14 ISI Price Prospects for Major Primary Commodities, 1988-2000 (C'roptAiments of Volume ii 1weki~NAL DOCUMENTS LUNIT Volume 1"lISI x^_434,61 '.- 4e1. Fo Products Fertilizers Agricultural Raw Materials f r ]~~~~~~ Price Prospects for Major Primary Commodities 1988-2000 Volume II Food Products Fertilizers Agricultural Raw Materials The WfrIctJank Wa5hington, D.C. Coprht C 199 The Frld Bank 1818 H Street, N.W Washington, D C. 20433, U.S.A. All rights reserved Manufactured in the United States of Armerica First printing Februarv 1969 Future ievelopments in cmmrnoditv markets cannot be known with certaintv: However, in activities involving comnodities. judgrnents hae to be made about future events in these rnarkets. The forecasts presented here are judgnents based upon analvsis of the commoditv markets and on disc-ussions with people with expertise in these mnarkets. However, no representation is made that the findings, interpretations, and condusions expressed are accur3te or complete; they are entirely those ol the aAh Nr(s) and should not be attributed in an! manner tO the WVorld Bank, to its affiliated organizatino-s, or to members of its Executive Board or the ctountries thev represent. Users of the intormation in this publication should recognize the large degree of uncertaintv associated with these forecasts and use them with appropriate caution. The World Bank aoes not take anv responsibility for the results o.f anv actions taken by purchasers of 'his publication based on the nformation therein. Because of the informality and to present the results of research with the least possibkl delav, the ty-pescript has not ?een prepared in accordance with the procedures approprie-te to formal printed texts, and the World Bank accepts no responsibility for errors. The material in this publication is copyrighted. Requests ftor permission to reproduce portions of it should be sent to Director, Publications Department at the address shown in the copyright notice above. The WVorld Bank encourages dissemination of its work and will normaliv give permission promptlv and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will bte appreciated. The complete bac',I-st of publications from the World Bank is shown in the annual lndex of Publications, which contains an alphabetical title list and indexes of subjects, authors, and co rntries and regions; it is of value principaliv to libraries and institutional pur'-hasers- The !atest edition of each of these is available free of charge from Publications Sales Unit, Department F, The WVorld Bank, IS18 H Street, N-W., Washington, D.C. 20433, U-S.A., or from Publications, The Woi.d Bans., 66, avenue d'lena, 75116 Paris, Fe-nce. Contributors to this volume are Takamasa Akivama (coffee, tea), Ronald C. Duncan (dairy products), Mathurin Gbetibouo (cocoa), Donald F. Larson (vegetable fats and oils), Donald 0. Mitchell (beef, grains), C. Suan Tan (rubber, sugar), Maurice E. Thigpen (cotton, jute, tobacco), Panavotis N. Varangis (tropical timber), and Maw-Cheng Yang (bananas, fresh citrus fruits, and fertilizers, Library of Congress Cataloging-in-Publication Data Price prospects for major primary commodities, 1988-2000 / World Bank. p. cm. Contents: v. 1. Summary, energy, metals, and minerals- v. 2. Food products, fertilizers, agricultural raw materials. ISBN O-8213-1190-5 (v. 1)-ISBN 0-8213-1191-3 (v. 2) 1. Prices-Forecasting. 2. Farm produce-Prices-Forecasting. 3. Raw materials-Prices-Forecasting. 4. Fuel-Prices- Forecasting. 5. Agricultural prices-Forecasting. 6. Food prices- Forecasting. 7. Commodity futures. I. International Bank for Reconstruction and Development. HB231.P82 1989 338.5'2-dcl9 89-5529 CIP oTENTS Notes and Definitions ...................... i Coimodizy Descriptions ..... ,.. vii FOOD PODUC7S AND FERTILIZERS Coffee ..................... 3 Sumary ...................... 3 Recent Developments in the World Coffee Market .......................... 4 Supply Outlook .................................................... 5 Demand Outlook .................................................... 8 Price Outlook . ................................................... 10 Policy Issues .................................................... 10 Cocoa .................................................... 19 Sumum ry................................................ 19 Recent Developments in the World Cocoa Market . . 19 Production Prospects ............................................... 20 Demand Prospects ............................... 22 Price Outlook .. .............. 24 Trade Prospects ............. 26 Policy Issues .. 2' Tea _.. ..................,.,.37 Summary . ............................................ 37 Recent Developments in the World Tea Market ............................ 38 Supply Outlook ..............,........,,... 38 Demand Outlook ... 40 'irade Outlook ..............,.,. ... 41 Price Outlook ...................,.,,.41 Sugar .... 49 Summary ... 49 Sugar Production ........................................,.,..S50 Sugar Supply Projections ..54 Recent Sugar Consumption Developments ..55 Consumotion Prospects ............................ . .59 Sugar Exports ........................ 60 Export Prospects . ..... 62 Sugar Imports ............................. 63 Import Prospects ............................ .. .... . .. 66 Price Outlook ................................. 67 Bananas ........................................ ........ 77 SumAry. . . .. ... .. ... .. .... ................... 77 Outlook for Import Demand ............................. 77 Outlook for Exports ........... .................. 79 P'rice Outlook ...o................ ** ...,..........4.. 81 - iv- Fresh Citrus Fr-uits ........................................................ 87 Sumary ................. 87 Supply Outlook ................. 87 Dlemand Outlook .................. 89 Trade Outlook ........................................ ................. 91 Price Outlook ............... 92 Policy Issues: Tariff and Non-Tariff Trade Barriers . ............ 93 Policy Issues: Governmental Assistance ................ 95 Grains ...... 115 Sumnary ... . . ....................................................... -115 Recent Developments in the Grains Economy . . ........................... 116 Price Forecasts .. ..................................................... 119 Comparison of the 1988 Forecasts with the 1986 Forecasts .............. 120 Spectral Forecast ....... 121 Production, Consumption, Trade and Stocks .... . ........................ 124 Update on the US Food Security Act .................................... 129 GAT ......... 132 Vegetable Fats and Oils .................................................. 155 Pr.ce Prospects ................................................. 155 Market Structure and Price Forecast Models ............................ 156 Supply Forecasts ......................................... 159 Demand for Vegetable Oils .......................... 162 Policy and Trade .. ........................ 168 Price Instability .. ........................ 174 Beef .... ............................ 217 Supply 0 ' look ............................... 217 Demand Outlook .............................. 218 Dairy Products ................... 223 Price Forecasts ................... 227 Fertilizers . .................. 229 Sunmary ..... 229 Demand Outlook ..... 230 Supply Outlook .... . 232 Trade Outlook ....... 237 Price Outlook ............ .... . ........ 238 AGRICULTURAL RAW MATERIALS Cot to ... ........ 265 Sunmary .. . ............... 265 Demand Out look . ...................... 266 Supply Outlook .................. *.................*.271 Trade Outl ook ....... ....... ..... ............. 273 Price Outlook .......... ... o.......... 274 - V lute .. .. . ... ... .... . ...... ......... . . , .283 Suunury ........ ...... I............... .t.. 83 Deinand Outlook ......... 284 Supply Outlook . ....286 Trae Ouatlook .. 288 Price Outlook ... ............................ 290 Comparison of the 1988 Price Forecast with the 1986 Price Forecast....290 Natural Rubber ..299 Sury 299......299 Natural Rubber Supply Outlook ... ... 300 Supply Outlook ..303 Denand Outlook ............. 306 International Trade in Rubbers ............................... 312 Price Outlook ...315 Tobacco ........... 327 Sumiary .... 327 Demand Outlook . . .. 327 Supply Outlook .... 331 Trade Outlook . . . ................. 334 Price Outlook ....334 Tropical Timber ....343 Sunmary ...343 Recent Developments ...343 Supply Outlook . . .348 Dem nd Outlook . . . 348 Trade Outlook .. .349 Price Prospects . . .352 Policy Issues . . .353 - vi - MMTKS AND DEFIMITIOUS -Dollars are United States dollars unless otherwise specified. -All tons refer to metric tons (1,000 kilograms) unless otherwise noted. Abbreviations and Sybols TOs = metric tons LB = pounds CU = cubic meters KG = kilogras NTOK = millions of tons of oil equivalent MA = not available ..1-J = no data = least squares growth rate for the said period is not meaningful due to the shortness of the time period for which data are available, or due to rapid growth from a low base. Economic Classifications Industrial Countries* North America...includes Canada, United States. EEC-10...includes Belgium-Luxembourg, Denmark, France, Federal Republic of Germany, Ireland, Italy, Netherlands, Spain, United Kingdom. Other Western Europe...includes Austria, Finland, Iceland, Liechtenstein, Norway, Sweden, Switzerland. Asia and Oceania... includes Japan, Australia, New Zealand. Centrally PlAnned Econowies USSR Eastern Europe...includes Albania, Bulgaria, Czechoslovakia, German Democratic Republic, Hungary, Poland, Romania. Developing Countries Southern Europe...includes Cyprus, Greece, Israel, Malta, Portugal, Yugoslavia, Turkey. Africa...includes South Africa. Latin America and the Caribbean...includes Cuba. Oceania...excludes Australia and New Zealand. Asia...excludes Japan; includes China (which includes Taiwan, China, except where specifically noted), Democratic Kampuchea, People's Democratic Republic of Korea, Lao People's Democratic Republic, Mongolia, Viet Nam. * Also includes American Samoa, Guam, Pacific Islands, Puerto Rico, US Virgin Islands with North America; Bermuda, Channel Islands, Faeroe Islands, Falkland Islands, French Guiana, French Polynesia, Gibraltar, Greenland, Isle of Man, Martinique, New Caledonia, Reunion with EEC-10. - vii - ~at maur,si Pit_Wom. emwm DMC ipCa (>C goar_1t siol, Val btedw by OC espurts) Tbre_a Cost. (12.01L iWlb. I sulfur. 121 a_i. FOR Pitrs. t_trm PAWNS ibtalk eIC (1O). ledictc prier, othbr mild Arabicas. ~rgMm i_ r turk aid _maAfmbu oekmts. i-.dck fwr pr_t shimat C(tlo )M . daily aeag price. _bm Ywk sod Londem, _mtrest bim fute tVOdi 5 stt's Tee (1afm Auction). irage ice reemied for *11 tom Suur hrtd). ISA daily piice, FCai sa st at "tw Caribbem ports Bef nZ), isuoted from bomtiess, 851 eisibe low cow in*t. FIII port of mmtry am t(C_trol Vid $outh ewi i. first-clan quality troical peck. FW S powts Or_mps (OM Ittmaramm Epor t.s). EEC indicatI imcort ori ca. CIF Paris CEMLS Rice (Thai). ubi to . *Iled, tS brokem. go_romt St_adard. eport prIce, FCO 8_gkok beet (CaMdIb). hDI. I Mto* lfud Seimg (CS) 15,51 baSis is store t4-1 4m_stic; fro April 195, St. L_aurece, export Wlzv PiA). no. 2, Vl low, FCO Cuol poets Cra Solregm (US). No. 2, PIto yel!ow. FP Gulf ports FATS AM Oi LS Palo Oil (1a1lasian), 5S bulk, CIF N.V. Europe e_comt OfI (tPhllpPlaaa/le1owioa). bullk, CIF Rotterdam Grn t Oil (NiprliamJot Africa), bulk CIF UK, ttrough Janery 1977; subsequmntly (any origi.), CIF tttardsm Soyb'a 011 IDutch), crude. FO o-ei ll Soybmm US ) C IF Rotterda Cra MPbIlippina/lodoml msia). bulk, CIF N.V, Eturo Pail Kervels (Nigorian), CIF UK l u t Most -1rdian), 481. CIF h%ttorSam; fr-rr 19, Argentioe, 4Y/50% Soybean Meat (LS), "% extractlon, CIF Rotter4a Cottom (Outlook 'A- Index), Middling (I-3/32-, CIF Europe ltm (Sml1as"h). 'bite D, FOS ChiittagongCana R rbb (SN o, 1). in bales, spot We Tork r,acco (Indian), flfm-curod, amamx apeort un,it value Lop (Malaysian), M_eeuti, Sabah SO Best 9ual ity sale price chwagd by importr-s, ,aian Log (siet African), Sqpmll, high quallty, loyal ad rchand, FOB Cmr_m Sammol (iblayslem), Dlek Amd k.r5itl, s elct and better qualifty steodard density. CIF Frach ports METALS AiO NiNltS Copwr (IE), cash wurebr through to,ere 1961; fr-o Decemb 1918 ttrough Jum 196, high grade cathodes n, tt I mnt price; s0seqent ly, grade A Tin (Mflmysiam), Straits quality, ex-alter, Pon , official s*ttlennt price Nickel (Caadian), mlmctroiytlc cathodes, tii 99.9S shipping :oiat; from 1900 (ILE) cattodes, mIniml 99.8% purity, official orning sosion _eekly average daskad price Aluminum oprentativm Frm Market Price), Ir5ots, 95.79 Purity, transactioes prIce, EEC duty Paid Led (UXE), settl_nt price, refined lead, Purity 99.97% Zinc (I), sotti_*nt price, good ordinary brand; from Sept. 19i4, High Grade rid li- -Or (Braziilan)i 651. CIF North Sea p:x-s imiteo, iS Import referance price based on imports from Jaica through 1974; frr_ 1975 UiS leport price, CitF iS port Gui4 (i;C, 99.5S fine, LAdm fteenoon fixing, average of daily rates Sliver i_y & Hmren)., 99.9% grade reflond. Mm York FEliTI LI PFosphaft hock (nooccan), 72% PL, FAS Casablanca; from 1961, 70S TPt contract Was (ay origim), beggd. FOS N.. Eur TSP (Triple Ssperphospete), bulk, F0B US Gulf OOWP iD!_osim Pisosft), bulk, FOS US Guif Potaslsm ChIloride (ilurit of PotFah), bulk, FCP Yenouvnor I no 0 0 PC Po 0 co '4 N U) Sumary 1. Prospects for the world coffee economy depend critically on developments in the International Coffee Agreement (ICA), on exchange rate policies, and on productivity growth in major coffee-growing countries. In particular, Brazil (the major producer) is likely to continue to play an extremely important role in determining the future path of coffee prices. 2. After prolonged negotiations, the ICA export quota regime was re- introduced in October 1987. The reintroduction basically resulted from the strong determination of both producing and consuming ICA member countries to keep world coffee trade under a controlled system. Given such determination, for the base case projections it is assumed that the ICA export quota system will continue to operate through the year 2000. It is further assumed that the global quotas will increase at a rate of about 1.5% p.a. for the period 1989-2000, which approximates the projected demand growth rate of the total import demand of the importing ICA members--who at present account for more than 85Z of world net imports. An import growth trend of this magnitude should keep world coffee prices 1/ in the range USC195-215/kg in 1985 prices-- leaving aside price peaks resulting from natural disasters. 3. Imports by countries which are not members of the ICA (the nonquota market) is expected to increase at about 2.6% p.a. However, competition between sellers in this market is expected to be severe. 4. During the forecast period, there is a high probability of Brazil experiencing low production in some years due to abnormal weather. When such production declines occur, world prices will increase sharply, and the quota system may be suspended temporarily. But because Brazil is expected to produce on the average as high as 35 million bags a year during the 1990s, any such increase in prices will be short-lived. 