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UN Agency Predicts Sharp Decline in World Cereal Stocks

World cereal stocks are expected to decline sharply in 2006, due to a slight decrease in global cereal output and significant growth in utilization, according to the latest forecast by the United Nations Food and Agriculture Organization (<"">FAO), which predicted that food emergencies will continue in a number of countries.

International prices of most cereals remained firm or rose further in recent months, supported by strong demand and tighter supply prospects, the Rome-based agency said in its latest Crop Prospects and Food Situation report.

Increased demand is expected to be driven by a recovery in feed use due to a rebound in poultry consumption, FAO said. In addition, the growing demand for ethanol is likely to boost industrial use of coarse grains, particularly maize, the report said.

While down about 1 percent from 2005 levels, world cereal output for 2006 would still be the third highest on record and above the five-year average, the report said.

Many countries are experiencing severe food difficulties and require external assistance, however, despite what the report called a "generally satisfactory global food outlook." These include a number of African States, such as Somalia, South Africa, Angola and Zimbabwe. The situation in Niger warrants "very close monitoring," according to FAO, because food reserves are exhausted in the majority of households and consumption has been sharply reduced.

Asia fares better, with bumper wheat crops in many countries. But the Democratic People's Republic of Korea (DPRK) is still facing a large cereal deficit, and "chronic food insecurity is likely to remain widespread," the report said.

Insecurity in Iraq is hampering food security there, while in Afghanistan the cereal harvest is above average but vulnerable households will still require food aid over the coming year.

In Central America and the Caribbean, early forecasts indicate that this year's Atlantic hurricane season will be active. "The region is still reeling from last year's hurricane season, the most active in history, causing nearly 2,300 deaths and a record total estimated damage of about $100 billion," FAO notes.

Source: United Nations