WORLD GRAIN SUPPLY/DEMAND OUTLOOK FOR 1978/79

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00702A000600070008-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 12, 2016
• Document Release Date: March 28, 2002
• Sequence Number: 8
• Publication Date: December 1, 1978
• Content Type: IR

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c44s F
Grain Supply/Demand
Outlook for 1978/79
ER 78-10753
December 1978
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25X1
World Grain Supply/Demand Outlook for 1978/79
Central Intelligence Agency
National Foreign Assessment Center
Key Judgments
? World grain supplies for 1978/79 are more than adequate to meet high
levels of consumption and trade for both wheat and coarse grains.
? Despite expected record exports in the marketing year ending 30 June
1979 (MY 1979), total grain stocks held by exporters will show a moderate
increase by mid-1979; the US share of wheat stocks will drop and that of
coarse grains will rise.
? Foreign demand for US wheat, currently stronger than a year ago, can
be expected to slack off by January 1979 as larger supplies of Southern
Hemisphere wheat become available and the European Community (EC)
continues to subsidize wheat exports. US exports could still exceed last year's
level by over a million tons in MY1979.
? Demand for US exports of corn in MY 1979 should remain stable
unless Soviet and Chinese demand exceeds expectations, while total world
trade should show a slight increase.
? A Soviet harvest of 235 million tons is not expected to reduce MY
1979 imports much below 15 million tons if livestock production plans are
implemented and stocks are not drawn down.
? Less is known than a year ago about Soviet intentions for purchasing
US grain above the Long Term Agreement (LTA) minimum of 6 million
tons. In the year ending 30 September 1979, our estimate puts total US
deliveries at about 8.5 million tons. Estimates of individual major US
exporters vary from 6 to 11 million tons.
? Chinese imports of large amounts of US grain-over 6 million tons-
for the first time since MY1975 will largely offset the expected cutback in
Soviet imports this marketing year.
? The EC is using export subsidies on a large scale in order to move
mounting stocks of wheat and barley. This action will lead to increased
competition in traditional markets of the US and other exporters.
SECRET ER 78-10753
December 1978
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? US export prices for wheat and corn are expected to remain above last
season and relatively stable through early 1979. Although Southern Hemi-
sphere supplies could exert downward pressure on prices, it will be moderated
by strong foreign demand.
ii
SECRET
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World Grain Supply/Demand Outlook for 1978/79
World Grain: A Bumper Year
World grain' production for 1978/79 is fore-
cast by the Office of Economic Research of CIA
at a new high of 1,160 million tons, 80 million
tons above last year and 40 million tons above
the previous record set in 1976/77. The USDA
and FAO are also predicting a record output.
Gains are equally divided between the categories
of wheat and coarse grains.' Production is ex-
pected to equal or exceed that of last year in
every major region of the world. The EC and the
USSR will register the largest gains. A larger
area sown to grain and very favorable growing
conditions are the major factors underlying this
optimistic global production forecast. Although
the estimates of Northern Hemisphere crops are
relatively firm, those for Southern Hemisphere
producers are still very tentative.
Plentiful grain supplies, rising incomes and
population in LDCs, and expanding livestock
programs will push consumption of both wheat
and coarse grain to new highs in the marketing
year ending 30 June 1979 (MY1979). Consump-
tion will still be less than production, particularly
for coarse grains. In turn this will permit an
addition to Free World stocks for the sixth
consecutive year. It is also possible that a signifi-
cant addition to Soviet wheat stocks may occur
and possibly a small addition to Chinese stocks,
if their level of imports approximates our fore-
cast. The large addition of coarse grain (mostly
corn) to US stocks will more than offset an
estimated 20-percent decline in US wheat stocks;
the US share of Free World stocks will stay at 40
percent.
Despite an outstanding production year, we
forecast global grain trade in MY 1979 to be
slightly above the previous high of 156 million
' Total grain as used in this report excludes rice.
2 Coarse grains include corn, sorghum, barley, oats, rye, millet,
and miscellaneous grains.
tons in MY1978. Import demand for wheat will
be down less than a million tons, and that for
coarse grains will rise about 2 million tons to
record levels. The US export share of the world
grain market is expected to hold at about 45
percent for wheat and decrease from 66 percent
to 62 percent for coarse grains.
We foresee grain export prices remaining rela-
tively stable through the early part of 1979, if
Soviet and Chinese buying develops as expected.