5. According to results coming from the World Bank's recently revised global coffee model, world production could easily be increased to satisfy world demand if prices are in the region of USC195-215/kg in terms of 1985 constant dollars. This result is due partly to the competitive exchange rate policies taken by the three largest coffee producers: Brazil, Colombia, and Indonesia. These three countries have devalued their currencies in real terms by about 35% in the last five years. As a result, they have been able to maintain or increase their coffee production even as world prices in real terms (nominal prices deflated by MUV) have declined by more than 30% in the last five years. Not all exporting ICA member countries, however, will be able to increase exports by 1.5% p.a. El Salvador, Honduras, Guatemala, Haiti, Dominican RepubLic, Nicaragua, Peru, Venezuela, Cote d'Ivoire, 1/ World coffee prices here refer to the ICA "Other Milds" Indicator Price, unless specified otherwise. - 4 - Ethiopia, Madagascar, and Angola could find their production stagnating and could experience difficulty in fulfilling their export quotas. 6. Besides real exchange rate movements, productivity growth will have a very important role in determining the production path of each producing country. Lack of productivity improvement has been an important reason for the stagnant production experienced in many African countries. Unless measures are taken to address this problem, their market shares and inCome terms of trade are likely to decline. 7. An important policy issue facing many producing countries is whether to support the continuation of an international export quota agreement. This is an important question for many African countries which have been losing their shares of the world coffee market over the past two decades. If the Agreement continues (an assumption made in the base case projection) they will have little opportunity to expand their shares at the expense of others. On the other hand, for those countries heavily dependent on coffee exports, they face the prospect of export revenues increasing at 2% p.a. or iess--hardly the basis for a take-off of economic growth. 8. Judging from some issues teing discussed amorg the ICA member =ountries, a ne agreement may not come into effect after September 1989. Consuming countt.es, especially the United States, are quite dissatisfied with the sales to tht nonquota market countries at large discounts and the current quota allocatiols among various types of coffee. If the quota system is discontinued af er October l189, the world coffee market would be quite different from tiat seen in terms of the base case projections. 9. Simulation results of the new econometric model show that world prices would be about 30% lower in 1990 and 10-20% lower for the following three to four years if the quotas are suspended, compared with the base case projections. In such a situation export revenues of efficient producers such as Brazil, Colombia, and Indonesia would be expected not to decline very much because these countries would be able to increase export volume. However, many countries in Central America and Africa would be likely to experience sharp declines in export revenues as both export volumes and prices would decline. These countries would need to consider adjustment of macroeconomic policies, including real exchange rates, to cope with such a situation. Recent Developments in the World Coffee Market 10. The world coffee market was subject to a substantial shock when Brazil's production fell sharply in 1986 after a prolonged drought in 1985. This caused a sharp rise in coffee prices in late 1985 and early 1986. After peaking in March 1986 at 'ISc529/kg, prices fell steadily until July 1987 when they hit USU204ikg. T ICA export quota system was suspended during the price boom. ICA members were unsuccessful in reimplementing the quota system before October 1987 due to disagreement among them over the question of quota distribution among the exporting members. The flexibility and objectivity of the distribution of export quotas became r major issue. - 5 - 11. Dur.ng the extended discussions among ICA members in 1987, it became clear that there were a number of exporting member countries, as well as several importing memoer countries, that were not happy with the way the Agreement had operated since 1980. The discussions revealed, however, that although many meirber countries were dissatisfied, there was a very strong will to conf:i^ e the Agreement. 12. Anot;;er important development has been the changes in real exchange rates which have taken place in many cofUee-producing countries over the last five years (see able 1). Notably, the currencies of the world's three largest cotree-produciro countries--Brazil, Colombia, ai.d Indonesia--have depreciated more than 30_ in real terms, which has meant that even at the low levels in the first half of 1988, world coffee prices (at around USc295/kg) increased in terms of local currencies in these countries. On the ither hand, the CFAF, which is linked to the French franc, has appreciated substantially, increasing the cost of coffee production in the CFAF-zone countries such as Cote d'lvoire ind Cameroon substantially in terms of US dollars. In 1988 the relative competitiveness of CFAF countries in terms of real exchange rate changes is otriv one-half what it __. in 1982. For the future, the movements of the exchange values of the major currencies will be of critical importance. Of equal importance will be the independent exchange rate policies fo'lowed by the coffee-producing zountries. 13. Low worid coffee prices in 1987 due to the suspension of the ICA export quota regime caused many ICA imporring member countries to increase their imrorts substantially. This increase was partly tor the purpose of stock accumulation. Large carry-over stocks in consuming countries are expected to reduce import demand in 1988. This is the main reason for the low levels of wcrld coffee prices in 1988 in spite of the low global quota and depreciation of the US dollar against other major currencies. Supply Out look 14. Due to substantial real exchange rate depreciation and productivity increases, the three largest producers--Brazil, Colombia, and Indonesia--are projected to increase their production at rates of 2.1% p.a., 1.9% p.a., and 1.2Z p.a., respectively, in the next 12 years. Their production is likely, on average, to be above demand and, thus, stocks in these countries are likely to increase. Increasing production and the accumulation of large stocks in. these countries are the main reasons why prices are expected to be fairly stable and at historically low levels in real terms. For the same reasons, any price hikes due, 'or example. to frosts in Brazil will be short-lived. 15. Within Brazil. efforts to reduce production costs by increasing tree densities and by shifting coffee growing away from the frost-prone and higher labor cost states of Parana and Sao Paulo to lower labor cost states of Minas Gerais and Espirito Santo have been successful and are likely to continue. However, if the Government's agricultural credit policies or the extension services of the Brazilian Coffee Institute (IBC) fail to satisfy coffee growers' needs, Brazil's average production may not reach the pr;-JecCed 37 million bag level by 2001. DZ h iA ENO t m V AOtt G C M _St ( W) IS182 163 19it4 1485 246 1487 S.ZIL liceI eACe4 rate 0.IS 0,56 1.85 8.20 15.63 3229 CGoesr price I"" 4C'.OC 784.00 2,924.00 9.55<6.0 23,436.00 76,334.00 RPol - cAqo rate 100_00 5.42 6%9t 6C.17 76,07 63.W COL)S IA oletal tcr_ng- rat 94.08 -8.tt5 100.82 142.15 194.26 237. t Cnes,r rIprice I1I l5stt 190,20 220.80 27.,90 525,70 406,40 Real y rate 100.00 9'.54 84.37 77.?76 67.06 69,14 COSTA RICA Nomial wcehIg rate 37.41 41.09 44.53 50.45 55.99 61.26 Conswe price lnd" 263,b0 345.60 586,0 445,10 *S 497.80 81.80 74,aI exchan9g rate I0. 00 ?2C 72 124.71 126.63 12T.53 136,32 EL SALVAr Inlftal anc6aga rate 2.50 2.50 2.50 2.50 5.00 5.O0 Coasumar Price l1ade '28.30 145.-, 162.10 196.20 261.60 330.00 Real cango rate 1.2,OC 153.25 126.34 154.48 11.95 128.60 GUATWALA %oaln.al nch"g rate .00 1.00 1.30 t.88 2.50 Consmer price l,dan 11 .SC ' 120.80 143.40 196.40 220.10 Ral acfan0g rate 1CC.0 - L06.05 12M.26 93.69 78.75 tIESIA ol,nal CCax .c. ratae 661.40 90)9.30 1,0C5,90 1,1'0.60 1,2S2.60 1,642.09 .c.suw peice ltd., 112.20 122.90 137.40 151.70 154.90 183.50 Real Sxce." rat. 00.00 7S.67 78.95 80.52 73.03 65.88 Noinal sch"n9 rate 326,15 581.06 436.26 44,26 346.30 504.81 Consumer prIce Idex 125.40 146_30 162.90 165.00 17_0C2 183.03 Real wxhanga, rte 100.00 100.61 97.70 9f.25 128,80 139.30 COTE D0"YO9RE NoIftal exchawst rat. 528.61 881.06 436.96 449.26 346.50 304.81 Oonsonr price index 1:6.80 123.70 129.00 131.40 140.10 147.05 Real edming* rate 100.30 91,33 83.06 82,29 113,82 134.74 !4celnsl exchange rate 10.92 1 531 14,41 16.43 16.23 16.30 Con.scer PCrIce index 134.70 15C.20 '65.40 187.00 194,40 202.CO Real eactas raTe 100.00 91.49 93.04 92.28 97.14 100.48 NmInal exchwV. rat. 0.94 1.539 3.597 6.72 14.000 42.8,41 Consc_r price Index 200.70 248.90 355.30 825.90 2,217.80 7,498,W8 Reol exchavg' rate 100.00 75.75 446.26 57.56 74.20 81.90 a/ ForusIa u5 ed to caloCuIte real -ec66n.e rate Is: fXt ' ,2X/mEXt}) CPI/ a2 where: REX, Real Eschwv %to IR r t IElt - Nminal Exchagnq Rate 1-1 yer t 1EX,2 Minsai Exchxnge Rate in 1982 CPlt - Consu_r PrIce Iodex in year t CPI z iConsuwwr ice Index In year 982 b/ CR is ,Ith ISM80 as IOC eccept for Uganda wicti6 Is wlith April 1981 as 100. Source: IMF, International Flnancial Statistics. -7- 16. Coloebia is expected to increase productivity through its excellent R and D system and because of its relatively high producer prices. Supply problems may arise if the current stumping program fails and if the currency appreciates due to increased exports of coal and petroleum. Also, internal transportation and port facilities need improvements to increase its coffee exports. 17. Kenya is an exception among African countries. It has succeeded in increasing coffee production because of its low export taxes and good R and D efforts. Recently, a new high-yielding CBD-resistant variety, Ruiru 11, was developed. If this variety is adopted widely, Kenya's productivity and production should increase substantially. 18. Countries which may face problems in increasing their exports to meet their allocated quotas include Nicacagua, Dominican Republic, Honduras, El Salvador, Guatemala, Haiti, Peru, Venezuela, C6te d'Ivoire, Ethiopia, Madagascar, and Angela. 19. Nicaragua's real producer prices are estimated to have declined sharply in recent years due to hiSn inflation and an overvalued currency. Real producer prices over the last four years have been less than one-hslf the level of the late 1970s. 20. Real producer prices in El Salvador also have been low in recent years and, with social disturbances, the number of productive coffee trees has declined by as much as 30% in the last 15 years. Unless new trees are planted soon, Salvadoran production capacity is likely to decline. 21. Very limited new plantings and productivity improvements in the Dominican Republic, Honduras, Guatemala, Haiti, Peru, and Venezuela are expected to lead to stagnation in prciuction and exports in these countries. 2?. Coffee growing in C6te d'Ivoire is presently doing poorly as a result of an overvalued currency and competition from cocoa. There have been limited new plantings in the last eight years, and productivity has been stagnant for many years. Unless a vigorous improvement program is launched, coffee production will experience a slow decline with the aging of trees. 23. Ethiopia's coffee sector is also suffering from the lack of new plantings in recent years and poor productivity growth. Insufficient technological development effort and heavy taxation are two of the main causes for the declining production trend. Exports could decline due to stagnant production and increasing domestic demand. 24. Madagascar's coffee production has been stagnant over the last 30 yearsl The major reasons for this are extremely heavy taxes on coffee and a weak infrastructure. Farmgate prices are estimated to be only about 25-35% of export unit values. Unless these problems are addressed, production and exports will likely experience a slow decline. 25. As in any industry, coffee production and exports will increase in countries where appropriate incentives and technological improvements are provided to farmers. As the brief discussion above suggests, differences in -8- productivity and production growth among producing countries are expected to widen. In sum, the world coffee market is likely to become increasingly more competitive for many of these countries which have been doing poorly in past years. Countries with high average production costs may consider adjusting their macroeconomic policies, including real exchange rates, to cope with low world coffee prices that may last several years. Unless such policies are taken, uprooting of trees and neglect of trees may occur, requiring large investments over a long period of time. Demand Outlook 26. It has been assumed that the ICA will remain in force over the projection period and that the export quota system will remain the main economic instrument of the Agreement. Forecasting demand for coffee therefore involves making a forecast of the price range and the global export quota to be adopted, as well as forecasting growth in the nonquota market and domestic consumption in producing countries. These forecasts were generated using the World Bank's revised global model of the coffee econom-y, which is capable of simulating the global market with and without the export quota. Following these exercises, it is projected that the global quota will increase at 1.51 p.a. between 1989 and 2000. The nonquota market demrand is expected to grow at 2.6% p.a. This gives a total export growth rate of 1.63% p.a. for this period. 27. Among the countries in the quota market, Japan is expected to increase its import demand at a high rate--3.5% p.a. This strong growth rate is mainly due to the high income elasticity for coffee (see Table 2). Other quota market countries which are expected to show relatively high demand growth rates are the United Kingdom, Australia, Austria, and New Zealand. The EEC as a whole is expected to increase its demand at the rate of about 1.7% p.a. in the 1990s. Other West European countries are also expected to increase their demand at 1.7% p.a. This slower growth is due to the fact that per capita conaumption in most Western European countries is already high. 28. An important influence behind the slow increase in world coffee demand has been declining demand in the United States at a rate of 1.6% p.a. over the last 16 years. Demand growth is projected to stabilize. This change in trend is expected because real coffee prices are projected to be low and the population growth rate is projected to be relatively high for the period 1987-2000. 29. The 2.6% p.8. growth rate forecast for the nonluota market is lower than in the past mainly because the non-market economies and the oil-exporting developing count.es are expected to grow less rapidly than in the 1970s. 30. Examination of recent demand trends in the major consuming countries shows soluble coffee consumption declining relative to roasted coffee consumption. Even -n countries where demand for soluble coffee has been high, such as the United Kingdom and Japan, a switch to roasted coffee appears to be in progress. Persistence of this trend would increase he size of the discount of robustas as compared to arabicas. As the trend is relatively recent, we have used the global model to make a prediction of the average price differential between arabica and robusta coffees. The average discount -9-. TABLE 2: 1XAMD KLASTICITIKS FM COFFEE -Elasticities- -Elasticities- Importing Countries Income Price Importing Countries Income Price ----------------------------------------------------------------__-----------_ Belgium 0.36 -0.28 Australia 1.72 -0.37 Denmark 0.58 -0.43 Austria 1.30 -0.54 France 0.68 -0.13 Finland 0.34 -0.08 Germany, Federal Republic of 0.98 -0.17 Canada 0.28 -0.13 Greece 0.52 -0.49 Japan 2.03 -0.31 Ireland 2.89 -0.34 New Zealand 1.28 -0.13 Italy 0.92 -0.18 Norway 0.26 -0.14 Ne. ierlands 0.89 -0.34 Sweden NA -0.29 Portugal 0.62 -0.28 Switzerland 0.56 -0.24 Spain 1.07 -0.07 Yugoslavia NA NA United Kingdom 1.26 -0.51 United States NA -0.46 ----Elasticities-- Selected Producing Countries Income Price a/ Brazil NA -0.09 Colombia 0.41 -0.14 India 0.24 NA Indonesia NA -0.07 Mexico NA -0.14 --------------------------------------------------------------------__-------_ NA - A significant coefficient was not able to be estimated. a/ Note that due to the unavailability of retail price data, the international coffee price in terms of local currencies and deflated by the local cPr was used instead. For this reason the price elasticities presented here are probably an underestimate of the true price elasticities of demand for these producing countries. Source: World Bank. - 10 - expected is 15Z. However, the discount may be larger in the late 1990s if the recent trends in consumption continue. 