According to the FAO report: "With this level of production, even after allowing for an expected increase in global cereal utilization in 2004/05, a significant surplus is expected, for the first time since 1999/2000."

This means that "global cereal reserves should increase by the end of the 2004/05 seasons, a positive development for world food security after sharp drawdowns in the past four years," the report says.

Wheat and coarse grains reserves higher

World cereal stocks are forecast to rise to 441 million tonnes by the close of the 2004/05 season, according to FAO. The bulk of the increase will be in maize. Wheat reserves are forecast to augment slightly. By contrast, the FAO report says rice inventories are expected to decline again.

The replenishment in stocks is expected mainly in wheat and maize reserves among the major grain exporters in developed countries whose share of global wheat and coarse grains stocks is seen by Food Outlook to rise well above the average of recent years.

World cereal utilization in 2004/05 is forecast by Food Outlook to rise by 2.4 percent from the previous season. Most of the increase is coming in feed usage of cereals.

Global cereal trade is forecast to decline in 2004/05, mostly reflecting reduced demand in the EU, which Food Outlook forecasts would more than offset an expected increase in imports by developing countries, China in particular.

Another positive development for the global grain situation, according to Food Outlook, is "the expected slowdown in the rate of depletion of China's reserves, mainly due to a strong rebound in production. Major stock reduction in China has accounted for the bulk of the depletion of global stocks in the past few years."

The FAO report says that international wheat and coarse grains prices are generally lower than a year ago, but those for rice remain well above 2003 levels. "Against the background of larger export supplies and improved global stock levels, international prices of wheat and coarse grains are likely to remain under downward pressure during the 2004/05 season," says Food Outlook. "For rice, firmer prices could be expected mostly as a result of reduced production in several major exporting countries."

"The larger grain availabilities and lower prices are essentially good news for developing countries," says Henri Josserand, Chief of FAO's Global Information and Early Warning System. However, he added, "the positive impact of lower prices could be tempered, for some countries, by the prevailing high freight rates."

Bumper 2004 cereal harvests

The bulk of the latest upward revision to the world cereal production forecast results from a substantial increase for coarse grains, particularly in the United States, where the report says an exceptional maize crop has been gathered. This, along with several other upward adjustments for the 2004 coarse grains crops still being gathered around the globe, including China, has added almost 48 million tonnes to the forecast since September, pushing the annual global increase to 8.5 percent.

Another upward revision has also taken place for wheat, after satisfactory conclusion of the last northern hemisphere harvests, especially in Europe where average yields turned out much better than anticipated. Food Outlook now estimates the increase in the world wheat crop this year "at a very substantial 10.8 percent."

Meat Production and Trade

Global meat prices stabilized somewhat in late 2004, according to the report, as import bans were lifted from previously disease-afflicted areas and exportable supplies increased. Meat production and trade are expected to continue to grow in 2005.

Demand for dairy grows

International prices for dairy products rose throughout 2004, and by November, the FAO dairy price index hit its highest level since 1990, the report says. "Upward price pressure is largely the result of growing international demand, especially for whole milk powder in developing countries."

Food Outlook reports that oilseed prices rose to record levels in the last marketing season, but have fallen significantly since April, due mainly to a large crop in the United States.