The Hindu Business Line : Cereal, sugar prices seen under pressure

WITH global cereal production in 2003-04 forecast to trail global consumption, world cereal stocks are expected to be drawndown substantially, the Food and Agriculture Organisation of the United Nations (FAO) said in its latest Food Outlook. Despite this, cereal prices have been under pressure in recent weeks.

FAO's latest forecast for global cereal production in 2003 is 1,874 million tonnes, two per cent more than in 2002, but still less than the expected utilization in 2003/04, which is forecast at 1,971 mt. As a result, global stocks will decline to 382 mt.

World cereal trade is forecast to fall significantly in 2003-04 to 227 mt, the lowest level in 6 years. Most of this large decline is being driven by wheat and to a lesser extent by rice; trade in coarse grains is expected to increase slightly.

Prices for most cereals remain under downward pressure. International wheat prices weakened during September and October, mostly influenced by the sharp reduction in global import demand. Export prices for nearly all types of coarse grains remained generally stable over the same period. Only international rice prices showed any significant signs of strengthening, and continued to rally in all categories except for the lower quality Indica rice.

A continued recovery in meat prices in the short-term is expected to prompt a slight rebound in meat production in 2004. The influence of trade restricting measures in major meat importing countries is likely to persist in 2004 limiting upward price movement, FAO said.

International prices for dairy products rose between August and October 2003, after being stable during the first half of the year. For the remainder of 2003, prices are expected to show a further moderate increase.

While global output of oil crops and products is expected to increase robustly in marketing season 2003-04, prices for oilseeds, and oils & fats should also increase with firm demand and low stocks. Record sugar production and surplus stocks will continue to pressure world sugar prices into the new year, as more recent forecasts for 2002-03 indicate an additional 10.2 mt of output, the Food Outlook report pointed out.

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Cereal, sugar prices seen under pressure