31. Consumption in the producing countries as a group is expected to increase at 2.3% p.a. in the 1990s. Growth rates a-e likely to be highest in countries where production and population growth rates are expected to be highest. Among the major producers the foliowing annual consumption growth rates are expected: Brazil (2.2%), Colombia (2.9%), Mexico (1.1%), and Indonesia (1.8%). Price Outlook 32. Assuming continuation of .he ICA, prospects for world coffee prices will be tied to future levels of the global export quota. Under the assumption that the global quota increases at 1.5% p.a., the projected prices are those given in Table A5. Prices wk 1d be lower if demand growth rates are lower than forecast a ove or if the global quotas increase at a higher rate than assumed. 33. To evaluate the effects on world prices of different GDP growth rates in importing countries and different global quota growth rates, two additional simulation runs were made with the coffee model. One had GDP growing at 0.5% p.a. lower than the base case and the global export quota increasing at 1.7% p.a., the other had the GDP growing at 0.5% D.a. higher than the base case and the global quota increasing at 1.3% p.a. The results are given in Table 3. 34. As the simulation results in Table 3 show, the differences in projected prices widen substantialLy with time. Large price differences under the two alternative scenarios are a result of low price elasticities of demand. Thus prices are considerably higher when the secular demand trend is higher and the quotas lower. The figures in Table 3 also show that real world coffee export revenues are likely to increase at a modest rate in the 1990s-- about 1.5% p.a. in the base case and 2.3% p.a. in the "high GDP growth and lower quotas" case. 35. A simulation was also carried out for the case in which the quota system is discontinued in 1990. The results are also shown in Table 3. After removal of the quota the initial decline in prices is large (about 35%), because exporting members with accumulated stocks will reduce them, depressing prices. However, with time the price difference narrows as the excess stocks are exhausted and world exportable production declines. In fact, by 2000, prices are only about 2% lower than the base case iri which quotas are still in effect. However, over an even longer period these prices would no,. last because they would encourage higher production and exports. Policy Issues 36. International Coffee Agreement (ICA). The current ICA expires at the end of September 1989. Prolonged discussions over renegotiation of the Agreement are likely. To allow sufficient time for discussion, some expect the current agreement to be extended for a year or two. - 11 - TABUE 3: PIOJECTD PRICtS a/ UNDER ALTERNATIVE SCENARIOS High CDP Growth Low GDP Growth Without Quotas Year Base Case and Lower Quotas and Higher Quotas from 1990 -----(1985 USC/kg)… 1989 211 (96) b/ 212 ( 96) 210 (95) 211 (96) 1990 211 (96) 214 ( 97) 208 (94) 137 (62) 1995 204 (93) 220 (100) 179 (81) 183 (83) 2000 205 (93) 234 (106) 167 (76) 200 (91) a/ ICO "Other Milds" Indicator Price in 1985 prices. b/ Figures in brackets are USC/lb. 37. Key issues currently under discussion include: (a) sales to ronquota market countries at prices much lower than for quota sales; (b) the inflexible and unclear method of distributing quotas among the exporting member countries; and (c) the inflexible quota distribution among arabicas, robustas, and Brazils. These issues have been under discussion for several years but no solLAtion satisfactory to all members has been found. 38. There are persistent rumors of coffee being sold at large discounts to the nonquota market countries. In spite of the efforts by the International Coffee Organization (ICO), it has proved difficult to control these sales. This issue is also likely to be a key item to be discussed in the negotiations for the renewal of the Agreement. 39. Distribution of the quotas among exporting members has not been altered significantly since October 1980. This situation has drawn criticism to the effect that the Agreement is not taking into account the dynamic nature of the world coffee market and changes in comparative advantage among producing countries. Quota changes have proven to be a very sensitive issue for most of the producing countries. 40. Many importing members claim that the rigid distribution of quotas ignores changing tastes in consuming countries. For example, they claim that demand for arabicas has been considerably stronger than that for robustas, but the Agreement is not flexible enough to take such a change into account. This issue is strongly related to that of the quota distribution among producing countries. 41. The outlook for prices in the event the quota system is suspended from October 1989 was discussed above and the results shown in Table 3. However, caution is required in interpreting these results. If, as has !appened in the case of cocoa production in Malaysia, one or more countries gain access to strong productivity growth whii. enables them to produce and export iarge quantities of coffee even at ver) low world prices, prices in the absence of - 12 - the quota system will remain considerably lower than otberwise. re stabilizing impact of the ICA was demonstrated by the results from the global model. In an ex post simulation run, world coffee prices would have been about 35% higher in the coffee boom of 1986 had the quota system not been in effect between October 1980 and February 1986. Without the quota, stocks held in producing countries would have been much lower and not available for release to dampen the boom. TABLE Ali CODTEE - PRODUCTION BY MAIN COUNT1RIES ANID EGONOMIC REG IONS ACTUAL PROJECTED GR49TYi RATCS A/ ,_....._._._.____._.____.,______.............--------____________________________________-----..---------____-.__,_--_._.____-_ COUNTRIS/ loss ECONOMIES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 !-------------------------------('000 BAGS)------------------------------------- ------(X FER AUM)------- INDUSTRIAL 255 230 250 250 250 250 250 250 250 0.0 0.0 0.3 NON-MARKET 0 0 0 0 9 0 0 0 0 0.0 0.0 0.0 DEVELOPING 65,962 84,642 95,119 76,796 100,213 8J4.575 94,623 103,367 108,115 1.4 2.2 1.2 ASIA 5,554 10,406 9,873 10,467 10,440 ;J,680 10,900 11,900 13,000 4.8 6.1 2.0 INDONESIA 2,882 5,218 5,800 5,800 6,200 6,200 6,300 6,800 7,500 5.3 7.1 2.0 INDIA 1,457 2,105 2,033 2,833 2,233 2,398 2,426 2,875 3,243 3.9 3.8 1.0 Cl AFRICA 21,194 19,479 20,095 19,902 21,200 20,200 20,500 21,700 22,500 0.9 -0.6 0.9 COTE D'IVOIRE 4,025 4,964 4,420 4,000 4,509 4,169 4,109 4,449 4,591 1.2 -1.3 0.0 ETHIOPIA 2,873 3,207 2,833 3,100 3,017 2,988 3,107 3,231 3,326 2.0 1.5 1.7 UGANDA 3,469 1,867 2,700 2,700 3,500 2,828 2,856 3,002 3,155 0.0 -1.4 0.S KENYA 905 1,446 2,011 1,835 1,865 1,901 1,944 2,047 2,156 4.9 4.0 2.2 CAHZROON 1,189 1,717 1,883 1,925 2,007 2,080 2,114 2,023 1,925 3.7 2.4 O.1 DO AMERICA 38,787 53,892 64,338 45,627 67,700 52,850 62,340 68,852 71,668 1.1 2.9 1.2 BRAZIL 19,943 24,590 33,000 13,900 35,000 20,000 29,120 33,600 35,800 0.0 3.1 1.9 COLOMBIA 8,050 12,477 12,000 11.000 11,800 12,200 12,452 14,621 14,663 2.7 3.8 1.9 EL SALVADOR 2,323 2,924 2,089 1,920 2,204 2,239 2,267 2,391 2,443 2.1 0.6 -0.6 GUATEMALA 2,076 2,762 2,590 2,530 2,646 2,531 2,586 2,614 2,540 2.2 1.9 -0.4 MEXICO 3,049 3,828 4,750 4,750 4,284 4,340 4,389 4,829 5,440 2.8 2.0 1.7 OCEANIA 427 865 873 800 873 845 883 915 947 12.0 4,7 1.4 w WORLD 66,217 84,872 95,429 77,046 100,463 84,825 94,873 103,61/ 108,365 1.4 2.2 1.1 Al LEASt SQUARES TREND FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PERIOD 1985-2000 B/ ESTIMATE. C/ END-POINT FOR PERIOD 1985J86-2000. D/ END-POINT FOR PERIOD 1986-2000. S8URCES, USDA, FOREIGN AGRICULTURAL CIRCULAR (ACTUAL)i ICO, QUARTERLY STATISTICAL BULLETIN (ACTUAL). WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A2i COFFEE - APPARENT CONSUMPTION BY MAIN COUNrRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COUNTRIES/ 1985 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ____________,.____________,._________,,_________________,________________------------------------------------------------------------- -----------------------------------('000 BAGS)------------------------------------- ------(% PER ANNUM)------- INDUSTRIAL 47,208 53,168 57,264 60,442 54,843 57,641 58,220 62,834 67,578 1.2 1.0 1.2 NORTH AMERICA 22,389 19,973 21,143 21,787 17,690 18,747 18,811 19,258 19,677 -1.0 -1.0 -0.4 UNITED STATES 20,914 18,141 19,357 20,001 15,900 16,941 16,981 17,295 17,:86 -1.2 -1.2 -0.5 EEC-10 18,817 24,292 25,858 27,244 26,366 27,127 27,427 30,004 32,750 2.8 2,1 1.7 OTHER WESTERN EUROPE 4,282 4,928 4,985 5,446 5,200 5,529 5,566 5,867 6,149 1.7 1.0 1.7 JAPAN 1,289 3,299 4,576 5,093 4,830 5,382 5,539 6,683 7,832 11.0 7.8 4.1 NON-MARKET 2,720 3,720 3,303 4,800 4,925 5,053 5,184 5,849 6,701 4,8 3.0 3.0 DEVELOPING 23,608 23,721 26,462 26,613 27,470 27,191 27,790 31,276 34,465 0.9 1.8 1.9 Cl BRAZIL 8,793 8,000 9,000 10,000 9,000 9,500 9,800 11,270 12,300 0.0 0.7 2.1 SOUTHERN EUROPE 1,159 1,477 1,542 1,862 1,506 1,531 1,559 1,670 1,771 3.4 0.2 2.0 D/ WORLD 73,536 80,609 87,029 91,855 87,238 89,885 91,194 99,959 108,744 1.2 1.3 1.7 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _,,_ _ _ _ _ _ _ _ _,_ _ _ _ _ _ _ _ _ _ _ _ __- - _ _ __- _ __- -_ _ _ _ _ __- -_ _ __- -_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __-- - - - - - - - - - - - - - - A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)t END-POINT FOR PERIOD 1985-2000. B/ ESTIMATE. C/ END-POINT FOR PERIOD 1986-2000. D/ END-POINT FOR PERIOD 1985/1986-2000. SOURCESi USDA, FOREIGN AGRICULTURAL CIRCULAR (ACTUAL)i ICO, QUARTERLY STATISTICAL BULLETIN (ACTUAL). WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (P! 0JECTED). TABLE A3z COFFEE - MET EXPORTS BiY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH 1071f6 Al COUNTRIES/ 1985 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 … - -------------------------------------------------------------------------------------------------------------------- …-------------------…----------('000 BAGS)------------- ------------- ( PR ANU)- DEVELOPING 54,336 60,820 68,453 72,954 63,996 66,903 67,691 73,907 79,756 1.7 1.5 1.1 ASIA 2,063 5,606 7,836 7,180 6,800 7,000 7,130 8,350 9,000 6.3 8.9 1.8 INDONESIA 1,403 3,705 4,935 4,897 4,600 4,700 4,800 5,800 6,200 6.5 8.9 1.4 INDIA 522 1,217 1,694 1,800 1,453 1,505 1, 3o 1,660 1,796 5.6 6.3 2.2 AFRICA 16,453 14,992 18,008 14,764 15,663 16,338 16,311 17,666 18,729 1.1 -0.5 1.1 COTE D'IVO.'.tE 3,432 3,921 4,288 3,924 3,994 4,200 4 ,270 4,514 4,612 2.1 1.1 1.2 ETHIOPIA 1,366 1,354 1,217 1,400 1,482 1,555 1,279 1,308 1,348 7.6 6.8 1.1 UGANDA 3,123 2,354 2,392 2,400 2,359 2,483 2,526 2,750 2,994 -0.1 -2.3 1.2 KENYA 841 1,198 2,070 1,650 1,543 1,620 1,652 1,822 2,011 4.5 3.7 1.5 CAMER0OO1 1.036 1,610 2,065 1,995 1,465 1,540 1,567 1,710 1,865 3.7 2.9 1.5 AMERICA 35,419 39,401 41,741 49,960 40,907 42,907 43,581 47,165 51,238 6.5 8.9 0.9 BRAZIL 18,333 15,267 12,851 18,117 17,869 18,767 19,101 20,862 22,790 -0.3 -0.3 1i5 COLOMBIA 6,564 9,854 11,816 12,048 9,h54 9,928 10,104 11,029 12,041 2.7 3.4 1.3 EL SALVADOR 1,885 2,451 2,662 1,800 2,107 2,217 2,255 2,150 2,167 2.5 1.9 -0.8 GUATEHALA 1,687 2,145 2,300 2,250 1,796 1,890 1,922 2,087 2,269 2.2 2.1 0.0 C/ MEXICO 1,539 2,437 3,693 3,200 2,630 2,748 2,791 3,018 3,263 3.3 3.7 0.8 OCEANIA 421 821 868 1,050 526 658 669 726 789 1.1 4.4 1.2 WORLD 54,356 60,820 68,453 72,954 63,996 66,903 67,691 73,907 79,756 1.7 1.5 1.1 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86), END-POINT FOR PERIOD 1"85-2000. Bf ESTIMATE. Cl END-POINT FOR PERIOD 1986-2U00. SOURCES: USDA, FOREIGN AGRICULTURAL CIRCULAR (ACTUAL) ICO, QUARTERL.Y STATISTICAL BULLETIN (ACTUAL). W1RLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TAJLE AiA coF0E - NET IMPORTS BY HAIN COUNTRIES AND ECONHMIC REGiONS ACTUAL PROJECTED GROWTH RATES A/ CC8Rfr- - -----R- -- --- -- -- --I--- --------- ----------- ---------------------;----- CODUNTRIEs/ 1985 - EcoWAGES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------(Dooo BAGS)------------------------------------- ------I( PER ANNUM)------- INDUSTRlAL 47,208 53,168 57,264 60,442 54,843 57,641 58,220 62,834 67,578 1.2 1.0 1.2 NORTS AMICA 22,389 19,973 21,143 21,787 17,690 18,747 18,811 19,258 19,677 -1.0 -1.0 -0.4 UNITED STATES 20,914 18,141 19,357 20,001 15,900 16,941 16,981 17,295 17,586 -1.2 -1.2 -0.5 EEC-10 18,817 24,292 25,858 27,244 26,366 27,127 27,427 30,004 32,750 2.8 2.1 1.7 OTMn WESTERN EUROPE 4,2D2 4,928 4,985 5,446 5,200 5,529 5,566 5,867 6,149 1.7 1.0 1.7 JAPAH 1,289 3,299 4,576 5,093 4,830 5,382 5,539 6,683 7,832 11.0 7.8 4.1 NON-MARKET 2,720 3,720 3,303 4,800 4,925 5,053 5,184 5,849 6,701 4.8 3.0 3.0 C/ DEVELOPING 3,350 4,023 5,164 4,716 4,434 4,535 4,641 5,300 5,850 6.5 4.4 2.3 D/ SOUTHM EUROPE 1,159 1,477 1,542 1,862 1,506 1,531 1,559 1,670 1,771 3.4 0.2 3.4 WOR.LD 53,278 60,911 65,731 69,958 64,202 67,229 68,045 73,983 80,129 1.7 1.4 1.1 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86); END-POINT FOR PERIOD 1985-2000. i/ ESTIMATE. Cl END-POINT FOR PERIOD 198511986-2000. Di END-POINT FOR PERIOD 1988-2000. SOURCES; USDA, FOREIGN AGRICJLTURAL CIRCULAR (ACTUAL); ICO, QUATERLY STATISTICAL BULLETIN (ACTUAL). WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). - 17 - TABLE A5: COFFEE - PRICES, 1950-87 (ACTUAL) AND 1988-2000 (PROJECTED) ICO INDICATOR PRICE, OTRHR MILD ARABICA (C /kg) -(c/kg)- Current S -1985 Constant SG Current $* MmV a/ US GNP b/ Actual 1950 111 468 516 1951 129 473 576 1952 126 440 552 1953 125 449 541 1954 170 626 724 1955 133 480 547 1956 151 526 602 1957 134 458 517 1958 109 365 410 1959 93 316 3.42 1960 92 307 334 1961 90 293 320 68 1962 83 268 292 65 1963 81 263 278 64 1964 101 324 343 83 1965 100 319 332 80 1966 93 285 297 77 1967 86 263 269 71 1968 87 265 257 75 1965 88 256 247 72! 1970 115 314 305 94 1971 99 258 250 82 1972 110 263 265 90 1973 137 283 310 113 1974 145 245 301 125 1975 144 219 272 117 1976 315 472 558 228 1977 517 708 859 423 1978 359 426 556 316 1979 382 402 544 313 1980 344 330 449 330 1981 282 268 335 224 1982 309 297 345 230 1983 290 287 313 232 1984 318 321 330 254 i985 321 321 321 252 1986 429 363 421 358 1987 251 193 239 205 c/ Projected 1988 300 213 275 245 1989 315 211 276 257 1990 320 211 267 294 1995 369 204 237 301 2000 465 205 238 379 * Developing countries' export unit value. a/ Deflated by Manufacturing Unit Value (IUV) index. b/ Deflated by US GNP deflator. c/ Projected. Sources: George Gordon Paton & Co. Inc., Cotmplete Coffee Coverage (actual); World Bank (projected). - 18 - COFFEE (CONSTANT 1985 DOLLAR PRICES ) 1000 - 800 3, 1945, 19,50, 1955 19S0 1965' 1970 197S' 1980 1985 1990 1995 20~00 - ~~~~DEFLATED BY MANUFACTURING UNIT VAL'JE ( MUV ) INDEX ' '' '' ' ' " DEFLATED BY U.S. GNP DEFLATOR. 