Global cereal stocks are forecast to fall in the new 2004/2005 marketing season, a fifth consecutive annual decline, despite an expected increase in cereal production for 2004 to 1 956 million tones, a substantial increase from the previous year, the UN Food and Agriculture Organization said today in Food Outlook, a publication that forecasts global crop, food and trade prospects.

"Production prospects are good, but not up to expected total levels of utilization", says Henri Josserand, Chief of FAO's Global Information and Early Warning System. "The downward trend in global cereal stocks continues, narrowing the buffer available to absorb large unexpected shocks. In view of already tight stocks, the possibility of higher and more volatile prices in 2004/05 should not be ruled out."

The report also says that outbreaks of animal disease in major meat exporting countries and resulting bans on imports from the affected areas are reducing exportable supplies and causing international meat prices to surge.

International prices for dairy products were well above average during the first-half of 2004, because of sustained import demand and limited availability of export supplies. Food Outlook forecasts that milk prices will be at or near their current high levels for the remainder of 2004.

Cereal trade declines

Food Outlook's first forecast for global cereal trade in 2004/05 stands at 229.7 million tonnes, down 3.4 percent from the previous year. The decline mostly reflects of good crop prospects in traditional importing countries, as well as a strong production recovery in Europe. Tighter rice supplies in major exporting countries also will reduce tradable volumes in rice.

Global cassava trade, on the contrary, is forecast to expand in 2004, due to a sharp increase in production. A tightening of feed grain supplies in China could also stimulate cassava imports by that country, further strengthening international prices.

Cereal prices ease, but prices for oils rise

After rising for several months, international prices of most cereals eased back in recent weeks, according to the Food Outlook. This reflects "generally favourable prospects for 2004 crops." Prices also eased for rice as China and Thailand released rice stocks onto tight domestic markets.

International prices in the oil crops have risen sharply in the past few months, strongly influenced by tight soybean supplies and by slower growth in palm oil production.

World pulse production will hit a record 60 million tonnes in 2004, which Food Outlooks says could lead to increased consumption and trade during the year.

FAO's Global Information and Early Warning Service publishes Food Outlook four times a year. The next issue will be out in mid-September.