A large portion of the current US harvest is
being stored and released slowly to the market by
farmers, thereby reducing the normal downward
price pressure during the fall harvest. Southern
Hemisphere and European selling of wheat and
coarse grains should tend to limit advances.
Downward pressure on prices can be expected,
however, if exporter supplies turn out to be larger
than now forecast. The reported strength in
prices from the increase in speculative and hedge
buying related to inflation and to the US dollar's
weakness has diminished at least temporarily.
US Government programs to decrease produc-
tion in 1979 and remove stocks from normal
commercial channels will place a floor under the
market. Aside from the selling decisions of US
farmers, these programs will have little effect on
prices before the second quarter of 1979 when
farmer participation in government programs to
cut acreage and 1979 prospects for grain crops
here and worldwide become better known.
Record Wheat Production and Consumption
We now expect a record 1978/79 world wheat
crop of 425 million tons-a 10.4-percent increase
over last year and 35 million tons larger than our
June forecast.' The UN Food and Agriculture
Organization, the International Wheat Council
(IWC), and the US Department of Agriculture
' See The Economic Intelligence Weekly, 8 June 1978.
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World Wheat and Coarse Grain' Supplies
Million Metric Tons
Million Metric Tons
200
Production
?e
/ >C.". Pt--,,
1970/71 71/72 72/73 73/74 74/75 75/76 76/77 77/78 78/79
Prelim. Forecast
Figure 1
57]948 11.78 CIA
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World Wheat and Coarse Grain' Exports2 Figure 2
Million Metric Tons
1970/71 71/72 72/73 73/74 74/75 75/76 76/77 77/78 78/79
Prelim. Forecast
1. Includes corn, sorghum, barley, oats, millet, rye, and miscellaneous grains.
2. Marketing year beginning 1 July.
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are estimating increases of about 9 percent.
Since June, production estimates have risen for
every region except Eastern Europe.
A combination of very favorable growing con-
ditions and expanded acreage have resulted in
higher wheat output for most major producing
countries in the Northern Hemisphere, except
for the United States (see table 1). A 12-percent
cut in US production-the impact of national
farm policy-will be more than offset by bumper
harvests in the USSR and Western Europe,
which together produced 30 million tons more
wheat than a year ago. However, excessive rain
at harvest time in these areas has resulted in a
large amount of low-quality wheat.
Southern Hemisphere prospects still look
much better than a year ago. Two major export-
ers-Argentina and Australia-this month start
harvesting wheat crops that are estimated by
several observers to be in the range of 35 to 55
percent larger than the drought-reduced ones of
last year. The widest range exists on the outcome
of the Australian harvest-12.5 to 14.8 million
tons. In South America, Ecuador is the only
country suffering from drought for the second
consecutive year; Brazil's output will be up less
than expected because of cuts in sown acreage.
Although we are projecting a large increase in
world wheat consumption for MY 1979, it will
fall short of the gain in production. This situation
should result in a moderate addition to global
stocks, which were drawn down last season.
Wheat consumption at a new high of 415 million
tons represents an increase of 5.6 percent and
exceeds the long-term trend for the third con-
secutive year. The increase is partly explained by
the larger harvests in the developing countries
and China plus continuing high levels of wheat
imports. China accounts for over a third of the
projected 22-million-ton increase in global con-
sumption. Chinese increases in consumption will
be for humans, not animals. Smaller feed usage
in the United States will be balanced by larger
feed usage in the EC and the Soviet Union. The
current price spreads between quality wheat and
coarse grains do not favor expanding feed use of
wheat in most countries, particularly if it must
be imported (see figure 3).
World Wheat Import Demand Strengthens
Developments since June suggest that world
trade in wheat for MY1979 will be only slightly
below the estimated record 72.4 million tons
shipped in MY1978. We are now forecasting
global import demand at 71.6 million tons; 5.5
Million Metric Tons
1974/75
1975/76
1976/77
1977/78
1978/79
Total ................. ......
378.6
362.1
353.1
420.2
385.3
425.5
Argentina .......
_....._
6.6
6.0
8.6
11.0
5.3
7.5
Australia .._....
.......
12.0
11.4
12.0
11.7
9.4
13.0
Canada .. .....
........
16.2
13.3
17.1
23.5
19.6
20.7
Eastern Europe
.......
31.5
33.9
28.4
34.2
34.1
33.3
India .. _._ .......