1948-87 ACTUAL; 1988 - 2000 PROJECE . SOURCE : WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT . Sumnary 1. In real terms, international cocoa prices for 1988 are likely to be at one of the lowest levels in recorded history. World cocoa prices in real terms are expected to stay low until the mid-1990s. Our forecast for the ICCO Indicator Price in 1995 is USC104/kg in 1985 constant US dollar terms (deflated by the MUV). Prices are projected to recover in the second half of the 1990s to reach USd1l5/kg in the year 2000. The expected low prices in real terms through the mid-1990s is due mainly to further rapid expansion of world production. The low prices experienced during this period should slow world production growth in the second half of the 1990s and cause prices to increase in real terms. However, the expected recovery would only bring year 2000 prices back to the disastrous 1988 level. 2. The projected low constant dollar prices are expected to reduce output growth rates in most of the major producing countries over the projection period. Output growth in C6te d'lvoire is projected to decline from the 7% p.a. experienced over the last 15 years to about 1.4% p.a. for the period 1987-2000; Brazil's output growth rate is expected to fall fr"m 5.1% p.a. to 2% p.a. over this same period; and Malaysia's output growth is expected to decline from 24% p.a. to 2.4% p.a. On the other hand, production in Ghana, Nigeria, and Indonesia is projected to iacrease. Ghana's output is projected co grow from its recent level of 200,000 tons to 28F,0GO tons by 2000; Nigerian output is projected to increase from recent levels around 150,000 tons to 180,000 tons; and Indonesian output is expected to double from 40,000 tons to more than 80,000 tons over the same period. The projected turnarournd in Ghana's and Nigeria's output is a result of their recent and expected pricing and exchange rate policies. These two countries have devalued their currencies substantially and lowered taxes on cocoa in recent years to make cocoa exports more competitive. Indonesia has also devalued its currency substantially in the last five years, and as the production cost of cocoa there is low, production should increase substantially over the next 12 years. 3. World consumption is projected to increase at 1.9% p.a. to the year 2000. Demand growth is projected to be low in the traditional markets of North America (1.7% p.a) and Western Europe (1.2% p.a.). Demand should increase at considerably higher rates in the USSR, Eastern Europe, and developing countries as their per capita consumption levels are substantially lower than those in the traditional markets. Based on the economic and population growth rates assumed, the USSR and Eastern Eu-ope together should increase consumption by 2.3% p.a. and developing countries also by 2.3% p.a. Recent Developments in the World Cocoa Market 4. Cocoa prices have been quite velatile during the past two seasons. But the underlying picture has remained bearish; prices declined gradually, in 1985 constant dollar terms, from US¢242/kg in 1984 to USC152/kg in 1981. The - 20 - fall in world prices has been basically due to the continued rapid exiansion of output, which h.as been increasing at a rate of 5Z p.a. since 1980. This fast growt h resulted in output outstripping consumption in 1987/88 for :he fourth consecutive year. The rapid world output growth has been underpi;ned by the production increases in Cote d'Ivoire and Malaysia and a significant recovery in production in Nigeria and Ghana. At the end of the 1986/8; crop season, world ending stocks were 750,000 tons--which is less than 100,000 tons sbort of t te record level reached in 1964/65 when Ghana produced about 570,OCO tons. If the current good prospects for the 1988/89 crop materialize, by the end of 1988 world cocoa stocks could match their historical record level of 850,000 tonxs. 5. Although the International Cocoa Organization "ICCO) has brought about 250.,000 tons into its buffer stock, these purchases have had little effect on prices. The buffer stock has been restricted in its fund.ag because major producing comntries have not met their financial comaitments. With woi'ld prices low and rigid producer prices in Cote d'Ivoire--nov owing $30 million tc the ICCO--the situation of underfunding is likely to prevail throughout the renaining life of the current agreement (which expires in 1989). The expiry of the agreement offers the gloomy prospect of the need for liquidatio n of the 250,000 ton buffer stock if the agreement cannot be renegotiat ed--which could have an adverse impact on prices for several years. 6. 0-n the demand side, chocolate manufacturers are enjoying the current situation whereby stocks, excluding buffer stocks, represent more than four months of consumption. Given the limited storability of cocoa and the possibility of rising interest rates, in the short run manufacturers are likely to remain apathetic about buying cocoa. Productiorx Prospects 7. Cote d'Ivoire. Cote d'Ivoire's production and export strategies will remain suxbject to considerable speculation over the next few years. To understand the Likely cocoa production pattern in C6te d'Ivoire, it is necessary to digress to discuss the country's producer price policy and export supply stxategy. Ikhile producer prices have been maintained at a constant level in r-eal terms since 1960, it is increasingly apparent that C-te d:Ivoire cannot affFord to continue such a polic- The low world prices ir dollar terms and the apopreciation of the currency (the CFA) with respect to the dollar (the main cur-rency of transaction for cocoa) have made producer prices un-competit_ive in international terms. In fact, producer prices are above export pr-ices in local currency terms, forcing the parastatal marketing agency (the Caisese) into deficit. Still, it is unlikely that policymakers will yield to the need for a producer price reduction or for a devaluation of the CFA in order for the Government to avoid subsidizing the industry and for the Caisse to reestablish a better financial standing. Arguments for the inflexible pricing pclicy range from the political unpopularity of a producer price cut to the recessionary impact of a -producer price reduction in a country where a large segment of the population earns its livelihood from cocoa. In fact, the short-run recessionary impact of a long-lived deficit incurred by the Caisse may even be worse than a producer price reduction since that agency financed in years of high cocoa prices as much as 27% of the state investment budget (which in turn was about 50Z of total investment). - 21 - 8. C6te d'Ivoire has been withholding cocoa from sale for several months in tLe hope of raising international prices. The strategy seems to have raised the premia on Ivorian beans as these are in increasingly short supply. It has also placed exporters of cocoa within Cote d'Ivoire in a financially embarrassing position as they have gone into debt to purchase beans but have not been able to sell them. Thus, if the difficulties faced by Cote d'Ivoire'~ cocoa exporters continue, it is unlikely that exportable output from that country will exceed 600,000 tons in 1988/89 and even in 1989/90. Marketable output cou d be reduced in 1989 and 1990 to an average of 590,000 tons--assuming that one-half of the current 200,000 tons of cocoa stored in Cote d'Ivoire is carried over to these years. 9. Letting the Ivorian producer price be fully flexible to reflect the world price, the World Bank's global model projects Cote d'Ivoire cocoa production to reach 632,000 tons by 2000 after declining to as low as 545,000 tons in 199l. However, we believe it very unlikely that the Government would allow cocoa production to decline in this way. Therefore, we have assumed some rigidity to remain in the producer pricing system, at least in the short run. Given some policy reform, including the Government undertaking some measures similar to the Nigerian marketing board reforms, cocoa production in Cnte d'Ivoire is projected to increase to slightly above 700,000 tons by 2000. 10. Brazil. The findings of a recent study by the World Bank of cocoa plantings in Brazil reveal that it was the exceptionally low--at times negative--real interest rates, as well as the high relative price for cocoa, that induced the high rate of new plantings over the 1975-81 period. Now that the plantings have begun to bear fruit, production growth has begun to slow domn. (Production has been more-or-less stagnant since 1984/85.) It is concluded, therefore, that Brazil's cocoa area will not grow ar the same pace as it did during the past decade. Our previous forecast of 520,000 tons by 2000 is thus revised downward on the basis of the new evidence. However, Brazil's cocoa orchard is young--with about one-half of the tree stock as of 1984/85 being 15 years old or younger, 15% less than 5 years old, and 41% less than IA! years old. Given that the yield of hybrid cocoa remiains at a peak for about 12 years, there is some room for production increases in the short run due to increasing yields. Thus, with good weather and/or price-induced increases in harvesting intensity, Brazil's cocoa output can experience some spikes (as high as 450,000 tons) between 1989 and 1992, although the general trend-because of relatively low world prices--will be for output levels of around 400,000 tons during that period. In the period beyond 1993, production growth will be more affected by the contribution of the trees planted in the period 1986-89 than by the increase in harvesting intensity. Because it is expected that extremely low prices will prevail through to the end of 1990, little planting of cocoa trees is expected to take place in Brazil during that period. Thus output beyond 1993 should grow at a slow pace to reach a level of 480,000 tons by 2000. 11. Indonesia. Indonesia is likely to become a major producer to reckon with during the forecast period. By using advanced technology this country is achieving one of the fastest production growth rates in the history of the cocoa industry-following the Malaysian experience. Records indicate that cocoa was growing in Indonesia at the beginning of this century, perhaps even earlier. But until the mid-1970s production never exceeded two tons. The - 22 - take-off occurred after 1982 when the trees planted at the time of the 1977-78 cocoa price boom came to maturation. Since then, Indonesia's cocoa production has been on a steady upward trend, from 12,000 tons in 1982/83 to an estimated 50,000 tons in 1987/88. Totai cocoa area is presently estimated to be around 125,000/hectares. Indonesian cocoa output is projected to grow at 6.1Z p.a. to 84,000 tons by 2000. However, assuming that producer price incentives are not altered and that the cocoa farms are operated at full capacity, Indonesian pr-'uction could pass the 100,000 ton mark by 1994 and reach 144,000 tons by 2000. Incentives to produce cocoa in Indonesia will depend on world price prospects and on domestic production costs. With output per hectare being about five times the average achieved in Africa, and production costs believed to range between $500/ton and $800/ton, Indonesian farmers should be better able than their African and Latin American counterparts to sustair output in the event of persistently low world prices during the next decade. Thus, there is a high probability that Indonesia will realize its production goals, especially if in the long run the higher-cost countries liberalize their marketing systems to let producers react to world market signals. 12. Ghana. The recovery in the Ghanaian cocoa industry suffered a setback in 1988 because of adverse climatic conditions--production declined 17Z to an estimated 190,000 tons for the 1987/88 cocoa year. Barring further adverse conditions, and assuming the institutional setting ol the Economic Recovery Plan that made it nossible prevails, the recovery should resume its course in 1989. If the flexible exchange rate and producer pricing policies adopted under the Economic Recovery Plan are pursued throughout, cocoa production in Ghana could reach 370,000 tons by 2000. 13. Malaysia. Malaysian cocoa production is expected to continue to increase, though at a slower rate than the average of the last 15 years. Although production costs are low, both because of scale and scope economies, there are persistent signs of labor shortages that, in addition to the current low international prices, will affect production growth in the short run. In the medium run, the rate of new plantings will be reduced because of the low prices and this will keep future production growth to about 2.4% p.a. 14. Nigeria. After the initial positive reaction to marketing and pri-e liberalization policies in the course of the 1986/87 season, Nigerian cocoa production should continue to recover at a slower pace. The high producer prices of the 1986-88 period led to some plantings; but future Nigerian production growth will be more affected by a fuller utilization of current productive capacity than the contribution from new vintages of trees. Production is expected to grow at 2.6% p.a. between 1988 and 2000. Demand Prospects 15. Before the analysis of regional demand prospects, a matter of more general concern needs to be discussed: the development of cocoa substitutes. The high-price period of the late 1970s gave impetus to cocoa product substitution in many chocolate confections in favor of non-cocoa fats (NCFs) such as palm oil, soybean oil, and other lauric oils. The outlook for these NCFs indicates that their prices will be on a declining trend over the next five years at least, spelling even more severe competition for cocoa butter - 23 - than in the past (see Fats and Oils section). The United Kingdom, where the use of NCFs in chocolate confectionery is the most liberal, initiated legislation for consideration by the other EEC members according to which as much as 5% NCF could be used in chocolate. But the legislation has been defeated after intense criticism from other EEC members. Unofficial estimates of the market to be taken by NCFs vary between 75,000 and 100,000 tons. 16. Demand prospects for Western Europe should not differ from the historical pattern. Consumption should grow at its historical rate of 1% p.a. 17. Following the slight decrease in consumption during the period 1970- 84, due to the high prices of the mid- to late-1970s, consumption in the CPEs is projected to grow at 2.3% p.a. Since prices are forecast to stay relatively low, especially over the first half of the period of interest, the only factors that could negatively influence demand from the CPEs would be their income and foreign reserves performance. 18. Cocoa demand prospects will also be greatly influenced by the perfornance of developing countries. With typically high income elasticities and high price elasticities of demand, cocoa consumption in these countries is expected to grow at 2.3% p.a. until the turn of the century. The major contributor in the developing country market will be Asia, where almost 4% p.a. consumption growth is projected. Within the Asian market, there is great uncertainty about China which might become an increasingly important consumer before 2000. 