Cereals - OECD-FAO Agricultural Outlook 2012-2021

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Cereal stock-to-use ratios in the decade to 2021 will remain below historical averages, posing the risk of future price volatility.

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Market situation

Despite record cereals production in 2011, international prices remained elevated. The bumper crop helped to replenish stocks and moderate prices in the second half of 2011, but a weakening US dollar and low freight rates bolstered export prices in early 2012.

Grain prices were further supported by excessive cold across much of Europe and the Commonwealth of Independent States (CIS), and the excessive dry conditions that prevailed in the southwest United States and portions of South America. A tight maize supply situation, following last year’s below trend yields in the United States, contributed to the increase in coarse grain prices while deteriorating conditions of the South American soybean crop put additional upward pressure on markets. Early reports revealed the intention of United States farmers to plant 38.8 Mha of maize, a level not seen since 1937, but price movements during planting showed the market bidding for more oilseeds (soybeans) area which could pull plantings down from the initial intentions. Given the low level of maize inventories, markets are expected to remain sensitive to the eventual size and progress of the maize crop in the United States, the world’s largest producer.

Despite significant losses due to floods in the second half of 2011, especially in Thailand, outstanding yields in India and several other major producers lifted world rice production in 2011. Rice prices over the year were very much influenced by the implementation of new polices in Thailand and India.

Projection highlights

• By 2021, wheat prices in nominal terms are projected above the previous decade, but below those prices seen during the last two years. Prices in real terms are expected to remain flat to moderately declining from 2012. Coarse grain and rice prices follow a similar pattern with nominal prices dipping in 2012, and then modest growth for the remainder of the period (with declining real prices).
• World cereal production is expected to grow in 2012 as a response to higher returns, increasing gradually during the rest of the projection period. Stocks-to-use ratios will remain below historical averages, potentially adding to price volatility.
• Harvested area for cereals continues expanding, but at a slower pace than in the past. Yield growth prospects are less optimistic and mostly concentrated on maize and rice.
• Trade of wheat and coarse grain increases at a slightly slower pace than in the past. The United States keeps its leading position as maize exporter. The CIS becomes an even more important source of wheat exports by 2021 than in the base period. Trade of rice is expected to increase faster than in the past driven by growing shipments from LDC Asia, in particular Cambodia and Myanmar, and by increasing imports by African countries. Nevertheless, trade in rice remains small compared with other grains.