........
24.7
21.8
24.1
28.8
29.1
31.0
United States ..
.........
46.6
48.5
57.8
58.3
55.1
48.4
USSR '
109.8
83.9
66.2
96.9
92.2
114.0
Western Europe .......
50.8
56.7
48.5
50.6
47.7
57.9
Other .........................
80.4
86.6
90.4
105.2
92.8
99.7
'includes all harvests occurring within the July-June year indicated, except those of the early
harvesting period in the Northern Hemisphere, which are moved forward-that is, the May 1977
harvests of India, North Africa, and the southern United States are included in the 1977/78 period,
which began on 1 July 1977.
Preliminary.
Forecast.
2 "Bunker weight" basis; not discounted for excess moisture and dockage.
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Export Prices: US Grains C.I.F. Rotterdam
US Dollars per Metric Ton
Figure 3
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million tons more than our June forecast. The
IWC and the USDA trade forecasts have also
trended up over the past quarter to highs of 69.5
million tons and 72.6 million tons, respectively.
The most significant development has been
China's larger-than-expected purchases of wheat;
these could push the Chinese MY1979 total
imports above last year's level of 8.6 million tons.
Other Asian countries increasing wheat pur-
chases are Pakistan, Bangladesh, and Indonesia.
Thus, on balance, Asia will import as much
wheat as in MY1978 even though Middle East-
ern imports (included in the Asian total) will be
down because of improved harvests. South
America is the only region where imports should
be noticeably larger this marketing year, because
of insufficient production gains in Brazil and
Chile. The increase, however, will not offset the
projected decline in West European and Soviet
imports of over 3 million tons (see table 2).
Our estimate of global import demand for
wheat could be on the low side if the European
Community (EC) and Canada choose to offer
some of their surplus low-quality wheat at prices
competitive with coarse grains. Such a pricing
policy might induce East European countries and
the USSR to replace corn and barley with wheat
in feed rations. Some less developed countries
(LDCs) may also import larger quantities of
lower quality wheat to build stocks if it is
favorably priced. So far neither Canada nor the
EC has cut prices enough to compete with corn
or barley, although they have been aggressively
marketing wheat. The EC, for example, has been
undercutting US wheat by over $5 per ton in
South American markets by subsidizing exports.
Exporter Supplies Adequate
We expect that the five major exporters will
have about the same amount of wheat available
for export and/or stocks in MY1979 as in the
previous year. Increases in production and lower
domestic consumption this marketing year by
most exporters should offset their smaller carry-
over stocks on 1 July 1978 than a year ago (see
figure 4). In addition, smaller exporters such as
Turkey and India again have surplus grain for
export. Therefore, estimated supplies of 200 mil-
lion tons are more than enough to meet our
current projection of world import demand of
nearly 72 million tons for MY1979.
Wheat stocks in the major exporting countries
on 1 July 1978, estimated at nearly 60 million
tons, were down 5.9 million tons from the high
World Import of Wheat and Flour, by Region '
Total ........ ............... ................. 68.0
Europe ........................... _ ................. 26.7
Western Europe ' ............................ 7.8
Eastern Europe ............................ 3.9
USSR . _........... _.......... _........... _........ 15.0
Western Hemisphere ........................ 8.8
North and Central America ._ 2.4
South America ................................. 6.4
Asia .._ ........... ........... .......... ........ .....__ 24.4
Middle East .......................... 2.6
Far East ........ ... ......................... 21.8
Africa ................... __....... .__............... 7.1
Oceania and unspecified _ ................. 1.0
Marketing year ending 30 June of stated year.
2 Preliminary estimates.
Forecast.
Excluding intra-EC trade.
63.1
63.4
66.4
61.0
72.4
71.6
16.9
13.0
21.7
17.0
19.3
16.0
7.0
6.4
6.6
6.0
7.7
6.3
5.5
3.8
4.9
6.2
4.6
4.5
4.4
2.8
10.2
4.8
7.0
5.2
9.1
7.4
8.8
8.1
9.9
11.5
2.6
2.7
2.0
2.1
3.0
3.0
6.5
4.7
6.8
6.0
6.9
8.5
28.0
33.5
26.0
25.8
31.5
32.3
4.0
6.1
3.3
4.7
6.5
5.8
24.0
27.4
22.7
21.1
25.0
26.5
8.5
9.0
9.5
9.8
11.6
11.7
0.6
0.5
0.4
0.3
0.1
0.1
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Wheat: Estimated Stocks of Five Exporters' as of 1 July
