pricesof maize followed an upward trend from the beginningof the current season in July until it peaked in late Augustto early September, and then drifted lower in October.The upward price movement closely followed repeateddownward adjustments to production prospects in theUnited States as crop conditions worsened due to thesevere drought (Figure 3). Unfavourable prospects for wheatproduction in the CIS countries also provided support to

4 Additional price analysis is included in the Market Indicators section of thisreport.

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Figure 8. CBOT maize futures for December

150

200

250

300

350

USD per tonne

D J F M A M J J A S O

2011 values 2012 values

2012 nearby values

Figure 7. Maize export price (US No. 2 yellow, Gulf)

100

150

200

250

300

350

2010/11

2009/10

2012/13

2011/12

USD per tonne

JMAMFJDNOSAJ

maize markets, given the regions importance as a leadingsupplier of feed wheat to world markets. In October, pricesof major coarse grains fell slightly on early signs of demandrationing from the livestock and biofuels sectors and slowingtrade activity, especially with regard to export pace from

the United States. The benchmark US yellow maize (No.2 delivered Gulf) averaged US$ 320 per tonne in October,down slightly from September but US$ 45 per tonne, or 16percent, above the average price in October 2011. The EUand Australian feed barley prices have largely followedmaize markets in recent months. In October, they stood from15 percent to 18 percent above the corresponding periodlast year.

In October, United States futures prices became generallymore stable as harvests neared completion. The maize

market exhibited some upward price movement followingthe October USDA report, which indicated that the 2013ending stocks-to-use ratio would fall to a critically low level.By late October, maize futures for December delivery onthe Chicago Board of Trade (CBOT) were quoted around

USD 297 per tonne, up 16 percent from the values quotedfor the same period last year.

PRODUCTION

Global coarse grains output decreases in 2012,contradicting the early seasons promisingoutlookFAOs latest forecast for world production of coarse grainsin 2012 stands at about 1 137 million tonnes, sharply downfrom earlier forecasts and 2.5 percent below the previousyears record. By far, the bulk of the decrease since the startof the season is attributed to the United States , whichwitnessed one of the largest turnarounds ever recorded forits maize crop: comparing prospects at planting time untilharvest, favourable sowing conditions and attractive pricesprompted farmers to plant one of the largest maize areasever recorded but, thereafter, the season was characterizedby widespread severe drought, which devastated cropsthroughout the major growing areas. The reduction in theUnited States maize crop also accounts for most of the

year-on-year decrease in global maize output, now forecastat 856 million tonnes, 3.2 percent down from 2011.

In Europe, summer drought in central and eastern partsof the region also reduced yield potential for maize cropsas the season progressed, resulting in smaller crops thanearlier forecast. Output in the EU for 2012 is now estimated

Figure 9. World maize production

0

250

500

750

1000

2012/132011/122010/112009/102008/09

Million tonnes

United States

Brazil

China (Mainland) EU

Others

estim. fcast

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Table 3. World coarse grain market at a glance

2010/11 2011/12 2012/13

Change:2012/13

over2011/12

estim. f'cast

million tonnes %WORLD BALANCE

Production 1 135.0 1 165.9 1 136.9 -2.5

Trade 1 123.3 131.0 121.0 -7.6


Food 200.7 201.6 201.7 0.0Feed 633.0 634.6 639.0 0.7

Other uses 322.1 325.2 311.1 -4.3

Ending stocks 169.5 174.0 161.0 -7.5



World (kg/year) 29.1 28.9 28.5 -1.4LIFDC (kg/year) 40.8 40.0 39.3 -1.8



FAO COARSE GRAIN PRICEINDEX (2002-2004=100) 2010 2011 2012

Change:Jan-Oct 2012

overJan-Oct 2011

Jan-Oct %

176 277 279 -0.8

1 Trade refers to exports based on a common July/June marketing season.2 Major exporters include Argentina, Australia, Brazil, Canada, EU, RussianFed., Ukraine and the United States.

