The East African Community states are among countries that will benefit from low cereal prices expected to prevail this year, following the record-breaking output in Europe and Asia last year.

The world cereal output is forecast at 2,509 million tonnes (including rice in milled equivalent), which is 39 million tonnes lower than in 2014 but still nearly 5 per cent above the average of the past five years.

According to the Food and Agriculture Organisation (FAO), exporting nations are still holding abundant stocks of cereals, hence an increase in prices will be unlikely.

“The world food import bill is forecast to reach a five-year low in 2015, mainly driven by a decline in international prices, low freight rates and a strong US dollar,” said FAO in its latest global food outlook.

The situation will benefit low-income countries that continue to spend millions of dollars importing cereals. As a result, these countries are expected to save on foreign exchange this year.

The EAC member states do not produce enough wheat, rice and maize for their 134.5 million citizens. Although Uganda and Tanzania have increased their maize production, supply still remains erratic and heavily dependent on rainfall performance.

Prices are expected to remain low despite a slight decline in global grain production this year compared with last year, as abundant stocks held by exporting countries and some importing nations are expected to offset any pressure from the demand side.

“Worldwide cereal production will likely decline by 1.5 per cent from last year’s record-breaking output, mainly due to reduced acreage planted with maize, but the impact will be cushioned by exceptionally high levels of existing stocks,” said FAO.

The world production of coarse grains (cereals other than wheat and rice) will fall below the 2014 record level, but the total inventories are likely to be released to meet the expected demand in 2015/16.

“Given ample inventories to be carried over from the current season, coarse grain markets are expected to remain well supplied in the new season,” said the FAO.

Kenya is the top maize importer in the region. The United States Department for Agriculture predicts a supply deficit in the year 2015/2016, which it says will need to be offset by imports from the EAC unless the government lifts a ban on genetically modified maize.

Maize production in the country, and other parts of the East African region, has suffered due to insufficient rainfall, low availability of fertiliser and an outbreak of the Maize Lethal Necrosis Disease.

On wheat, FAO said overabundant supply of the crop is likely to remain in the 2015/16 season. This follows two consecutive years of record crop harvests, which have made it possible for countries to store the surplus.

“This, coupled with less buoyant growth in demand for feed wheat, could contribute to fairly stable market conditions in the new season,” the organisation added.

Source: The East African

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