Million Metric Tons
Figure 4
78 79
Prelim. Forecast
1. Argentina, Australia, Canada, the EC, and the United States.
2. Excludes new crop of wheat harvested in June.
level of a year earlier-the first drop in five
years. US stocks, on the other hand, increased
and represented about 45 percent of total ex-
porter carryover supplies. While commercial or
"free" supplies are still relatively large, US loan
and grain reserve policies are building farmer-
held inventories of wheat that are not releasable
at current prices. An estimated 36 percent of the
total US stocks on 1 July 1978 were in the latter
category; 1.4 million tons have since been added.
The national price of wheat at the farm will have
to rise roughly 10 percent over current levels
before wheat can be sold from this reserve.
The relatively high level of trade projected for
MY 1979 will not require a drawdown in total
stocks of wheat exporters by 30 June 1979. A
small addition may occur and among the export-
ers we project a reversal of the stock changes
experienced in MY 1978. In the current market-
ing year the US and to a lesser extent Canadian
stocks will decrease, while those of all other
exporters will increase, most significantly in the
EC (up over 3 million tons). The success of the
EC's export subsidy program will determine the
size of their additions to stocks. For the United
States, we are now projecting a 20-percent or 5.6
million-ton drop in wheat stocks. We expect the
US share of exporter stocks to fall from 45 to 35
percent by next July.
Strong Foreign Demand for US Wheat
We are now forecasting that US exports of
wheat and flour in MY1979 could set a new
high-in the range of 32.4 to 34.3 million tons-
and exceed the previous record of MY1973.
USDA's last published forecast was 31.0 million
tons. We have raised our export forecast 5
million tons since last June because of: (a) an
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increase in total global import demand, (b)
unexpected large Chinese purchases of US
wheat, (c) downward revision of likely Austra-
lian and Canadian shipments, and (d) increased
recognition by importers of the United States as
a dependable rather than just a residual supplier.
Demand for US wheat is forecast to be signifi-
cantly down from MY 1978 only in Western and
Eastern Europe. China's purchases of over 3
million tons will push US exports to Asia up
sharply. Only minor import changes are forecast
for other regions.
A number of uncertainties surround any fore-
cast of US wheat exports made this early in the
marketing year, and the most important one may
be the magnitude of EC exports. The EC, faced
with large surplus stocks after this year's wheat
harvest, could choose to boost exports by 3-5
million tons and still have adequate stock carry-
over next 30 June. The Community has already
made the policy decision to aggressively sell
wheat in international markets with the help of
export subsidies. The quantity of wheat the EC
hopes to market and the financial burden it will
underwrite are still unknown. So far 1.5 million
tons have been put out on tenders eligible for
export restitutions, but only 900,000 tons sold. In
recent weeks, traders indicate they now need
higher export subsidies than those offered ($110
to $115 per ton).
In spite of the export subsidies, we believe that
it will be difficult for the EC to push exports of
wheat and flour much over 7 million tons in MY
1979, up 2 million tons from last season. To do so
means expansion into new markets-Asia and
South America-on a large scale, which we
doubt can be done in the next six months. Any
success the Community has in expanding sales
above this level will adversely impact not only on
sales of US wheat but those of other exporters as
well.
Shipments of US wheat in the first quarter of
this marketing year ran 20 percent ahead of a
year ago. We do not expect the shipment rate to
taper off much before December, when Aus-
tralian and Argentine wheat, currently in short
supply, will become available in larger quantities.
Larger supplies of EC wheat also will be avail-
able throughout 1979. Although this means the
international market will be much more competi-
tive during the second half of MY1979, the
chance of the United States holding its annual
market share appears relatively good. It is fa-
vored by fewer logistic problems in moving grain
for export, a good supply of high-quality wheat,
potential deliveries yet to be made to China and
the USSR, and use of PL-480 and Commodity
Credit Corporation programs.
Bumper Coarse Grain Crops Here and Abroad
World coarse grain production in 1978/79 is
estimated at a new high of 737 million tons, 43
million tons over 1977/78. We forecast that
foreign production of 524 million tons, almost 7
World Exports of Wheat and Flour, by Source'
Total ............._...
. 68.0
63.1
63.4
66.4
81.0
72.4
71.6
Argentina ..........