Table 4. Coarse grain production: leading producers 1

2011 2012Change: 2012


million tonnes %

United States 324.0 284.6 -12.2China (Mainland) 201.3 209.8 4.2European Union 150.3 138.2 -8.1Brazil 59.0 75.2 27.5India 42.1 40.0 -5.0Argentina 32.8 29.9 -8.8Mexico 24.7 30.6 23.9Russian Federation 34.2 30.5 -10.8Ukraine 33.3 29.1 -12.6Canada 21.9 23.8 8.7Nigeria 22.3 22.8 2.2Indonesia 17.6 18.9 7.4Ethiopia 16.9 16.3 -3.6

South Africa 11.5 12.6 9.6Turkey 12.5 12.4 -0.8Other countries 161.5 162.2 0.4

World 1 165.9 1 136.9 -2.51 Countries listed according to their position in global production (average2010-2012).

at some 54 million tonnes, 21.8 percent down from 2011.In Asia, latest information conrms a signicant increase inmaize production in the Far East sub-region, largely on theback of a new record output in China . In Africa, the maizeharvest in the Western Africa subregion is set to recoverslightly from last years reduced level. By contrast, in EasternAfrica, aggregate maize output is forecast to decrease for thesecond year in succession after the 2010 bumper crop, butshould nevertheless approach the average of the past veyears. In Central America and the Caribbean, the aggregate2012 maize output is forecast to register a sharp recoveryfrom 2011 to almost 27 million tonnes. The sharp increasemainly reects a rebound anticipated in Mexico , the largestproducer of the subregion, where the aggregate 2012 maizeproduction is forecast to recover by 26.8 percent from the2011 drought-reduced level. Prospects for the 2012 mainrain-fed summer maize crops are favourable in the countryfollowing adequate precipitation in recent months, whilethe 2012 secondary season harvested earlier in the year was

good due to higher plantings and a recovery in yields.In the Southern Hemisphere, the main maize crops were

harvested earlier in the year. In South America, harvesting of

the 2012 second season maize is virtually completed, withthe aggregate production of the rst and second seasonsestimated at a record high of some 107 million tonnes.This mainly reects a bumper second season maize crop

in Brazil , following an increase in the area planted andfavourable weather, which more than offset the drought-reduced output in Argentina . Sowing of the 2013 maizecrop is currently underway. Persistent rains in Argentinaand hot weather in Brazil have caused planting delays insome areas. However, in both countries, the overall areaplanted is anticipated to be close to the high levels of 2012.In Southern Africa, generally adverse weather conditionsin 2012 depressed maize production (harvests completedin July) to levels below 2011, but the aggregate output,estimated at 22.8 million tonnes, was still above the ve-year average. Although South Africa registered a signicantincrease of about 11 percent, this was more than offset bydeclines in most of the other countries in the subregion.

FAOs latest forecast for world 2012 barley productionstands at about 130 million tonnes, 3.4 percent down fromthe 2011 level and below the ve-year average. Similarto wheat, most of the contraction was on account of theCIS countries, where crop yields were severely reduced bydrought, more than offsetting increased production in theEU, the United States and Canada , among the other main

barley producers.The forecast of world sorghum output in 2012 is put at

about 60.8 million tonnes, almost 9 percent up from 2011.

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Figure 10. US maize production and stock-to-useratio

0

100

200

300

400

Oct(USDA)

Sept(USDA)

Aug(USDA)

July(USDA)

June(USDA)

May(FAO)

20110

5

10

15

20

Million tonnes Percent

Production

2012 Production forecasts

Stock-to-use ratio

Figure 11. World barley production

0

60

120

180

2012/132011/122010/112009/102008/09

Million tonnes

EU

Canada

CIS

Others

estim. fcast

Prospects are generally favourable for the harvests underwayor soon to start in Africas main producing countries inthe Western and Eastern subregions. In Sudan , whereharvesting of sorghum starts from late October, output isexpected to recover sharply from last years drought-affectedcrop to reach 4 million tonnes.