19. Although cocoa bean prices have been low, short-r^in consumption growth has not been affected because these low prices did not translate into low end-product prices. In general, chocolate confectionery prices have stayed firm becau':e the prices of non-cocoa ingredients have increased by more than a compensating magnitude. White sugar (f.o.b. Europe) prices increased by 32% from 1986 to 1987, whole milk powder by 17%, and almonds by 34%. In addition, confectionary retailers usually resent changing products--a feature that is characteristic of the oligopolistic nature of the retail chocolate industry in the United States. Nonprice competition in the form of product size changes is also limited in the short run because it requires alterations to the hardware setting of the production line. 20. Longer-run demand prospects will depend on income growth, especially in the developing countries. Among these countries China provides the most promising prospects if the current drive toward openness stays on course. In the traditional industrial country markets, the North American consumer will continue to be the major factor. Despite the large absolute volume of cocoa consumed, per capita consumption in the United States (95% of the North American market) is still about one-half that of Switzerland or Belgium. In the United States chocolate confectionary is about one-half of total confectionary products (including sugar confectionary). Thus, with aggressive marketing, helped by the rising health consciousness of the American consumer, chocolate manufacturers could displace a substantial share of the sugar confectionary market. With the low-calorie sweeteners increasingly being used as a substitute for natural sugar, more Americans are buying chocolate products. The upsurge in US chocolate consumption from 1982 to 1985, due to the lower imported chocolate prices during the period of high dollar exchange - 24 - rates, has been sustained through 1987 despite the fact that chocolate imports decreased as the dollar value declined. If this sustained growth of cocoa consumption is an indication of a shift in US demand for chocolate, long-run demand could grow by 1.2%. A higher rate of growth of consumption could result from an expansion of the chocolate-based product line. Indeed, after the successful introduction of new lines of chocolate chip cookies and gourmet-types of chocolates in the early 1980s, American bakers are now extending their product line with numerous varieties of chocolate bakeries. Although these products, launched late in 198', are still new on the market, they are likely to survive consumer tests because they are supported by well- established, quality-renowned bakers. In any event, product line extension is a characteristic feature of North American bakers and confectioners that could well be intensified because of the relatively low prices of cocoa in the future. Price Outlook 21. Cocoa prices are projected to stay at low leve.s at least until the mid-1990s--at which point they are expected to reach USd104/kg in 1985 constant dollar terms. Beyond the mid-1990s they are expected to recover somewhat and increase to US¢115/kg by 2000. The expected recovery from the mid-1990s is conLi-;ent on the reaction of production growth to the low real prices believed li;'ely during the period up to the mid-1990s. 22. Cocoa price movements in the near term will depend heavily on the export strategy adopted by C6te d'Ivoire. C6te d'Ivoire has been withholding cocoa from the market over the past several months, presumably in an effort to increase prices. Their action has increased the differential between Ivorian bean prices and prices of cocoas from other origins, rather than raising the average level of cocoa prices. Premia for Ivorian beans reached levels as high as 15% to 20% above average prices in the first trimester of 1988, after Cote d'Ivoire's seven-month absence from the market. Unlike 1981, the first time that C6te d'Ivoire resorted to a strategy to--unsuccessfully--support prices, the country now has better and larger storage facilities, capable of holding cocoa for a longer time without significant quality loss. However, C6te d'Ivoire stocks cannot be of the size needed to increase world prices significantly. It is estimated that the country possesses sufficient space to store a maximum of 200,000 tons--maybe less. In the first half of 1988 total noncommerical stocks, including buffer stocks held by the ICCO, amounted to about 400,000 tons. Despite this level of stocks, prices followed their declining course. The market appears to have discounted Ivorian actions, expecting that it will have to sell the cocoa when the new harvest begins. The stocks of cocoa tied up in C6te d'Ivoire warehouses should be released by the end of 1988, which is the beginning of the 1988/89 crop season. 23. Cocoa prices could deviate from their predicted long-run path for various reasons. For instance, during the past two years prices have been lower than anticipated by most market analysts because many producing countries outperformed their average output growth rate of the early 1980s. Mairysia's output grew by an average of 33% during the period 1984/85 to 1986/87 compared with 21% during the period 1980/81 to 1984/85. C6te d'Ivoire's output will total 630,000 tons at the end of the 1987/88 season, - 25 - which represents a 7% increase over 1986/87 output. In Nigeria, output is expected to recover from 80,000 tons in 1986/87 to 135,000 tons in 1987/88--a 69% increase. Although it is not uncommon to find such a high degree of output responsiveness in the short run, most observers have underestimated production increases in CBte d'Ivoire and Malaysia because of a lack of knowledge of the yield behavior of the newly introduced hybrid cocoas. While it is widely observed that the yield of hybrid cocoa trees is about twice that of the traditional trees, it has also been found that only 25% of the hybrid trees on a typical hybrid cocoa farm contributes 75% of the total production of the farm. Thus, under certain ecological conditions not yet fully understood by agronomists, the total yield of a hybrid cocoa farm could be increased dramatically if the productivity of the trees could be rendered more urniform. 24. Thus, given the uncertainties surrounding the yield pattern of the new cocoa trees and other exogenous factors such as the world income growth prospects and policy actions and weather patterns in the major producing countries during the period of our forecasts, different scenarios of optimistic and pessimistic assumptions were simulated. The varied assumptions pertain to the growth of per capita income of the industrial market economy countries and to the production environment in the major cocoa-exporting countries, which account for over 80X of the world total output. 25. In the income sensitivity simulations, per capita income of the industrial councries was allowed to grow at rates 0.5% higher and lower than assumed in the base case. In these cases the path of cocoa prices did not vary much from the predicted path of the base case scenario. This result is not surprising because the industrial countries are the largest consumers of cocoa products--with 70% of world consumption--and the demand for cocoa in these countries is income inelastic. 26. Any deviations of future prices from the base case forecasts will be induced more by supply shocks than by demand shifts. The supply shocks could take the form of exceptionally favorable or adverse weather conditions. Also, changes in macroeconomic policies of major cocoa-producing countries such as exchange rate and interest rate pc-li--ies and other policies having a bearing on producer incentives could also affect world prices significantly. Therefovo, in the optimistic or high-production scenario, a combination of the above cited exogenous factors is assumed to lead to an increase of 5% in the production levels of the major cocoa-producing countries during the period 1990 to 2000. In the pessimistic or low-production scenario, an equivalent 5% decrease is assumed. 27. As Table 1 shows, cocoa prices will be an average 10% higher (under the low-production scenario) and lower (under the high-production scenario) than the baseline forecasts between 1990 and 2000. Because of the low price elasticities of demand and supply, the difference in prices between the base case and high/low production profiles increases with time to reach + 18% by 2000. - 26 - TABLE 1: WORLD COCOA PRICES UNDER DIFFERENT SCEMARIOS ABOUT OUTPUT CROITH IN MAJOR PRODUCINC COUNTRIES Year Base Case High Production Low Production --(1985 USC/kg)----------------------- 1988 114 1989 100 - 1990 105 92 108 1995 104 94 116 2000 115 95 136 Trade Prospects 28. Very little cocoa is processed for consumption in producing countries, except for Colombia (which consumes the entirety of its production), Nexico, and Brazil. The other major producers typically export beans and semiprocessed products, such as cocoa liquor, butter, and powder. Brazil has become the largest exporter of cocoa butter and plans to grind an even larger share of its bean output. Exports of cocoa products by other producing countries will be limited by their grinding capacity and various technological constraints. For many of these countries the local grinders receive the substandard cocoa beans that do not meet the requirements for exports. It is difficult for chocolate produced on this basis to penetrate markets in the traditional consuming countries. 29. There is a freight cost saving by processing before exporting as well as value-added. It has been estimated that processing beans before export results in a 20% weight reduction. The impact of this weight saving has to be assessed in light of recent maritime transport technological developments which have led to the increasing use of more efficient containers for beans. Nevertheless, there are factors favorable to an increase in the semiproducts trade by producing countries, including (i) the tendency of small- and medium- size chocolate manufacturers not to grind beans but instead to purchase the butter or powder required; and (ii) the opening of a futures market for cocca butter in Paris. Still, it should be pointed out that in some countries the shift towards local processing has been distorted by subsidies promoting its expans ion. 30. The regional trade data presented in Tables A3 and A4 are almost a mirror image of the production and apparent consumption data included in Tables Al and A2 because (i) very little consumption takes place in cocoa- - 27 - producing countries; 1/ (ii) only developing countries produce cocoa; and (iii) storage of cocoa beans in producing countries seldom exceeds a one-year time span. Policy Issues 31. At the low price Levels which have prevailed in the first half of 1988, many producing countries cannot export cocoa profitably. While some in urgent need of hard currency have continued to sell, others have held back supplies. It is likely that the current situation will induce policy changes in the near future in the countries that rely heavily on cocoa export revenues. The changes could take many forms: ranging from privatization of the marketing system as Nigeria has done, to liberalization of exchange rates as occurred in Ghana, or to more cost-efficient production technology with diversification as has happened in Southeast Asia. 32. The following discussion will focus on the likely policy changes that will affect the structure of the cocoa industry during the next decade. 33. Production Technology and Output Costs. There are stark differences in cultivation methods across continents. In Africa, traditional cocoa production costs are relatively low, and labor still constitutes almost all the variable inputs used. Production technology largely resembles that of the early days of the introduction of the crop. In Latin America, the cocea- producing countries inherited a long tradition of cultivation of tree crops, like their African counterparts, but unlike them Latin American farmers have gradually adopted innovative methods of husbandry, aided by a complex of institutional research and extension support. In Asia, cocoa production came much later as a result of the implementation of a policy of agricultural export diversification. But progress has been remarkable in Malaysia and Indonesia, which are currently the fastest growing producers. By and large these countries are regarded by the industry as the "suppliers of the future." Costs of production are estimated to be relatively low despite high intermediate consumption of commercial material inputs. However, imputation of cocoa production costs in Malaysia and Indonesia is difficult because cocoa is interplanted with other important cash crops such as coconut and palm trees. Because yields are very high, sometimes five times that achieved in Africa, the returns are also high. But low-cost labor is becoming in short supply for the large plantations of Malaysia's cocoa-producing areas. An alternative, the use of cheaper labor from the Philippines, is a politically-sensitive issue for the Malaysian plantation owners. 34. A critical question to answer is whether or not the efficient Southeast Asian cocoa plantation technology can be replicated in Africa where 1/ Cote d'Ivoire consumes annually about 1,000 tons of cocoa products. Brazil, where local consumption is the highest of the producing countries, consumes about 20,000 tons. Consumption of cocoa in Brazil is projected to reach 6,000 tons by 2000 at which time the country is assumed to become self-sufficient in chocolate consumption and production, and export data would then diverge more markedly. 28 - average yields are the lowest. It would obviously be difficult to restructure the African cocoa industry from the smallholder mode to the private, plantation type of cocoa mode of farming prevalent in Southeast Asia. One major reason is the rigid traditional land tenure system in major African producing countries that leads to fragmentary ownership. Unless the farm land markets are freed, consolidation of larger areas for cocoa plantations will be limited. Assuming that these constraints are alLeviated, however, it would still remain to transfer the technology appropriate for large-scale cocoa cultivation. Such a transfer would entail investment in human capital as well as in new material inputs. 35. Beside the institutional and technical constraints to large-scale plantation farming of cocoa in Africa, another limiting factor may be the poor flavor of the cocoa produced under this kind of system. Although the acidic taste of Malaysian cocoa has certainly something to do with agronomic rather than husbandry- related factors, many specialists believe that the large-scale fermentation methods are the main reason. Since the premium differential between high grade cocoa such as from Ghana and the lower-grade Malaysian cocoa can be as large as 30%, African farmers would need to be cautious in adopting the Malaysian technology--unless the taste of cocoa produced under large-scale farming conditions can be improved. If the fermentation practices are the major factor for the low quality, by performing the African type of fermentation African farmers could adopt the Southeast Asian technology and preserve the reputed quality of their cocoa flavor. Such a combined technology would necessitate additional labor inputs to monitor the large number of small-scale, decentralized fermentation pits that a large plantation would require. 