Optimistic outlook for world feed grains
April 01, 1994
by Teresa Acklin
Consumption and trade forecast through 2003 is "moderately optimistic," study indicates.
The potential for increased consumption and expanded trade results in a "moderately optimistic" outlook for world feed grains into the next century, according to a recent study released by the U.S. Feed Grains Council.
The "World Feed Grains Demand Forecast," produced each year by the Council, projects global demand and market conditions for feed grains. The latest report was issued in February at the Council's 34th annual membership meeting in Scottsdale, Arizona, U.S.
For the period 1993-2003, world feed grain activity will be primarily market-driven, and consumption will increase slightly faster than production. Consumption by the 2002-03 marketing year is projected to be 13.1% higher than in 1992-93, while production will gain only 10.4% in the same period.
The world will rely somewhat more heavily on trade during the 1990s than in recent years, with slow but steady growth. Major feed grain importers, who account for about 78% of world trade, are expected to increase their imports by an aggregate 1.7% annually. And total world trade during the period is projected to increase by 20%, to 105.5 million tonnes in 2002-03 from 87.7 million in 1992-93.Outlook for importers
The report examined economic condltions and agricultural trends for importing countries and regions and developed projections for each. Key markets include Japan, Russia, Mexico and South Korea.
Japan is the largest feed grain importer in the world, taking an estimated 20.9 million tonnes in 1993-94. The report predicts Japan's annual imports will increase slightly in the next few years, peaking at 21.5 million tonnes in 199798. Imports then will begin to decline in succeeding years, falling to 20.8 million in 2002-03.
In the next decade, Japan's economy is expected to rebound from recent sluggishness, which will encourage rising demand for meat and livestock products. But Japan already has begun to rely more on imported meat and meat products- and less on domestic livestock production -to meet consumer demand. This trend is likely to intensify, reducing the amount of feed grain imports required, the report indicates.
Yet, the prospects of declining feed grain imports, particularly of maize, could be altered by development of new uses. Industrial products made from maize, such as ethanol and starch-based biodegradable plastics, hold great potential in Japan, the report says. If that potential is realized, Japan's feed grain imports could exceed projections.
Although Russia's feed grain imports in 1994-95 are expected to increase by 10% from the7.8 million tonnes imported in 1993-94, the remainder of the decade will see sharply declining levels. Imports in 2002-03 are estimated at 3.9 million tonnes, down 50% from the current marketing year.
The report suggests that even though Russia's current economic woes are likely to improve slowly over the next decade, the current trend of contraction in cattle and dairy cow inventories is likely to continue. Weak consumer demand and low profitability are the primary reasons for this trend.
The poultry and pork sectors are expected to expand slightly. But stronger feed grain demand from those sources should be countered by increased production of domestic feed grains, the report says. Maize production is expected to increase by 18% during the period, while barley production should advance by 7%.
A huge expansion in Mexico's feed grain imports should occur during the period, based on economic growth, changes in agricultural price support policies and the North American Free Trade Agreement. The report projects total feed grain imports will increase by 136% during the period, to 10.4 million tonnes in 2002-03, making Mexico the world's second largest importer.
Maize imports in particular are expected to expand steadily, reaching nearly 6 million tonnes in 2002-03, compared with a mere 146,000 tonnes in 1993-94. Sorghum imports, at 4.2 million tonnes in 1993-94, are expected to post only small advances during the period, increasing to 4.4 million tonnes by 2002-03.
In the past, high maize price supports, especially relative to other grains, and strong food demand sparked large increases in maize production, minimizing the need for imports. But a new price support plan is designed to protect farm incomes while allowing market signals to influence planting decisions. This policy is expected to result in a sizable shift away from maize plantings.
NAFTA also will affect maize imports, with the gradual elimination of Mexico's import levies expected to stimulate increasing consumption of U.S. maize.
For the past decade, strong economic growth and rising living standards boosted South Korea's demand for livestock and dairy products, and the subsequent demand for feed grains also skyrocketed. Since 1981, South Korean maize imports jumped by more than 130% to 6.5 million tonnes in 1993.