TRADE

Coarse grains trade to fall sharply in 2012/13World trade (exports) in coarse grains is forecast to fall to121 million tonnes in 2012/13 (July/June), down 7.6 percent(10 million tonnes) from the 2011/12 estimate, which hasbeen revised up from October 5 by almost 6 million tonnesto a record 131 million tonnes. The upward revision to the2011/12 trade estimate is mostly on account of higher thananticipated shipments from Argentina , Australia , theUnited States and South Africa . This seasons decline inworld trade is largely driven by reduced maize and barelyexports.

International maize trade in 2012/13 is currently forecastat 94 million tonnes, down almost 7 percent from theprevious seasons near record volume of almost 101 milliontonnes. The sharp decrease mostly reects this seasonsexceptional reduction in maize supply in the United States,the worlds largest producer and exporter of maize. Worldtrade in barley is also forecast to drop sharply this season,by 19 percent, to 17.5 million tonnes, mostly on reduced


shipments from Australia and the Russian Federation.However, trade in sorghum is forecast to expand by 13.4percent to reach 6 million tonnes, mainly on higher importsby EU and Mexico. Trade in other coarse grains (millet, rye,oats and other grains) is expected to change little from theprevious seasons level, totalling roughly 3.5 million tonnes.

The bulk of this seasons decline in coarse grains imports

is likely to occur in Asia , where total imports are put ataround 62 million tonnes, down 5.5 million tonnes from2011/12. Maize imports by China (Mainland) are forecastto reduce by half, from 4 million tonnes in 2011/12 to 2million tonnes, following this years record harvest. OtherAsian countries expected to curb coarse grains importssignicantly in 2012/13 include: Saudi Arabia , importing 1million tonnes less barley due to large purchases last seasonand therefore high carryover stocks; the Republic of Korea ,importing 500 000 tonnes less maize than in 2011/12 mostlybecause of high international prices; Indonesia , reducingimports by at least 300 000 tonnes, following this yearsrecord maize production; the Philippines and Vietnam ,reducing imports by at least 200 000 tonnes each, on backof this years bumper maize harvests in both countries.

In Africa , total coarse grains imports in 2012/13 areforecast to remain steady at around 18.6 million tonnes. InNorth Africa, a decline of 500 000 tonnes in maize imports byEgypt due to this years rebound in production is likely to beoffset by larger maize and barley imports by Morocco giventhis years sharp decline in domestic production. Morocco

has also suspended import tariffs on barley (as well as durumwheat) until the end of 2012 to ease domestic marketprices. In other parts of Africa, maize imports by Kenya are

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Figure 12. Coarse grain imports by region

0

20

40

60

80

2011/12 estimate

2012/13 forecast

Million tonnes

Asia Africa EuropeSouthAmerica

CentralAmerica

Figure 13. Major coarse grain exporters

0 20 40 60

2011/12 estimate 2012/13 forecast

Million tonnes

UnitedStates

EU

Canada

Brazil

Ukraine

Argentina

Australia

RussianFederation

forecast to increase by 500 000 tonnes in 2012/13 mostlybecause of the drop in domestic production. By contrast, astrong rebound in sorghum production this year in Sudan isexpected to reduce sorghum imports by 600 000 tonnes.

Imports by several countries in Latin America and theCaribbean are forecast to be cut in 2012/13. Total importsby the region are currently put at nearly 25 million tonnes,down 4.3 million tonnes from 2011/12. In Mexico , the

subregions largest buyer of coarse grains, maize importsare forecast to fall to 8.5 million tonnes, 3 million tonnesbelow the record volume imported in 2011/12. The likelydecline reects this years anticipated strong recovery indomestic production from the drought-reduced harvest lastyear. Maize imports are also anticipated to slide by 600 000tonnes in Venezuela because of the expected increase indomestic production. In Europe , maize imports by the EU are forecast to increase by 1.5 million tonnes, to 7.5 milliontonnes, mostly in response to this years fall in production.

