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MUMBAI, Sept. 2

WORLD grains situation has witnessed major transformation over the last 4-6 weeks with production prospects of wheat and coarse grains in different parts of the world, especially major exporting countries, dimming further.

Latest estimates suggest that in case of both wheat and coarse grains, global output will trail consumption by a significant measure. This will lead to an inevitable drawdown of stocks and firm prices.

While world wheat supplies are expected to tighten among top exporters, the impact will be diminished by non-traditional exporters. The top four exporters — the US, Australia, Canada and Argentina — will have reduced exportable surplus. This has led to dramatically higher prices.

In its forecast as of August 28, the London-based International Grains Council (IGC) has placed world wheat production in 2002-03 at 568 million tonnes, not only down 7 mt from last month's forecast, but also down 13 mt from the 2001-02 output of 581 mt.

Continued dry conditions severely affected prospects in Canada, the US and Australia, while heavy rains in Europe reduced the quantity and quality of crops in some countries. Prospects in Russia and Ukraine improved.

Projected world wheat consumption in 2002-03 is 593 mt, up from 587 mt of previous year. Food use is generally unresponsive in the short-term to rising prices, while there are still large availabilities of feed wheat in Europe and the CIS, IGC noted.

World wheat trade in 2002-03 is forecast at 103 mt, down from 107 mt of previous year. The combined exports by the five major exporters may total only 73.5 mt, the smallest in 30 years. Poor growing conditions in Canada are expected to reduce exportable supplies by more than 6 mt from last year and 10 mt from just two years ago. As a result, Canadian exports, which have been falling since the early 1990s, are forecast at the lowest level in 28 years at a mere 12 mt, the US Department of Agriculture (USDA) pointed out.

Shipments of higher protein grades will be constrained by tight supplies. While wheat supplies tighten among top exporters, the impact would be diminished by others. Sales, mainly of medium and lower-quality wheat by Ukraine, Russia and India will be particularly large, IGC noted.

Global ending stocks of wheat are forecast to fall to their lowest level since 1995-96, according to USDA which put the figure at 138.7 mt (down from 161.3 mt in the previous year). However, IGC's forecast of stocks by the end of 2002-03 is 142 mt, of which major exporters' share will be 36 mt.

Coarse Grains: The forecast supply-demand balance for coarse grains in 2002-03 has also turned much tighter. Although consumption is projected to grow only marginally, a sharp reduction in output will mean consumption will exceed output by as much as 30 mt, resulting further drawdown of stocks.

For 2002-03, IGC's forecast of output is 876 mt (893 mt), the smallest since 1995World coarse grains trade is expected to remain unchanged at 107 mt. The continuing food crisis in southern Africa will lead to bigger imports, particularly of white maize, both as food aid and on commercial terms, it is expected.

Because of tight supplies , maize exports by the US will be at 51 mt, but shipments by China will remain high at about 8 mt.

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