36. Reduced Role of Government Controlled Marketing Boards. The government control over the marketing of export cash crops has historically had two main justifications: the revenue imperative, and the nationalization of the marketing structure. The difficulty of collecting taxes from individuals in a country with inadequate infrastructure made export taxation the preferred source of public finance of state governments in West Africa. In their enabling decrees, the marketing agencies are to make farmers' revenues less subject to fluctuations through the stabilization of producer prices. In theory, stabilization involves the accumulation of the differential between the realized export price and the stabilized producer price in times of high prices, and in times of low prices, to make up for the losses to the producers (or the exporters) by drawing upon the accumulated reserves. Following the sharp increases in export prices during World War II and the commodity booms of the 1950s and the mid-1970s, some of the West African marketing agencies accumulated financial resources that reportedly sxceeded those of the governments. The temptation for governments to borrow or to transfer funds from the marketing agencies in times of budget deficits was irresistible. The practice became a rule to such an extent that the original objective of producer revenue stabilization has been relegated to a minor priority. Arguments for redistribution--i.e., taking funds from cash crop farmers by means of export taxes to invest in nonagricultural sectors-- have traditionally been presented in favor of the marketing board system of taxation. However, in many cases the export taxes have been so high as to severely discourage production. - 29 - 37. Against this background, and in the face of the current economic difficulties--including the threat of further market share loss--users of the marketing board system may well find it in their interests to revise their pricing and taxing policies. It should be noted that most countries that have had fast-growing cocoa sectors also have free internal marketing systems. 38. Investment Opportunities. Investment in cocoa in the traditional cocoa-producing countries has been mainly confined to the production of cocoa beans. Downstream processing activities have been judged toc capital- intensive when capital was scarce and labor relatively more abundant, especially in the rural areas where cocoa is grown. However, as tine has passed and some (human and technical) capital constraints have been alleviated, bean-producing countries have become increasingly involved in cocoa product manufacturing. Brazil, nowadays, is the leading exporter of cocoa butter, having overtaken the Netherlands. In the 1962-65 period, bean- producing countries were on the average grinding only 16% of their bean production. By 1985 they ground 31% of total bean production. Future expansion of grinding activities in producing countries will have to take into account the price relationships between beans and products as well as their specific market demand characteristecs. A study conducted by the World Bank concluded that the problems of competing effectively in the heterogenous market for cocoa powders means that .echnologies whose joint product mixes are weighted in favor of producing the more homogenous cocra butter are likely ta be more profitable. 2/ 39. Another investment opportunity, but one that requires less technological sophistication than the processin, of cocoa beans, is the management of cocoa waste. Cocoa wastes, includ&ng pods, husks, and shells, could be used to fabricate various by-products, varying from animal feeds and mulching material to marmalade. Alcohol and ,elly can also be derived from the mucillage juice which is produced in the early stage of the cocoa bean fermentation process. Researchers at Ghana's Cocoa Research Institute have fourd that cocoa pod meal, used as feedstuff for poultry, swine, and dairy co-is, is as nutritious as corn. It has been estimated that cocoa growers could increase their income by an average of 15Z if cocoa pod meal was used in place of corn in animal feeding preparation alone. 3/ Although corn is cheap and plentiful in North America, its transport to tropical areas is often costly due to the poor state of the infrastructure. In addition, in many of the tropical countries where food security is a concern, using corn as a feedstuff could aggravate the food deficit. Further financial and economic evaluation is needed to assess claims that a country could operate a profitable comnercial feed preparation facility with as little as 60,000 tons of cocoa pod meal. Since for every 100/kg of dry cocoa beans the farmer jointly produces 160 kg of cocoa pod meal, every country producing more than 37,500 tons of cocoa bean could consider cocoa pod meal preparation a project worthy of attention. 2/ M. Gbetibouo and K. Mehta, Cocoa Product Price Relationships, Division Working Paper No. 1988-1, January 1988. 3/ Glenn Trout, Augmenting Cocoa Production Tncome: Intercrops, By-Products, Proceedings of First Pan-American Cocoa Forum, Costa Rica, 1987. TABLE Al: COCOA BEANS - PRODUCTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES A/ COUNTRIESI 1987 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------------------( '000 TONS) ------ ------------------------------- ------- (% PER ANNUM) ------ DEVELOPING 1,378 1,594 1,970 1,958 2,013 2,052 2,086 2,268 2,401 1.6 1.7 1.6 ASIA 11 50 175 218 251 265 280 313 326 10.4 11.4 3.1 MALAYSIA 3 33 125 164 190 201 213 229 224 32.6 24.4 2.4 INDONESrA 2 7 32 39 43 46 49 66 84 17.3 17.4 6.1 AFRICA 1,001 960 1,114 1,086 1,126 1,142 1,166 1,284 1,332 0.8 0.0 1.6 GHANA 424 264 219 228 192 215 220 269 288 -3.5 -5.1 1.8 NIGERIA 241 155 110 80 134 153 171 183 182 -2.2 -4.9 2.6 COTE D'IVOIRE 167 365 585 590 613 590 595 671 707 7.0 7.4 1.4 CAMEROON 108 117 118 123 125 122 118 99 93 1.8 0.6 -2.1 AMERICA 323 552 647 620 601 612 608 641 714 4.7 4.6 1.1 BRAZIL 182 319 376 369 388 401 397 417 481 5.1 5.1 2.1 ECUADOR 56 87 97 80 80 76 76 89 97 3.3 2.3 1.5 OCEANIA 31 32 34 34 35 33 32 30 29 2.5 0.8 -1.2 WORLD 1,366 1,594 1,970 1,958 2,013 2,052 2,086 2,268 2,401 1.6 1.7 1.6 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)s END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOURCES: GILL AND DUFFUS, COCOA MARKET REPORTS (ACTUAL); WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED) TABLE A2: COCOA - APPARENT CONSUMPTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES A/ COUSTRIESI 1987 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS)------------------------------------- ------tX PER ANNUM)------- INDUSTRIAL 996 1,066 1,249 1,323 1,361 1,392 1,417 1,541 1,635 1.4 1.3 1.6 NORTH AMERICA 412 417 528 574 588 598 605 658 717 1.1 1.3 1.7 WESTERN EUROPE 512 562 644 650 671 686 700 748 761 1.1 1.1 1.2 NON-MARKET 193 241 285 288 294 307 313 365 388 4.6 1.3 2.3 DEVELOPING 166 218 247 298 315 324 329 360 400 3.0 3.8 2.3 ASIA 16 18 41 60 72 75 77 78 96 4.2 3.8 3.7 AMERICA 113 131 133 150 153 155 156 166 173 1.0 1.2 1.1 WORLD 1,356 1,526 1,781 1,908 1,972 2,024 2,059 2,266 2,423 2.0 1.8 1.9 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)4 END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOURCES: FAO TRADE TAPES; GILL AND DUFFUS COCOA MARKET REPORTS (ACTUAL); WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A3: COCOA - NET EXPORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COUNTRIES/ 1987 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------------------- '000 TONS)------------------------------------…--- ------(I PR ANNUM)------- DEVELOPING 1,378 1,594 1,970 1,958 2,013 2,052 2,086 2,268 2,401 1.6 1.7 1.6 ASIA 11 50 175 218 251 265 280 313 326 10,4 11.4 3.1 MALAYSIA 3 33 125 164 190 201 213 229 224 32.6 24.4 2.4 INDONESIA 2 7 32 39 43 46 49 66 84 17.3 17.4 6.1 AFRICA 1,001 960 1,114 1,086 1,126 1,142 1,166 1,284 1.332 0.8 0.0 1.6 GEANA 424 264 219 228 192 215 220 269 288 -3.5 -5.1 1.8 NIGERIA 241 155 110 80 134 153 171 183 182 -2.2 -4.9 6.5 COTE D'IVOIRE 167 365 585 590 613 590 595 6?1 707 7.0 7.4 1.4 CAMEROON 108 117 li 123 125 122 118 99 93 1.8 0.6 -2.1 AMERICA 284 477 566 526 507 515 512 539 595 4.7 4.6 1.0 BRAZIL 160 275 329 313 381 394 389 384 445 5.1 5.1 2.7 ECUADOR 49 75 85 68 67 64 64 75 81 3.3 2.3 1.4 OCEANIA 27 28 30 29 30 28 27 25 24 2.5 0.8 -1.3 WORLD 1,366 1,594 1,970 1,958 .2,013 2,024 2,081 2,268 2,401 1.6 1.7 1.6 .. _______________-- - - - -- - - - - - -- - - -...........- -- - -______-__-. -_-___-________-________-______-_____-_______ ___-___-__ _- - - - - - - -________________ ..-- - - -- - - -- - - - - - - -- - - - -- -- - - -- -- -________-_______-_-I A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)t END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOURCES; PAO TRADE TAPESt GILL AND DUFFUS COCOA MARKET REPORTS (ACTUAL), WORLD BANK, INTERNATIONAL ECONOH.CS DEPARTMENT (PROJECTED). TABLE h4i COCOA - MET IMORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COUNTRIES/ 1987 - BCOIKoHIES 1969-71 1979-81 1986 19871L 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS)------------------------------------- ------(X PER ANNUM)------- INDUSTRIAL 870 838 1,024 1,323 1,361 1,392 1,417 1,541 1,635 1.4 1.3 1.6 NORTH AMERICA 292 202 224 574 588 398 605 658 717 1.1 1.3 1.7 WESTERN EUROPE 482 559 717 650 671 686 700 748 761 1.1 1.1 1.2 NON-MARKET 193 199 248 285 294 307 313 365 388 4.6 1.3 2.3 WORLD 1,356 1,526 1,781 1,908 1,972 2,024 2,059 2,266 2,423 2.0 1.8 1.9 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)1 END-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMATE. SOURCES: FAO TRADE TAPESi CILL AND DUPFUS COCOA NARKET REPORTS (ACTUAL)i WORLD OANK, INTERNATIONAL ECONOMICS DEPARTMIENT (PROJECTED). - 34 TABU AS: COCOA LEANS - PRICES a/ 1950-47 (ACTUAL) XYD 1988-2000 (PROJECTE>) (Ci;), k(Cg)- Current S -1985 Constant S- Curre:nt S* !MLY bl U'S S ? c. i950 63 266 295 1951 70 257 312 1952 70 245 308 1953 68 242 292 1954 116 427 494 1955 '9 287 327 1956 57 201 228 1957 64 219 246 1958 88 294 330 1959 73 248 266 1960 59 197 213 1961 49 1S9 174 1962 46 149 1,1 45 1963 55 182 '91 48 1964 5! 163 172 50 1965 37 117 121 38 1966 52 160 166 41 I967 60 1S3 189 54 1968 72 222 214 60 1969 90 265 254 78 L970 68 186 180 76 19,71 54 140 136 63 1972 64 154 155 57 1973 113 234 255 84 1974 156 265 324 133 1975 125 191 235 140 L976 205 308 363 150 1917 379 520 630 280 1978 340 406 527 312 1979 329 347 469 327 1980 260 250 340 263 1981 208 199 248 175 1982 174 168 194 157 1983 212 211 228 162 1984 240 242 248 210 1985 225 225 225 206 1986 207 175 203 210 1987 199 153 190 172 d2 P'ro jected 1988 160 114 147 147 1989 150 100 131 132 1990 160 105 133 142 1995 188 104 121 169 2000 260 115 133 229 * Developing countries' export unit value. al Annual avera-e ICCO daily prices. b/ Deflated by Manufacturing Unit Value (IUV) Index. c/ Deflated by 3S GNP Deflator. d/7stimte, Sources: ICCO Secretariat and FAO Trade Yearbook (acttal); World Bank, Interna1tonal Economics Deparrment (projected). I - 35 - COCOA (CONSTANT 1985 DOLLAR PRICES ' 700- 400 -' 300 ~ ~ ~ ~ ~ ~ ~ ~~~~~~~3 500 a 1~~~~~a 1 400 194s 1950 1955 1960 196S 1970 1975 1980 1985 1990 1995 2000 DEFLTED BY MANUFACTURING UNIT VALUE ( MUY ) INDEX v - ---..- - DEFLATED aY U.S. GNP DELTOR. a 194 -a ACtUAL; 1988-2000 PROJECTD . SOURCE: WORLD BANK . INTERNA-TiONAL ECONOMICS DEPARTENt . TKA Summary 1. In thp first half of 1988 world tea prices in real terms 1/ were at their lowest level on record. Although some recovery from these depressed levels is expected in the medium to long term, prospects for world tea prices are not bright. The major reason for our more pessimistic forecast than that made two -ears ago is limited import demand growth, which has been adversely affected by the fall in world petroleum prices. World tea production growth is expected to easily satisfy the limited import demand growth even at low real prices. 2. In terms of 1985 constant dollars, world tea prices are not expected to rise above USCl30/kg until '990. They are projected to strengthen to USC150/kg level in the mid-1990s and to reach about USC160/kg by the year 2000. World production and consumption of tea are projected to increase at about 2.3% p.a. during this period, while world trade in tea is projected to increase at 1.6% p.a. The difference between the two growth rates is due to higher expected demand growth in producing countries than in importing countries. 3. Because the balance between world production and consumption is forecast to become tighter than at present, world tea prices could fluctuate widely with relatively small supply or demand shocks. On the other hand, because supply is fairly price-elastic, especially in the medium term, any such fluctuations should dampen within a year or two and stabilize around the projected price trend. 4. Critical factors which will influence the world tea market include {i) production and demand in India, (ii) demand in the USSR, and (iii) demand in the Middle East. As the largest producer and consumer of black tea, India has been and will continue to be the most important country influencing the world tea market. Despite some supply and export problems in the mid-1980s, India produced the largest quantity ever in 1987. Meanwhile, the rate of growth in consumption appears to have slowed. In the light of expected developments, India is projected to be able to export approximately 165,000 tons by 2000, which represents a decline from its export level of around 200,000 tons in recent years. 5. Consumption and import demand in the USSR has been increasing at high rates. The low levels of tea prices in real terms were an important cause of these high growth rates. However, slower ecoacmic growth and slightly increasing real world prices are projected to reduce USSR import demand growth. 1/ World tea prices refer to the average auction price in London; real terms are the nominal US dollar prices deflated by MUV. Tea refers only to black tea. - 38 - 6. Demand growth in the Middle East and other Muslim countries in South Asia and North Africa contributed greatly to world black tea import demand growth in the 1970s and early 1980s. However, tea consumption growth in these countries has slowed in the last five years, due to the slowdown in economic growth as a result of the lower petroleum prices. The reduction in the forecast tea consumption growth in these countries is the major reason for the lower projected prices compared with those issued two years ago. Recent Developments in the World Tea Market 7. Tea prices were high in 1983 and 1984 but plunged in early 1985 and continued to decline until the summer of 1987. The large decline experienced was caused by a world supply increase between 1984 and 1986 of more than 150,000 tons (about 20% of annual world black tea trade). This large increase occurred at a time when tea demand growth in the Middle East and South Asia was slowing, due partly to the fall in world petroleum prices. Such a large increase in production dissipated any concerns regarding supply constraints. 8. Another shock occurred in April 1987, when Pakistan, an important importing country, announced it would reduce its tea imports from Kenya to correct its bilateral trade balance. This action caused a sharp fall in Mombasa (Kenya) auction prices, which, in turn, pulled down prices in other auctions. The action taken by Pakistan revealed a fragile dimension of the tea market. The import share of developing countries has been growing fast and in recent years has exceeded 40%. This, by itself, is a positive factor and results from the higher population growth and income elasticities in these countries than in inoustrial countries. However, foreign exchange availability and economic activity in many important tea-importing developing countries are heavily dependent, directly or indirectly, on petroleum prices. Thus, fluctuations in petroleum prices can have an important impact on world tea trade and prices. 9. Although by mid-1988 world tea prices had increased by about 45% from the trough of US¢134/kg in June 1987, further recovery was dampened by record large crops in India and Kenya in 1987 and by large crops in these two countries in 1988. Supply Outlook 10. In spite of expectations for low tea prices in real terms, major tea- producing countries such as India, Indonesia, and Kenya are expected to continue to increase their production through the year 2000, mainly through yield increases. Countries which are unable to increase yields will face declining profitability and may see their production and exports stagnate. 