.. 3.5
1.1
2.2
3.1
5.6
2.5
2.5
Australia .......
. 5.6
5.5
8.0
8.1
8.3
11.0
7.0-7.5
Canada .. .....
.. 15.6
11.7
11.2
12.1
12.9
15.9
15.0-15.5
EC'
6.5
5.5
7.1
7.7
3.9
5.2
7.0-7.5
USSR ._.....__.. ......
.. 1.3
5.0
4.0
1.0
1.6
1.0
1.2
United States ......
.. 31.8
31.1
28.3
31.5
25.7
31.3
32.4-34.3.5
Other ........ __......
.. 3.7
3.2
2.6
2.9
3.0
5.5
4.6-5.0
Marketing year ending 30 June of stated year.
Preliminary.
' Forecast.
Excluding intra-EC trade.
US as residual supplier.
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percent over levels of 1977/78, will account for
80 percent of the total world increase in
1978/79. On the other hand, the increase in
world corn production to a record 358 million
tons is dominated by the bumper US harvest, up
13.2 million tons over last year to a total of 175
million tons (see table 4).
Expanded plantings and excellent yields have
pushed up West European coarse grain produc-
tion to 92.6 million tons, 6 percent over the
previous record set last year. Although the EC's
crop of 68.4 million tons, including more than 40
million tons of barley, shows the greater rise,
other West European production is also up.
Rainy late-season weather in the south, which
damaged corn the most, has prompted a cut in
our estimate of Eastern Europe's coarse grain
production to 58 million tons, 1.4 million below
last year. The Office of Geographic and Carto-
graphic Research of CIA forecast the USSR
coarse grain harvest at 108 million tons-more
than 17 percent above last year, but not enough
to match the 1976/77 record of almost 115
million tons. While other kinds of grain are up
compared to last year, the Soviet corn crop is
expected to drop slightly, to about 10 million
tons. Thailand has had a much improved grow-
ing season compared to last year's disaster, and
recent heavy rains caused little loss to the impor-
tant corn crop.
We expect 1978/79 corn production to fall in
Argentina and South Africa, the two largest
World Corn Production'
Million Metric Tons
1975/76
1976/77
1977/78''
1978/79a
Total ................................
322.0
337.1
340.5
358.2
3
8
Argentina ............. ....
5.8
8.3
9.5
.
South Africa ................
7.3
9.7
10.1
9.4
Brazil
17.9
18.8
14.3
19.0
Thailand ....................
3.1
2.8
2.1
3.0
European Community
14.1
11.4
15.6
16.0
Eastern Europe
29.9
29.8
29.8
27.0
United States ............
148.1
159.2
161.8
175.0
Other
95.8
97.1
97.3
100.5
' Year runs from 1 July through 30 June.
2 Preliminary.
Projected.
Southern Hemisphere exporters. Although the
planted area in both countries should approxi-
mate that of last year, yields are not likely to
match last year's impressive levels. The same
holds for Argentine sorghum production, which
is expected to fall 13 percent, to 6 million tons.
On the other hand, Brazil's corn harvest should
rebound to near the long-term trend following
last year's drought-reduced yields. Australia's
crop outlook is also vastly improved due to better
weather; barley production is officially forecast
to reach 3.7 million tons and sorghum 1.2 million
tons, increases of 55 and 115 percent respec-
tively.
Another Record Year for Consumption
We expect world use of coarse grain in
MY 1979 will be up 3 percent because increased
supplies and relatively attractive prices will com-
bine to encourage their use in expanding live-
stock production. The increase represents a con-
tinuation of growth since MY1976, despite the
less optimistic forecast for some nations-due
partly to the sluggish economic situation. Corn
consumption is estimated to rise almost 3 million
tons, to 332.5 million tons in MY1979. We still
expect West European use of coarse grains to be
up 2 percent in MY 1979-to almost 109 million
tons-even though their usage is impeded by a
good forage harvest, greater feed use of wheat,
and a slightly lower growth rate outlook in
livestock industries. This increase will occur
largely in non-EC countries, while Community
use of coarse grains will continue to be dampened
by competition from imports of levy-free grain
substitutes.