This trend is expected to continue through 2003 as economic growth remains strong and livestock product demand advances. The report projects a 35% increase in maize imports during the period, to about 8.8 million tonnes in 2002-03.Outlook for exporters
The report predicts some major shifts in exporting patterns in the coming years. China's feed grain exports are expected to drop dramatically, and European Union exports also will decline. Meanwhile, Eastern Europe will move from a net importer to a significant net exporter. Argentina, Canada and the U.S. should see steady gains in their export shares.
China's strong economy, market-oriented reforms, rising living standards and improved diets, including growing consumption of livestock and dairy products, will fuel domestic feed grain demand significantly.
An ever-increasing share of China's domestic production will be required to meet this demand, leading to steady declines in China's exports. By 2002-03, China is expected to export a mere 260,000 tonnes of feed grains, compared with 11.4 million in 1993-94.
Eventually, China will become a net importer, but the timine is uncertain. The report projects this change in status will not occur before 2002.
Since 1986-87, the E.U. has been a net exporter of feed grains, with its barley exports exceeding its maize imports. Although this pattern is expected to persist through the next decade, the net export level is projected to shrink.
In 1993-94, maize imports are expected to total 517,000 tonnes. By 1995-96, annual imports should increase to about 2.5 million tonnes and remain at that level through the end of the study period.
Meanwhile, barley exports are projected to fluctuate from year to year, reaching a stable level of 3.45 million tonnes by 2000. That compares with the 1993-94 export level of 4.6 million.
Reform of the E.U.'s Common Agricultural Policy is the primary reason for these projected changes. Planting set-asides for barley and maize are expected to take more than 2 million hectares out of production. Although higher barley yields should more than offset reduced plantings, maize yields probably will not compensate for the loss in area.
Meanwhile, pork and poultry production should increase by 8% and 10%, respectively. Growth in these industries will compensate for reduced beef and dairy production, leading to a net increase in feed grain demand.
Maize imports could be greater than the projections if industrial use expands.
This region is the only market expected to shift completely to a net exporter position from net importer during the study period.
Eastern Europe has undergone dramatic economic restructuring and agricultural adjustments in recent years. Economic prospects for individual countries through the remainder of the 1990s are uneven, but the region overall should experience slow economic growth.
Livestock production patterns and feed grain use have changed markedly in recent years. Between 1990 and 1993, beef production fell by 22%, pork by 14% and broilers by 20%. The result was a 28% drop in feed grain consumption and a 23% decline in imports.
Livestock production declines have reached bottom, but growth from this point will be slow. In fact, feed grain production increases should outpace demand growth through the decade. By 2002-03, the region is projected to export about 4.4 million tonnes, compared with imports of 1.4 million in 1993-94.
ARGENTINA, CANADA, U.S.
These countries should enjoy expanded feed grain exports in the next decade. Between 1992-93 and 2002-03, Argentina's maize exports should increase by 51%, Canada's barley exports should rise by 66%, and U.S. exports of maize, sorghum, barley and oats in total should advance by 19%.
Although Argentina's feed grain use has increased rapidly in the past few years, production has more than kept pace. The surplus has enabled Argentina to increase its exports steadily.
The trend should continue through 2003. The livestock production growth rate is expected to slow, and production should continue to exceed use.
Canada' s barley production is expected to increase only marginally during the decade, while use should advance by about 13%. But historically large stocks in 1993-94 will permit Canada to expand its exports through the period.
U.S. feed grain export volume in 2002-03 is projected to total 59.5 million tonnes, compared with 49.9 million in 1992-93. The U.S. market share is estimated to expand gradually to about 59% from 57%.
U.S. plantings and yields are expected to rebound sharply after 1993's weather-reduced output. Longer-terrn, annual setaside requirements should be low, and more significantly, land in production gradually should increase; the report predicts the 10-year Conservation Reserve Program will be extended, but only 50% of the 1.6 million maize hectares currently in the program will remain idled by 2003-04.
The report was prepared by a task force consisting of members of the Council; the staff of the Center for Agricultural and Rural Development at Iowa State University, U.S.; and Sparks Companies, Inc., Memphis, Tennessee, U.S., an economic research and analysis group specializing in agricultural commodities.
The task force prepared its projections using economic models from the Food and Agricultural Policy Research Institute in the U.S., although the assumptions used in the report were developed by the task force and differ from the Institute's assumptions.