11. India had a record crop of more than 674,000 tons in 1987. Good weather and relatively high prices in India have kept production on its long- term growth trend. With improving husbandry and more widespread use of clonal varieties, production should increase, albeit at a steadily slower rate, to about 780,000 tons in 1995 and to 860,000 tons in 2000. 12. Sri Lanka has succeeded in making its production more efficient by in-filling and by eliminating low-yielding, aged trees. These activities have - 39 - reduced production costs and should enable Sri Lanka to reverse its long-term declining trend. However, social unrest continues and this has discouraged large-scale investments. Output is projected to show a small increase to about 215,000 tons by 2000. 13. Indonesia has reduced its output slightly in the last two years as world tea prices have declined. The decline resulted, in part, from an effort to improve quality. Indonesia st:ll has a large production potential and its output should increase with demand. Tea growing in Indonesia has benefited from the substantial real depreciation of its currency in recent years. Indonesian output is projected to reach about 137,000 tons by 1995 and about 157,000 tons by 2000. 14. Due to lack of reliable data, it is very difficult to project China's black tea production with any degree of certainty. For want of better data China's black tea exports have been counted as China's black tea production. Black tea exports have almost doubled in the last eight years. Domestic consumption growth and low world prices are expected to slow the export growth rate to 2.P' p.a. On this basis exports are expected to increase to about 143,000 tons in 2000. 15. Kenya also had a record crop of about 156,000 tons in 1987--a 9% increase over 1986. However, low real prices and the increasing scarcity of land suitable for tea growing are likely to slow its production growth rate substantially in the future. Given the in-filling program of the Kenyan Tea Development Authority (KTDA), some land expansion, and yield improvement in the estate sector, Kenyan production is expected to increase at about 5S p.a. in the 1990s and to reach the 250,000 ton level by 2000. 16. Malawi's output was low in 1987 after a severe drought but is expected to recover in 1988. Production is not expected to increase very much because of the expected low real world prices, an already high yield, and a scarcity of suitable land. The production growth rate is projected to be 1.8% p.a. during the 1990s. 17. Zimbabwe's output has doubled in the last 8-10 years. A major reason for this sharp increase was the introduction of very high-yielding clones. Output should continue to increase at a very high rate. Uganda still suffers greatly from the neglect of past years, and its production is expected to increase at only a very moderate rate. 18. Tne above discussion suggests that countries with the capability of reducing production costs through yield increases will be able to increase their production and exports in spite of the projected low real world prices. But countries without such capability or with limited suitable land will at best face stagnation in their tea sectors. Bangladesh, Sri Lanka, Tanzania, and Uganda will face difficulties in increasing production and exports unless they increase their efforts to improve productivity and adopt more export-oriented policies. Since world import demand is ezpected to increase at a low rate, improvements in quality and increases in value-added activities (such as packeted and instant teas) may be useful means for producers to increase export revenues. - 40 - vemand Outlook 19. Demand prospects are expected to vary from region to region. Demand in South Asia, the Middle East, North Africa, and the USSR is likely to increase while that of the industrial countries is projected to stagnate or even to decline. Although the trends in demand of nonproducing developing countries and the USSR are high, these countries may face difficulties in increasing their imports because of foreign exchange constraints. Foreign exchange availability and economic activity in many of these countries depend on oil exports; world petroleum prices, therefore, will have an important impact on world tea demand. 20. Among the producing countries, consumption in India is expected to increase at 4Z p.a. Tea consumption growth w il critically depend on GDP growth, especially in the rural sector. India's tea consumption is expected to reach over 700,000 tons in 2000, by far the largest in the world. Indonesia's domestic consumption is also projected to increase from the current level, estimated at about 20,000 tons, to 30,000 tons by 2000. Kenya's domestic consumption should increase at the high rate of 4% p.a. due to its high population growth rate and anticipated large production increases. Consumption in Turkey is projected to increase at 1.8% p.a., with most of the tea produced being consumed within the country; Turkey's exports are likely to remain low due to poor quality and high production costs. Consumption in other producing countries, such as China, Tanzania, and other African countries, should also increase although it is difficult to quantify the likely incrsases due to very poor statistics for these countries. 21. Black tea consumption in the USSR has been increasing at an es-imated rate of 6.5% p.a. cve- the last 16 years. This high rate of growth is a result of the high population growth among the Asiatic peoples of the USSR, the relatively high economic growth of the past, and the declining real tea prices. Consumption growth is projected to slow to about 3% p.a. as economic growth slows and world prices in real terms are to increase slightly. However, by 2000, the USSR should be the world's second largest consuming country and the largest importing country. 22. Consumption in the industrial countries as a whole is expected to show some decline during the projection period. This decline is the net result of an expected decline in consumption in the United Kingdom, Australia, and Canada outweighing consumption increases in the United States, Japan, and Western Europe (excluding the United Kingdom). 23. Consumption in the United Kingdom is projected to continue its long- term decline and to fall to about 120,000 tons by 2000 from the current level of about 160,000 tons. This decline is caused by competition from coffee, soft drinks, and alcoholic beverages. A recent generic campaign to promote tea seems to have had little effect in reversing this trend. 24. An important factor contributing to the recent low world prices is stagnant demand in tae importing countries of the Middle Eastt Pakistan, and North Africa. Imports into these countries increased at very high rates until the early 1980s, but in the last few years demand has stopped growing or even declined. Because the economic growth and foreign exchange availability of - 41 - these countries depend directly or indirectly on petroleum export revenues, the recent decline in world petroleum prices impacted heavilv on their tea imports. Consumption in these countries is projected to grow, but at a much slower rate than in the 1970s. Trade Outlook 25. World black tea exports are expected to increase at less than 2% p.a. during the projection period. The reasons for such a low rate are the stagnant demand growth in industrial countries and the limited import demand of many tea-importing countries due to limited foreign exchange reserves. Notable changes projected for trade figures include India's decline in exports (from 200,000 tons in 198; to 165,000 tons in 2000), Kenya's continued increase in exports (from 130,000 tons in 1987 to 230,000 tons in 2000), China's substantial increase in exports (from 95,000 tons in 1986 to 143,000 tons in 2000), United Kingdom's decline in imports for consumption (from 171,000 tons in 1986 to 120,500 tons in 2000), USSR's increase in imports (105,000 tons in 1>36 to 180,000 tons in 2000), and Pakistan's continued increase in imports 'from 85,000 tons in 1987 to 130,000 tons in 2000). Price Outlook 26. World tea prices in real terms were at an extremely low level in 1987. Reportedly, even very efficient farmers and estates in many countries have been experiencing difficulties in making profits. If there are no real devaluations in major producing countries, the recent levels of prices are too low for production to expand to meet future demand. Based on simulations of the World Bank's global econometric model, prices measured in real terms are projected to remain relatively low over the next three years but to increase gradually to about USC150/kg in 1995 and to about USd160/kg in 2000 in 1985 constant US dollar terms from the 1987 level of USd131/kg. 27. World production and consumption are expected to be in tight balance by the early 1990s. Because the world price elasticity of demand for tea is low, wide price fluctuations, triggered, for example, by supply shortages due to abnormal weather, are likely to occur during the projection period. However, because additional production capacity exists in major producing countries such as India, Indonesia, China, and Kenya, these price fluctuations should dampen within a year or two and stabilize around the projected prices trend. 28. Some key assumptions used ih the econometric model to project the world tea market were altered to carry out a sensitivity analysis on projected prices. Two simulation runs were made; one under a set of assumptions more optimistic than the base run and the other under a set of assumptions more pessimistic than the base run. Optimistic assumptions are defined as those that wouLd reduce production or increase consumption and would lead to higher prices. 29. Assumed values of exogenous variables for the optimistic (pessimistic) run were: - 42 (i) The real exchange rates in Kenya, Sri Lanka, India, and Indonesia were assumed to be overvalued (undervalued) during the period 1988-2000 by 10% compared with the 1987 levels. This action reduces (increases) production in these countries. (ii) Tea demand in Syria, Pakistan, India, Egypt, Saudi Arabia and surrounding countries, and countries in North Airica was increased (decreased). This was done by increasing (reducing) the projected annual GDP growth rate by 0.5% in Pakistan, India, and Egypt. For the other countries demand was exogenously increased (reduced) by 10% in the 1990s. 30. The price projections from these simulations, as well as those of the base case run, are given in TabLe 1. TABLE 1: PRICE PROJECTIONS UNDER ALTRRMTIVE SCENARIOS a/ Year Base Case Run "Optimistic" Run "Pessimistic" Run ---------------------------------------------------------__------------------_ ---------------------(1385 US¢/kg)---------------------- 1989 134 145 121 1990 145 156 133 1995 150 165 123 2000 160 196 124 ---------------------------------------------------------------------__------_ a/ In 1985 constant terms. Source: World Bank, International Economics Department. 31. The differences in projected prices in Table 1 widen with time because the differences in assumed values of the exogenous variables also widen with time. The results indicate that the exogenous variables for which the assumptions were altered have an important impact on world tea prices. Detailed analyses of these simulation runs revealed that exchange rate movements in major tea-producing countries, in particular, are important variables affecting world tea prices. TABLE A1i TEA (SLACK ) PRODUCTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED RODWTH RATS1 Ai COUNTRIES/ 19S7 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS)------------------------------------- ------(Z PER ANJUM)- NON-MARKET 52 102 116 127 129 132 1314 148 160 5.8 5.9 1.6 USSR 52 102 116 127 129 132 134 148 160 3.8 5.9 1.S DEVBLOPING 918 1,272 1,502 1,615 1,640 1,668 1,689 1,912 2,172 3.1 3.1 2.3 ASIA 732 943 1,089 1,145 1,157 1,176 1,190 1,326 1,478 2,1 2.4 2.0 INDIA 407 550 619 668 670 682 687 778 881 2.6 2.6 2.1 CHINA 17 49 95 99 101 104 108 124 143 6.0 9.6 2.9 SRI LANKA 217 203 211 212 211 211 211 212 214 -0.4 -0,4 0.1 INDONESIA 44 78 101 100 108 112 116 137 160 4.0 5.4 31.7 BANGLADESH 25 39 38 40 41 42 43 47 52 2.4 4.3 2.0 AFRICA 119 199 260 265 275 279 283 350 136 6.5 4.6 3.9 KENYA 38 93 143 156 157 158 157 201 262 10.0 8.1 4.1 MALAWI 18 31 39 32 39 40 40 45 48 5.1 4.7 3.2 AMERICA 34 43 48 49 49 50 51 54 58 4.5 2.4 1.3 ARGENTINA 26 28 33 34 34 35 35 38 41 4.5 1.6 1.5 OUTHERN EUROPE 34 80 144 147 150 153 156 172 190 11.3 8.1 2.0 TURKEY 34 80 144 147 150 153 156 172 190 11.3 8.1 2.0 WORLD 971 1,375 1,618 1,742 1,769 1,800 1,823 2,060 2,333 3.2 3.3 2.3 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)1 END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOURCES, FAO, PRODUCTION YEARBOOK TAPES AND INTERNATIONL TEA COMMITTE, ANNUAL BULLETIN OF STATISTICS (ACTUAL)l WORLD BANK, INTERNATIONAL, ECONOMICS DEPAR1IENT (PROJECTED). TABLB A2t TEA (BLACK) - APPARENT CONSUMPTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED CROWTH PATES A/ COnUtRIESI 1967 - ECNomKIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------------------- U000 TONS) ------------------------------------- ------ ( PER ANNUM)------- INDUSTRIAL 385 375 361 351 351 349 347 332 318 -0.3 -0.6 -0.8 NORTH AMERICA 86 98 99 99 100 101 101 100 100 1.2 0.4 0.1 UNITED STATES 66 78 81 85 84 85 86 87 88 1.6 0.9 0.3 WESTERN EUROPE 258 240 227 219 216 214 212 199 188 -0.8 -0.8 -1.2 UNITED UINGDoY 215 181 164 158 157 154 151 135 121 -1.6 -1.7 -2.0 NON-MARKET 87 118 264 277 286 295 304 348 388 6.5 6.3 2.6 USSR 74 153 221 231 238 247 254 292 327 6.1 6.3 2,7 DEVrLoPING 482 829 1.050 1,069 1,108 1,144 1,172 1,384 1,580 4.8 A.8 3.1 ASIA 350 593 724 728 753 780 803 973 1,116 4.5 4.5 3.3 INDIA 210 341 427 427 451 461 486 592 707 4.8 4.5 4.0 PAKISTAN 30 67 80 85 81 9a 88 123 130 7.6 6.5 3.3 IRAN 25 40 47 47 A8 49 50 55 61 4.4 4.4 2.0 IRAQ 21 34 45 43 44 45 46 50 56 3.1 5.6 2.1 AFRICA 89 137 156 160 178 179 186 210 242 4.0 4.2 3.2 SOUTHERN EUROPE 23 78 147 146 149 152 155 171 189 11.1 11.1 1 8 TURKEY 22 75 144 144 147 149 152 168 186 11.1 11.5 1.8 WORLD 954 1,392 1,675 L,697 1,745 1,789 1,823 2,063 2,286 3.3 3.4 2.3 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)1 END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. BOURCESt VAO, PRODUCTION YEARMOOR TAPES AND INTERIATIONL TEA COMMITTE, ANNUAL BULLETIN OF STATISTICS (ACTUAL)i WORLD LANK, INTERNATIONAL ECOxOHmCS DEPARTMENT (PROJECTED). TABUL A31 TEA (BLACK) - MET EXPORTS BY MAIN COIINTRIES AND ECONOMXC REGIONS -------------------------------------------------------_----__--------------- _-------------------------------------------------- ACTUAL PROJECTED GROWTH RATES A/ COUNTRIES/ 1987 - ECXoUKoIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------_--------------------- ------------------------------------------------------------________________._________ ---------------------------------- ('OO TONS)-- --------------- ------------- ------(Z PER ANLRUM)------- DEVELOPING 607 769 873 874 891 906 902 981 1,07Q 2.0 2.1 1.6 ASIA 470 552 611 610 617 628 621 639 659 0.9 1.4 0.6 INDIA 187 219 200 201 210 215 201 182 165 0.1 0.2 -1.5 SRI LAMNA 203 185 208 201 188 187 187 187 18 -0.5 -0.4 -0.5 CHINA 17 49 95 99 101 104 108 124 143 6.0 10.0 2.9 INDONESIA 37 66 79 86 89 92 95 112 126 4.5 5.6 3.0 BANGLADESH 22 31 28 22 29 29 30 34 38 2.2 4.0 4.3 AFRICA 101 165 208 217 225 229 231 289 364 6.3 4.0 4.1 KENYA 35 81 116 130 136 137 136 176 230 9.6 7.5 4.5 MALAWI 1s 31 40 38 38 39 39 43 47 5.3 5.0 1.7 AMERICA 23 39 46 40 40 41 41 44 47 7.6 4.7 1.3 ARGENTINA 19 30 36 31 31 31 32 35 37 7.3 4.7 1.5 WORLD 607 769 873 874 891 906 902 981 1,079 2.0 2.1 1.6 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)t END-POINT FOR PROJECTED PERIODS (1987-2000). St EGTIMATE. SOURCES, FAO, PRODUCTION YEARBOOK TAPES AND INTERNATIOSL TEA COMMITTE, ANNUAL BULLETIN OF STATISTICS (ACTUAL)i WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE Ai TEA (BLACK) - NgT IMPORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH iD%TES Al COUNTRIES/ 1987 - IOOMOKIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 -------------..