The global cereal supply and demand situation has further tightened, with a downward revision of the 2006 world cereal production forecast and a projected increase in cereal utilization in 2006/07. At current forecast levels, the utilization would exceed production by 3.3 percent in 2006/07. World cereal stocks are forecast to decline for the third consecutive year, with those of wheat falling to their lowest level since 1981.
Cereal export prices have increased sharply in recent months, mainly in response to tightening world supplies and by November 2006 were well above their levels of a year earlier. Because of higher prices, the cereal import bill of the Low-Income Food-Deficit Countries (LIFDCs) is forecast to increase by 15 percent in 2006/07.
However, higher prices are also encouraging larger plantings of 2007 crops. Wheat planting has been completed in the main producing regions and early prospects are favourable, with increased areas reported and satisfactory weather conditions so far.
Severe floods in the Horn of Africa in the past weeks have adversely affected up to 1.8 million people in Kenya, Ethiopia and, in particular, Somalia. Hundreds of thousands of people are urgently in need of humanitarian assistance. Despite the flooding, overall prospects for the 2006 cereal crops, now being harvested, in Eastern Africa remain favourable.
In the developing countries, the 2006 cereal production has increased, or is projected to increase in almost all regions of the world, in particular Africa and Asia. As a result of the improved supplies in Africa, per caput cereal consumption is expected to rise in the 2006/07 marketing year.
Following bumper harvests and ample cereal supplies in countries of Western and Southern Africa, and in order to support domestic prices, donors are encouraged to undertake local purchases and triangular transactions for their on-going food aid distribution programmes.
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