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World cereals supply tight, prices soar

Milan, February 13, 2008

World cereals supplies will be tight, driving prices higher this marketing year, with strong demand and dwindling stocks offsetting an increase in output, the United Nations Food and Agriculture Organisation (FAO) said.

"With world demand showing little sign of abating, international prices of most cereals remain high, and some are still on the increase, while world reserves are heading for yet another decline from their already low levels," the FAO said in a Crop Prospects report on Wednesday.

The FAO has raised its estimate of world wheat output in 2007 to 603.2 million tonnes, up from a previous forecast of 602.2 million tonnes and 1.2 percent higher than in 2006, saying virtually all of the increase came from big producers in Asia.

The bulk of a 4.6 percent increase in world cereals output to 2.102 billion tonnes in 2007 came from a record maize crop in the United States, the agency said. It confirmed its earlier forecast of a 1.069 billion tonne coarse grains output in 2007.

The FAO said it expected a "significant increase" in the global wheat output in 2008 thanks to expansion of planted areas in major European producing countries and in the United States.

Winter crops were reported to be developing well across Europe and yields were likely to recover from last year's below-average levels, the Rome-based organisation said.

China, India and Pakistan, three major wheat producers in Asia, were likely to see output similar to last year's records and the wheat crop outlook was satisfactory in Egypt.

But FAO warned that despite an estimated increase in wheat output, supplies would remain tight in the 2007/08 marketing season.

"The current situation is such that it may require significant increases in production of more than one season's cereal crop for markets to regain their stability and for prices to decline significantly below the recent highs," it said.

Wheat stocks would fall to 146.8 million tonnes by the close of season in 2008, up from previously expected 141.6 million tones, but still at the lowest level since 1983.-Reuters




Tags: Supply | prices | tight | cereal |

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