With prospects for the 2005 global cereal crop remaining favourable, FAO now forecasts world output in 2005 at 1 996 million tonnes, just 2.8 percent below the record 2004 crop. Pulse production is also expected to decline just slightly in 2005 to 61 million tonnes.

Virtually all the decline in global cereal output in 2005 is forecast for major producing and exporting developed countries. "The bulk of the decrease is expected in coarse grains production in the United States and Europe," according to the report, "where yields are expected to return closer to average after record levels last year."

Drought lowers cereal output in Africa

Among the developing countries, the report forecasts a "marginal increase in the 2005 aggregate cereal output, mostly on account of better prospects in parts of Asia. Output in Africa may fall for the second consecutive year reflecting drought in the north of the region, which more than offset a slight increase expected in sub-Saharan Africa. In the group of Low-Income Food-Deficit Countries, the 2005 cereal production is also forecast only marginally up from 2004."

Cereal use to exceed production

Food outlook projects a modest growth of just 0.3 percent in world cereal use in 2005/06, compared to 2.3 percent in the previous year. However, if production forecasts hold, world cereal output in 2005 would not meet next year's projected cereal needs without dipping into global stocks.

Despite the tighter supply and demand outlook for 2005/06, cereal prices currently remain well below their levels a year ago, mainly reflecting large export availabilities.

Milk production rises in developing countries

FAO forecasts a rise in global milk output to 2.8 percent in 2005. The bulk of the growth is expected in developing countries. Asia and South America particularly are increasing their share of global production.

Coffee prices surge

Coffee prices, which started to recover in late 2004 surged in the first quarter of 2005 and by late May were almost 60 percent higher than a year ago. FAO says, "The early outlook for 2005/06 points to a further reduction in output, which could support a continuing upward price trend for the rest of the year, further increasing revenues in exporting countries.

Banana production recovers in Latin America

International prices of banana weakened slightly in March and April, as production recovered in several Latin American countries after a period of reduced supply while demand remained stable in the main banana markets.