East European use of coarse grains may drop 1
million tons in MY1979. Production losses are
not expected to be fully offset by imports, partly
because of larger forage supplies in the northern
countries. In the USSR, grain feeding rates were
up sharply in the past two years, and, with a
continued push to expand livestock production, a
further increase is expected this year. Growth in
Latin American use of coarse grains in MY1979
is expected to be less than normal due to lower
supplies in Brazil. Although consumption growth
will slow in the principal non-Communist Asian
countries, we still foresee an increase of almost 8
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percent. With a good crop and the big jump in
corn imports, China's use of coarse grains will be
up. Although less optimistic than earlier, the
USDA projects US coarse grain consumption in
MY 1979 will rise more than 5.5 percent to 144.5
million tons.
Import Demand Continues to Climb
World coarse grain imports have grown stead-
ily over the last four years and in MY 1979 are
forecast to reach a record 85 million tons, 1.7
million tons above imports for MY1978. Corn
imports, which in recent years have represented
about 70 percent of total coarse grain trade, will
reach an estimated 60.2 million tons in MY 1979,
1 million tons above the level for MY1978 (see
table 5).
Western Europe's abundant supplies and a
continued competition from grain substitutes in
the EC will depress coarse grain import demand
by more than 6 percent. Higher imports by the
southern tier of countries in Eastern Europe will
be more than offset by lower demand from the
two largest importers, Poland and East Ger-
Imports ................. ..._.....
52.5
54.3
59.2
60.2
European Community'
13.5
18.6
12.9
12.1
Other Western Europe
5.5
7.3
7.9
7.6
Eastern Europe .. .
....
4.9
5.1
4.3
4.1
USSR ........ .__....... ._.
....
11.9
4.9
11.2
8.5
Western Hemisphere
3.3
3.2
4.2
5.2
Asia ....... .,....
12.1
13.8
16.9
20.8
Africa ...... ._... ..... ..
....
1.3
1.4
1.8
1.9
Exports _ ................ __
._.
52.5
54.3
59.2
60.2
Argentina
2.6
4.4
6.0
6.0
Brazil ....... ............ ....
1.4
1.2
0.8
0.4
South Africa . ........ .....
3.2
1.3
2.7
3.7
Thailand .............. .___.
2.4
2.1
1.2
2.1
Eastern Europe
2.0
1.3
1.5
1.0
United States
40.0
42.8
45.6
45.4
Other _ ........... ._.__.....
0.9
1.2
1.4
1.6
Marketing year ending 30 June of stated year
Preliminary.
Projected.
Excludes intra-EC trade.
many. Although we expect further expansion in
the livestock industries of these latter two coun-
tries, shortages of hard currency and Western
credit will hold down coarse grain imports. This
also could shift some purchase of corn to barley
and other cheaper grains.
Despite a much improved harvest in the
USSR, we still expect Soviet imports of coarse
grains in MY 1979 to be about 9 million tons,
only 2.5 million tons less than last year. This
level is based on continued expansion of livestock
production according to plan.' Corn is forecast to
account for about 8.5 million tons of the total,
with 6.5 million tons from the United States--
2.7 million tons below US shipments during
MY1978.
A number of factors point to smaller Soviet
imports of US corn in MY 1979.
? Shipments of US corn to the USSR during
the fall and early winter will be less than last
year.
? Total import requirements are down, and the
USSR can obtain as much corn from other
sources as in MY1978.
? Even though the Soviets are permitted to
take up to 12 million tons under the LTA
year ending 30 September 1979, only about 1
million tons have been shipped or registered.
? Noneconomic considerations and the lower
prices of other coarse grains may also depress
demand for US corn.
Factors which may partially offset these con-
siderations are the widely perceived Soviet pref-
erence for cornand the lower shipping costs from
US ports.
Were the USSR's harvest next year to be no
better than average, however, Soviet import
needs during the third quarter of 1979 would
rise, and the prognosis for US exports of corn to
the Soviets in the current LTA year would be
more optimistic.
'See the forthcoming Office of Economic Research report,
USSR: Long-Term Outlook for Grain Imports, for more detail on
Soviet grain feeding requirements.
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The PRC's reemergence as a significant corn
buyer highlights Asian market developments.
We estimate Chinese imports will be 3.6 million
tons in MY1979, with 3 million tons coming
from the United States. Because most of this is
for human consumption and because of the in-
creasing price advantage of corn relative to
wheat, total corn imports could go even higher.
