April 7, 2000

A number of events in 1999 made the world outlook for feed grains brighter for the coming decade, and the recently-released World Feed Grain Demand Forecast issued by the U.S. Grains Council predicts a "fundamentally strong and positive" outlook through 2008.

Chief among the reasons for the optimistic forecast is positive growth in Asian economies that recently struggled through economic crisis. The world economic forecast is also improving with growth rates predicted between 3.3 percent and 3.5 percent annually through the rest of the decade. This growth is high enough to "rekindle the strong demand generated by expanding middle classes in many of the developing countries, and significant enough to increase dependence on feed grain imports," the report said.

As a result, the report said world coarse grain demand that was just over 874 million tons in 1999 could exceed 1 billion tons by 2008/2009. Similarly, total trade that was below 95 million tons last year could near 120 million tons by the end of the forecast period (2008).

"And, while competition for world markets will grow during the decade, U.S. producers are well-positioned to expand both their markets and market shares," the report stated.

There are some uncertainties, however. The Seattle Ministerial meeting, for example, intended to inaugurate a new WTO round of trade negotiations, failed among deep divisions between developed and developing nations, and between exporting countries and primary importers, especially the EU and Japan. Other uncertainties include future policy developments of the EU, which is considering extensive internal reforms and the accession of five new members with large agricultural potential, and reexamination of the FAIR Act in the United States.

In summary, the forecast implies:

• Strong market growth predicted. World coarse grain use is predicted to increase by 132 million tons (1.6 percent annually) during the 1998-2008 decade. Total coarse grain use by 2007/2008 could exceed 1 billion tons, up from 874 million tons in 1999/2000.

• Slight growth in harvested area. Coarse grain plantings and harvested area both are projected to grow (just over 3 million ha, an average increase of 0.1 percent annually) to over 370 million ha by 2008.

• Strong reliance on technology to supply world market growth. With harvested area growing far less rapidly than population, demand growth will be satisfied primarily by increasing yields, projected to grow 1.4 percent per year over the decade. Yield growth is projected to be quite steady and very significant, reflecting advances in genetics, nutrient use, and the growing use of seeds improved through biotechnology that boost yields, reduce production costs and/or improve crop quality.

• Modest declines in stocks throughout the period. Even though world coarse grain stocks are considerably above their low levels of 1995/96, when they fell to 11.8 percent of use, they are modest by historical standards at 17.6 percent of use (154 million tons) at the end of 1999/2000. Over the next decade, stocks are predicted to decrease modestly to just under 139 million tons by 2008/2009. With total use projected to exceed 1 billion tons, the projected stocks level would be just under 14 percent of consumption.

• Slow price increases. Stronger world demand and a declining stocks-to-use ratio could boost world prices modestly during the forecast period. While well below the record levels of 1995-97, corn prices (FOB Gulf) could increase $87 per ton to $124 per ton by 2008/2009.