High prices are in part to blame for the anticipatedcontraction of world trade this season. Internationalquotations have surged this season primarily because ofshrinking supplies in the United States, the worlds largestmaize exporter. Maize exports from the United States coulddecline by as much as 12 million tonnes (28 percent) to 31million tonnes, the smallest level in 40 years according to theUSDA. This drop would be partially offset by larger shipmentsfrom a number of other exporters, in particular Brazil , whoseshipments are forecast to hit a new record, at 16.5 milliontonnes, up almost 8 million tonnes from the previous season.

This puts Brazil nearly at a par with Argentina as the worldssecond largest maize exporter. Reduced sales of maize andbarley by the EU and Ukraine as well as lower exports of

barley by Australia are expected to partially offset largershipments from Canada , where this seasons exports couldreach 1.6 million tonnes for barley and 1 million tonnesfor maize. Among the other leading exporters, maize salesfrom South Africa are forecast to decline from the previousseasons level of 2.4 million tonnes, in spite of the increase in2012 production. The reduction of South Africas exports in2012/13 in part reects the need for the country to rebuild

its depleted stocks. However, exports from Zambia couldremain at the previous seasons high level of 950 000 tonnes,with the country establishing itself as the second largestregional supplier of white maize (used as food staple) afterSouth Africa.

UTILIZATIO N

Total utilization of coarse grains in 2012/13 todecline for the rst time since 2002/03World utilization of coarse grains in 2012/13 is forecast to fallto 1 152 million tonnes, down almost 1 percent (10 milliontonnes) from the previous season and almost 5 percentbelow the 10-year trend. The decline follows nearly ten yearsof undisrupted expansion, which was largely supportedby increasing demand for feed and industrial use. Growthhad already started decelerating in 2011/12, reecting atightening of maize supplies and a slowdown in maize-based ethanol production, but a contraction of utilization, asprojected for 2012/13, would be the rst since 2002/03.

This reduction would be entirely driven by falling coarse

grain demand for processing into ethanol in the UnitedStates, the worlds largest maize-based ethanol producer. Highmaize prices combined with a saturated domestic ethanol

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November 201220

Table 5 . Maize use for ethanol (excluding non-fuel) in the United States

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12estim.

2012/13(fcast )

Thousand tonnes

Maize productionEthanol use 127 005127 538116 61693 39677 45353 83740 716 114 305

271 938282 263 267 503 331 177 307 142 332 549 316 165 313 918

Yearly change (%) 21 32 44 21 25 9 -0.4 -10As production (%) 14 20 23 30 35 40 40 42

Source: WASDE-USDA (October 2012)

market in the United States are expected to result in the rstsignicant contraction in ethanol output in over a decade,down 10 percent from the previous year, which would result ina similar reduction in maize demand. In spite of this decrease,nearly 42 percent of this years domestic maize crop (or 114million tonnes) is expected to be used for ethanol productioncompared to 40 percent in the previous season. However, theincreased share reects a lower maize production estimate andnot a greater use of maize by the ethanol sector.

Global feed utilization of coarse grains, which normallyconstitutes nearly 56 percent of the total use, is forecast at639 million tonnes in 2012/13, barely increasing from theprevious seasons level. Global feed utilization has remainednearly at after a decline in 2008/09, mostly because theincrease in feed use among the developing countries is

offsetting the steady decline in the developed countries.Total feed use of coarse grains in 2012/13 in the latter groupis currently forecast to reach 309 million tonnes, down 3percent from the previous season and almost 14 percentlower than before the declining trend started in 2007/08.By contrast, total feed use in the developing countries is

forecast to grow by 4.3 percent to 330 million tonnes in2012/13, a level which, for the rst time, would exceedfeed utilization of coarse grains in the developed countries.

