On May 9, 2019, the Food and Agriculture Organization of the United
Nations (FAO) released a report that the world cereal production is predicted
to hit a new record of 2.72 billion tonnes in 2019, with a year-to-year
increase by 2.7%. Similarly, the world cereal utilization is also likely to experience
a growth by 1.5%, while the global cereal consumption will rise by 1.1%. Meanwhile,
the consumption growth of rice is anticipated to speed up, and the demand for animal
feed and industrial-grade coarse grain will swell to a greater extent.
Under the
circumstance of sufficient supply and demand, the world cereal price will
continue to be under pressure. However, world trade in grain is predicted to
have a promising future, especially the trade in wheat and rice.
Besides, as
the food price index from FAO demonstrates, there is a growing tendency towards
the price of meat and dairy products, but not for cereal.
The increase of world cereal production to have
less influence on China's cereal price
FAO’s
prediction has aroused some concerns regarding whether the increasing grain output
in the world will drag down the cereal price in China. However, Chinese industry
insiders hold an opinion that the growth of world cereal production will not
have a great impact on China’s cereal price.
According
to statistics in terms of China’s agricultural consumption and import, the import
of rice will total to about 3 million tonnes in 2019, while the inventory is
over 100 million tonnes at the moment. The import of wheat is predicted to reach around
3.5 million tonnes in 2019, while the domestic stock already gets to tens of millions of
tonnes. The import of corn will be under 4 million tonnes in 2019, in contrast
to the current stock of 80 million tonnes. This data shows a sufficient storage of
grain in China, compared with the less amount of grain import. Insiders analyse
that China is self-sufficient in food production, with great surplus. A
decrease of price in grain, caused by a huge quantity of grain import is not
expected, due to the strict supervision under the Chinese government. Hence, the
increase of world grain output will not have much effect on China‘s cereal
price.
Chinese cereal price to increase in the long
run
With increasing
costs and constant improvement in mechanism of agricultural product price, a rising
price in Chinese agricultural products in the future is predicted.
Rice stock
will decline in a faster way. Rice output will
remain around 200 million tonnes, but an upward tendency towards rice
consumption will appear, which may speed up the reduction of rice stock.
Corn price
will increase in fluctuations. Corn supply and corn demand will have a tension.
The sown area and output of corn will experience a growth, together with the
price.
Wheat price
will recover after a slight drop. In the next ten years, the sown area of wheat
will reach around 240 billion m² steadily, with a rise towards the consumption.
In 3 -5 years, wheat price will undergo a slight decline after being stable for
a while. It is estimated that wheat price will recover again in a stable way in
2022. In 2028, the market price will again remain stable.
For more
information about China’s grain market, please have a look at our monthly
newsletter Crop Farming China E-News.