The United States should be the primary benefi-
ciary of further Chinese imports during the next
five months, and beyond, if Argentina's supplies
are less than expected. Due to slower expansion
in livestock feeding requirements, corn imports
by the traditional big three Asian importers
(Japan, Taiwan, and South Korea) are expected
to be up only slightly in MY1979, and US
shipments to Japan may fall.
Plenty of Exportable Supplies
Even with the expected growth in demand for
grain, the pressures of abundant exportable sup-
plies in the market are already noticeable. Com-
petition among exporters and between the indi-
vidual coarse grains is keen; the availability of
low priced feed-quality wheat may also become a
factor. The 1.7-million-ton increase in total
coarse grain trade is estimated to be about
equally split between corn and the aggregate of
all other coarse grains. However, export policies
by the EC and others concerning barley-al-
ready priced $10 to $15 per ton under corn-
could result in smaller corn sales.
The major Southern Hemisphere corn export-
ers increased their MY1978 shipments by almost
38 percent, with big jumps in Argentina and
South Africa offsetting Brazil's drop (see table
5). South Africa will be solely responsible for the
expected small rise in the Southern Hemisphere
exports in MY1979. This forecast of a rise in
Southern Hemisphere exports may be altered as
better information on crop projections become
available in early 1979. Although we expect
Brazil to again be a net exporter after its harvest
next spring, the greatest portion of this grain
export will move in MY1980.
Thailand's projected higher shipments for
MY1979 will be destined for its traditional
Asian markets. This, along with the availability
of more South African corn, makes for greater
competition in the Asian market. The big US
corn sales to China increase the US share in this
important market. Eastern Europe and EC corn
exports to third countries will be insignificant.
Barley exports from the EC, Canada, and
Australia could exceed 11.0 million tons in
MY1979, compared to 9.0 million tons in
MY1978. The EC, as in MY1978, is again
encouraging barley exports by providing high
subsidies. The EC's willingness to subsidize ex-
ports, Canadian and Australian grain export
decisions, and importer preferences will be deci-
sive factors in determining how much barley
moves into world markets. In Canada especially,
where the use of export capacities are near
maximum, a determination to ship more barley
could mean a reduction in wheat shipments.
Wheat price premiums over barley have in-
creased, and this would appear to favor wheat
exports. However, pressures to move farmer-held
barley could be offsetting. Due to lower produc-
tion prospects, exports of Argentine sorghum-
also expected to be priced under corn-are pro-
jected to be slightly under the 4.2 million tons
shipped in MY 1978.
Stocks, More and More and ...
We estimate Free World coarse grain stocks at
the end of 1978/79 will top 100 million tons for
the first time and could approach 110 million
tons, depending on the success of the EC, Aus-
tralian, and Canadian export programs (see fig-
ure 5). The increase in world stocks has occurred
due largely to an astounding 140-percent growth
in US stocks, primarily corn, over the last five
years. During 1978/79 we predict nearly a one-
third increase in US stocks, to a total of 53
million tons. As of 17 November 1978, US
farmer-owned stocks of corn under the govern-
ment reserve program exceeded 13.2 million
tons. They will not be available to the market
until farm prices reach $2.50 per bushel, or 25
percent above current levels. The increase in
Free World grain stocks since 1972/73 has been
largely due to the steady rise in coarse grain
supplies. Non-US Free World exporter stocks are
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Free World Coarse Grain Stocks'
Million Metric Tons
concentrated in Canadian and EC barley. De-
spite rising exports, these stocks are still likely to
increase. Brazil's corn stocks could almost double
during 1978/79, to over 1.5 million tons.
Foreign Demand for US Corn Down
USDA estimates of this year's US corn crop
have risen steadily since early summer and the
latest is for a record 175 million tons, 13.2
million tons over last year. We expect foreign
demand for US corn in MY1979 will be 45.4
Figure 5
million tons, slightly below last year. Increased
exports to Asia and the Western Hemisphere,
most notably China and Brazil, will be offset by
declines in exports to Europe and the USSR.
For the official US crop year ending 30 Sep-
tember 1979, we concur with the USDA corn
export estimate of 48.3 million tons, compared to
49.5 million tons in the 1977/78 crop year. This
leaves stocks on 30 September 1979 at 39 million
tons, a 44-percent rise in 12 months, and the
highest since 1963.
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The authors of this paper are
of the Materials Division of 25X1A
the Office of Economic Research. Comments and
SECRET 13
queries are welcome and should be directed to
either
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