Much of the anticipated contraction in feed use in thedeveloped countries would be due to the United States,where maize use for feed is ofcially forecast to decline forthe fth consecutive year, to 110 million tonnes (includingresidual), down 8 percent (10 million tonnes) from 2011/12.In spite of sharp increases in wheat usage for feed, total useof grains (including wheat) for feed in the United States hasbeen drifting lower in recent years, in part reecting theirsubstitution with distiller dried grains (DDG), a by-productof ethanol production. By contrast, feed use by severalcountries in Asia and Latin America and the Caribbean hascontinued to expand, driven by rising demand for livestock

products. Even with high grain prices during the currentseason, several countries are expected to boost their feeduse of coarse grains, in particular China (up 6 percent or 7million tonnes), Brazil (up 5 percent or 2 million tonnes) andIndonesia (up 22 percent or 1.7 million tonnes).

Total food consumption of coarse grains is forecast toremain steady at around 202 million tonnes, resulting in asmall decline in the annual per capita consumption of coarsegrains from 29.0 kg in 2011/12 to 28.5 kg in 2012/13. Mostof the fall is expected in the CIS and countries in CentralAmerica. However, in Africa, where several coarse grainsconstitute important food staples, total food use is put at83 million tonnes, up 2.5 percent from the previous season,leading to a steady per capita level of around 77 kg.

STOCKS

Coarse grains stocks at their lowest in six yearsWorld stocks of coarse grains for seasons ending in 2013are currently forecast at 161 million tonnes, down 13 milliontonnes from their opening level. This sharp decline follows a

small recovery in the previous season and puts world reservesat their lowest level since 2006/07. As a result, the worldstock-to-use ratio for coarse grains is expected to approach

Figure 14. Coarse grain utilization

0

350

700

1050

1400

2012/132011/122010/112009/102008/09

Million tonnes

Feed use

Other uses

Food use

estim. fcast

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Figure 15. Coarse grain stocks and ratios

0

100

200

300

2012/132011/122010/112009/102008/095

10

15

20Million tonnes Percent

United States Rest of the World

World Stock-to-use ratioStock-to-disappearance ratio of Major Exporters

estim. fcast

13 percent, which would be two percentage points belowthe estimated ratio in 2011/12 and the lowest since 1980when FAO started to compile data on stocks.

Most of the anticipated decrease in world stocks is likelyto be concentrated among the major exporters, particularly

the United States, following the devastating drought.Based on the latest projections by the USDA (publishedin October), total maize inventories in the United Statescould shrink by as much as 37 percent (9.4 million tonnes)this season to only 15.7 million tonnes, pushing down itsstock-to-use ratio to its lowest level in 20 years. Anothersignicant decline is forecast for the EU, where maize andbarley inventories are expected to decline sharply. This isespecially the case for maize, which is forecast to fall by3.5 million tonnes to 6 million tonnes, driven by the declinein 2012 production. A sharp reduction is also anticipatedin Argentina where a disappointening maize crop couldresult in a drawing down of stocks by 1.3 million tonnes,to 1 million tonnes. Also in Australia , stocks are forecastto be drawn down, mostly barley stocks, because of lowerproduction. Smaller barley inventories are anticipated forUkraine as a result of the fall in domestic production whilein the Russian Federation , total inventories of coarse grains(barley and maize) are expected to remain unchanged.

By contrast, among other major exporters, Brazil is expected to end the season with signicantly larger

inventories. This years record maize crop is expected toboost Brazilian maize stockpile to 8.5 million tonnes (up3.5 million tonnes from the previous season) in spite of asurge in exports and increasing domestic feed use. Stocksin Canada are also expected to end at a higher level thisseason, especially for barley, the production of which hasincreased in 2012. Overall, the major exporters stocks-to-disappearance ratio (i.e. domestic consumption

plus exports) could decline to a critical level of 9 percent,compared to 10 percent in 2011/12, which was already verylow in historical terms.

Among other major variations coarse grains inventoriesin China are forecast to increase by 7 percent to nearly 58million tonnes following this years record crop. However,smaller maize stocks are anticipated in Indonesia becauseof strong growth in feed use while barley inventories inSaudi Arabia are forecast to decline on expectation ofsmaller imports. In Africa, following the poor 2012 harvestin Morocco , barley stocks are expected to be halved while inSouth Africa, maize inventories are projected smaller, givenstrong exports.

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