---------------------------------------------..--__ ----------__---------------------------------------------------- ---------------------------------- ('000 TONS)------------------------------------- (1 PEP ANNUM)------- INDUSTRIAL 379 3S9 367 335 350 348 346 331 317 -0.3 -0.6 -0.4 NaTH AMERICA 86 98 99 99 100 101 101 100 100 1.2 0.4 0.1 UNITED STATES 66 78 81 85 84 85 85 87 88 1.6 0.9 0.3 WESTERN EUROPE 251 224 234 203 216 214 212 199 188 -0.8 -0.8 -0.6 UNITED KINGDOK 209 165 171 143 157 154 151 135 121 -1.6 -1.7 -1.3 OCEANIA 34 30 26 24 25 25 24 22 19 -1.3 -1.8 -1.8 NON-MARKET 35 86 148 150 157 167 172 213 241 7.5 6.9 3.7 USSR 22 S0 105 104 109 117 122 137 280 7.4 6.8 4.3 DEVELOPING 170 305 350 358 367 388 385 455 502 4.4 4.7 2.6 ASIA 88 185 215 220 220 241 231 285 310 5.8 6.2 2.7 PAKISTAN 30 f.7 80 85 SI 100 8S 123 130 7.6 6.5 3.3 IRAN 7 18 22 23 23 24 24 29 33 6.1 9.3 2.8 IRAQ 21 34 45 43 44 45 46 50 56 3.1 5.6 2.1 AFRICA 69 101 115 119 129 128 135 149 170 4.0 4.6 2.8 EGYPT 23 54 73 75 78 80 83 99 117 3.1 8.8 3.5 WORLD 584 749 865 843 874 903 904 999 1,060 1.8 2.0 1.8 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (0961-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). 5/ ESTIMATE. SOURCES: FAO, PRODUCTION YEARBOOK TAPES AND INTERNATIONL TEA COMIMTTE, ANNUAI. BULLETIN OF STATISTICS (ACTUAL)i WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). - 47 - TABLE AS: TEA - PRICES, a/ 1950-87 (ACTUAL) AND 1988-2000 (PROJECTED) (4//kg) -($/Ton)- Current $ 1985 Constant $ Current SC MiJV b/ US GNP c/ Actual 1950 111 468 518 1951 113 414 503 1952 94 329 413 1953 113 404 487 1954 163 599 692 1955 154 557 636 1956 149 520 595 1957 137 467 527 1958 142 476 534 1959 141 479 517 1960 142 472 514 1961 136 444 487 1,144 1962 138 442 482 1,105 1963 131 427 451 1,126 1964 133 425 450 1,104 1965 129 4!2 428 1,074 1966 126 386 402 1,056 1967 127 385 395 1,039 1968 105 320 310 956 1969 97 283 273 833 1970 110 300 292 892 t?71 105 274 266 866 1972 105 251 253 905 1973 106 218 239 884 1974 140 237 291 1,033 1975 139 211 261 1,204 1976 154 2iO 273 1,174 1977 269 367 447 2,152 1978 219 260 339 1,942 1979 216 226 307 1,833 1980 223 213 291 1,904 1981 202 192 240 1,827 1982 193 186 216 1,666 1983 233 231 251 1,918 1984 346 348 359 2,568 1985 198 198 198 2,067 1986 193 163 189 1,708 1987 i71 132 163 1,495 d/ 1988 175 124 ;60 1,523 1989 200 134 175 1,692 1990 220 145 183 1,828 1995 271 150 174 2,170 2000 363 160 186 2,798 * Developing countries' export unit value. a/ Average of all teas at London auctions. b/ Deflated by Manufacturing Unit Value (MUV) index. c/ Deflated by US GNP deflator. d/ Estimated. Sources: International Tea Committee and FAO Trade Yearbook (actual); World Bank, International Economics Department (projected). - 48 - TEA (CONSTANT .985 DOLLAR PRICES ) 800 - 700 - 600 0 A,,t ' : Soo i945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 - ~~~~DEFLATED mY MANUFACTURING UNIT VALUE ( Uuv) INDEX - ' O EFLATEDWsru.s. cN DEFLTOR. 2 1948-87 ACUAL; t988-2000 PROJCt. SOURC[: WORLD BANK E INTE RNATIONAL ECONOGICS DUNR VLEMU. ...... 00O.. DEFLATED BY_______________________U.S.________MP___________OR__ Sunmary 1. The outlook is for a free market price recovery to a long-term average price of $254/ton in 1985 dollars. Prices in the United States and EEC preferential markets are projected to decline in real terms, with US prices movirng below those of the EEC. The US domestic market stabilization price in 1985 dollars is projected to fall from $346/ton (15.7C/lb) in 1988 to $276/ton (12.5C/lb) in 2000, while the EEC/Lom& price is projected to fall from $346/ton (15.7c/lb) in 1988 to $287/ton (13c/lb) in 2000. The free market sugar price is projected to continue to rise in real terms the next two years to peak at $300/ton (13.6C/lb) in 1990. This will induce supply responses thbat will set off another cycle, with a low of $224/ton (1Oc/lb) in constant dollars in 1995 and a high of $254/ton (11.5c/lb) by 2000. 2. Worid sugar supply is projected to grow at 2% p.a. from 1987 to 133.2 miJlion tons in 2000. The bulk of this growth is expected to be concentrated in the developing countries where suppiy is projected to grow at 2.7X p.a. from 62.9 m-llion tons in 1987 to 90 million tons in 2000. 3. Among the ceveloping countries, supply growth is expected to remain concentrated in Asia and Latin America. Supply from Asia is projected to grow at 3.4% p.a.. ts 37.6 million tons. Much of this supply is projected to originate from China, India, Indonesia, Pakistan, Philippines, and Thailand. Latin American output is projected to grow from 27.8 million tons in 1987 to 36.3 million tons in 2000, of which about one-half of the increase will be from Brazil and Cuba. For the industrial countries, long-term growth should only be 0_8Z p.a. because projected EEC supply growth--based on the continuatiorn of its support policy--will be partly offset LV lower US production. 4. World consumption is projected to grow at 1.7% p.a. from 105 million tons in 1987 to 130.7 million tons in 2000. Of this, 21% will be consumed in the industrial countries, 17X in the nci-market industrial couatri^s, and the remaining 62% in the developing countries. Of projected demand in the industrial countries, about 27% will be by the United States where saturation of substitution by high fructose corn syrups (HFCS) provides scope for some sugar consuraption growth to a projected 7.7 million tons in 2000. Projected EEC consumption i_. lower than the projections made two years ago because of the recent French approval of low-caloric sweeteners; EEC consumption is projected to reach 12.6 million tons in 2000. 5. In the non-market industrial countries, consumption is projected to grow at 1% p.a. to 21.9 million tons in 2000. However, total sweetener consumption will be greater because of HFCS consumption once HFCS production in Bulgaria, Hungary, Yugoslavia, and USSR comes on-stream. 5). Sugar consumption is projected to grow fastest in the developing countries, end to increase from 61.8 million tons in 1988 to 81.7 million tons in 2000. Slightly more than one-half of total cen.sumption will be absorbed by developing Asia, with developing countries in Afilca and America absorbing 15% - 50 - and 25%, respectively. Asian consumption will be dominated by China and India, while consumption in Latin America will be dominated by Brazil and Mexico. 7. World sugar exports are projected to grow at 0.9% p.a. to 31.6 million tons in 2000 (24% of world production). About 70% of exports will be from the developing countries and 27X from the industrial market economies. The developing countries--with the highest expected export growth--should increase exports from 18.5 million tons in 1987 to 22.1 million tons in 2000. Of this, 63% will be from Latin America where Cuba and Brazil will remain the two largest producing and exporting countries. Asian exports are projected to decline marginally at -0.1% p.a. from 4 million tons to 3.9 million tons with Thailand remaining the largest exporter. The major African exporters, Mauritius, South Africa, Swaziland, and Zimbabwe, will jointly contribute 88Z of total African exports. 8. By 2000, the top three importing countries are projected to be the USSR, China and Japan. USSR imports are projected tc grow at 1.9% p.a. from 5 million tons in 1987 to 6.8 million tons in 2000 on the assumption that continued increases in sugarbeet productivity will lead to shifting of land out of sugarbeet to alternative crops. However, imports in the long term could be lower than projected if USSR policy becomes geared to fulfilling its sugar-exporting country status as claimed to the International Sugar Organization. Japan's imports are projected to decline at 1.3% p.a. from 2.2 million tons in 1987 to 1.8 million tons in 2000 with increased competition from the high-intensity sweeteners. Among the developing countries, China will remain the lead importing country, where imports are projected to grow at 6.2% p.a. to 4.3 million tons in 2000. Sugar Production 9. Sugar is one of the few primary commodities characterized by widespread involvement by the developing as well as industrial countries. All countries consume sugar and a majority also produce sugar, albeit to varying degrees of self-sufficiency. Despite this widespread involvement, international trade in sugar is dominated by only a small proportion of the 148 sugar-producing countries. 1/ The longer-term market outlook basically depends on the evolution of the sugar sector in these major trading countries. Therefore, the projections presented here are mostly based on insights drawn from reviewing the sugar-related policies in these countries. 10. Using 1986 as the benchmark year for ranking the top 10 producing countries, Table 1 gives the ranking for selected years in the historical period. While world production nearly doubled between 1961 and 1986, from 54 million to 100 million tons, the share of the top 10 producing countries has remained relatively stable at about 68%. Furthermore, the composition of the top 10 countries nas also remained fairly stable, as shown by the fact that the same 13 countries qualify for such ranking during the period. These are .Australia, Brazil, Cuba, India, Mexico, Philippines, and South Africa for cane sugar; EEC, Poland, and USSR for beet sugar; and the United States for both beet and cane sugar. l/ The countries belonging to the EEC are here considered as a single entity. TABLE 1. RAXiNG O?F TOP SUGAR PRODUCING COUNTRIES SY SELECTED YEARS, 1961-1986 (MILLION TONS) COUNTRY 1961 1965 1970 1975 1980 1981 1982 1963 1984 l9os 1P99 EEC 8.23 (1) 8.75 (2) 10.17 (1) 11.94 (1) 14.53 (1) 16.57 (1) 16.65 (1) 13.69 (1) 14.53 (1) 14.97 (1) 15.11 (1) USSR 6.63 (3) 9.70 (1) 8.85 (2) 8.09 (2) 7.17 (3) 6.41 (4) 7.39 (5) 8.70 (3) 8.59 (3) 8.26 (3) 0.66 (2) BRAZIL 3.35 (5) 4.61 (5) 5.02 (3) 6.30 (4) 8.27 (2) 8.73 (2) 8.94 (3) 9.56 (2) 9.26 (2) 5.46 (2) 5.00 (3) INDIA 3.09 (6) 3.49 (6) 4.63 (6) 5.05 (6) 4.53 (6) 5.99 (5) 9.13 (2) 8.45 (4) 6.61 (3) 7.02 (3) 7.59 (4) CUBA 6.77 (2) 6.08 (3) 7.56 (3) 6.43 (3) 6,81 (4) 7 93 (3) 8.04 (4) 7.46 (5) 7.78 (4) 7.69 ) 7.47 (5) UNITgD STATES 4.89 (4) 5.69 (4) 5.73 (4) 5.95 (5) 5.32 (5) 5.79 (6) 5.42 (6) 5.22 (6) 5.34 (6) 5.42 (6) S.68 (6) CHINA, PEOPLE'S REPUBLIC 1.00 (13) 1.10 (12) 1.15 (12) 1,50 (12) 2.80 (8) 3.45 (8) 3.70 (7) 3.90 (7) 4.30 (7) 5.20 (7) 5.67 (7) KgXIOO 1.49 (9) 2.12 (7) 2.40 (8) 2.64 (9) 2.72 (9) 2.64 (9) 2,74 (10) 3.08 (9) 3.31 (9) 3.49 (a) 3.70 (8) AUSTRALIA 1.45 .10) 2.07 (8) 2.51 (7) 2.93 (7) 3.42 (7) 3.S1 (7) 3.65 (8) 3.26 (8) 3.63 (8) 3.44 (9) 3.44 (9) THAILAND 0.1E s38) 0.32 (31) 0.49 (26) 1.22 (14) 0.78 (20) 1.70 (13) 1.02 (9) 2.11 (11) 2.55 (1) 2.39 (11) 2.72 (10) SOUTH AFRICA 1.07 (12) 1.01 (13) 1.65 (10) 1.97 (10) 1.78 (11) 1.99 (11) 2.37 (12) 1.58 (15) 2.28 (12) 2.54 (10) 2.25 (11) INDONESIA 0.63 (19) 0.78 (15) 0.71 (18) 1.03 (16) 1.17 (14) 1.20 (17) 1.59 (16) 1.51 (16) 1.76 (14) 1.70 (13) 2.15 (12) POLAND 1.51 (8) 1.54 (10) 1.54 (11) 1.85 (11) 1.16 (15) 1.82 (12) 1.93 (13) 2.14 '10) 1.93 (13) 1,84 (12) 1.88 (13) PHILIPPINES 1.53 (7) 1.66 (9) 1.98 (9) 2.67 (8) 2.33 (10) 2.38 (10) 2.71 (11) 2.11 (12) 2.58 (10) 1.66 (14) 1.51 (14) l TURKEY 0.47 (22) 0.57 (21) 0.64 (22) 0.76 (21) 1.14 (16) 1.21 (16) 1.64 (14) 1.84 (13) 1.65 (15) 1.40 (16) 1.43 (15) in TOP 10 TOTAL 38.93 45.73 30.50 53.97 57.89 63.39 68.68 65.45 65.95 66.67 68.40 WORLD TOTAL 53.70 63.70 71.14 78.85 84.49 92.76 101.81 96.90 99.20 98.55 100.22 TOP 10 SHARES OF WORLD %X) 72.50 71.78 70.99 68.44 68.51 68.34 67.46 67.54 66.48 67.65 68.25 NOTE: FIGURES WITHIN PARVNTtESES DENOTE COUNTRY RAN^K AHNG ALL SUGAR PRODUCING COUNTtIES. SOURCE: ISO YrARIOOK, VARIOUS ISSUES. - 52 - 11. These leading producing countries can also be differentiated according to their output rates of growth. The low output growth countries are Cuba, Philippines, Poland, South Africa, United States, an'd the USSR. The higher output growth countries are Brazil and Mexico in Lacin America, China, India, Indonesia, and Thailand in Asia, and the EEC. These production growth rate differentials may be attributed to nonmutually exclusive factors that include national policies on agricultural production in general and sugar production in particular, access to preferential export markets, bilateral trade relationships, and having access to requisite technology. 12. The poor output performance in Cuba stems primarily from labor and managerial problems. Nearly 85Z of Cuban sugar is produced by state-owned estates that have become increasingly mechanized in the last decade because of labor problems. This mechanization extends from land preparation through cane-cutting, loading, and lifting. Despite a massive effort to machanize the estate sector, this sector has lagged in productivity to that of the small- scale labor-intensive farms. For the past four years, weather conditions, as well as managerial and organizational problems, have contributed to constrain overall production growth. 13. Productivity in Philippine sugar is basically constrained by poor soil, land elevation, and the absence of a cold season so that .he sucrose content is low. The stagnant output in recent years is due to a combinatic. of area expansion into marginal and submarginal land for sugar and an increate in cane-growing by small- and medium-scale farmers with below-average yields. Productivity has also been affected by lack of capital for upgrading machinery. 14. The leveling off in South African production growth since the earl' 1980s has been caused primarily by land constraints. Historically, So-:: African sugar estates were located in the rainfed areas. But expansion in the 1970s has been mainly to irrigated land. Consequently, future output growti. must derive from higher yields, thereby invoking the choice-of-techniques question. This choice has, so far, been dictated by the labor cost differentials between skilled and unskilled labor, resulting in the use of labor-intensive methods for jobs requiring unskilled labor and the switching to mechanization where skilled labor is required. Further increases in productivity are therefore contingent on implementing the optimum mix of capital and labor throughout the entire process from cane cultivation to sugar production. 15. Output stagnation in Poland and the USSR stems primarily from low beet yields and sugar recovery in the refining process. In the USSR, the Large size of estates and collective farms has hindered attempts to increase yields through more intensive cultivation. In an attempt to raise yields since 1980, the Industrial Cultivation Technique (ICT)--which involves the scientific application of inputs and the timely performance of major tasks-- has been introduced. Increased USSR production in 1987/88 is attributed to the introduction of the ICT. However, transportation problems have prevented the timely processing of the beets. 16. A feature common to the higher output growth countries is the adoption of policies to encourage increased production. In Brazil, policies - 53 - promoting sugar production have been partly linked to the production of alcohol. Production has been encouraged through favorable prices and subsidies which were particularly important for the poorer northeastern areas having more labor-intensive cultivation. In contrast, cultivation in the central-south flatland area near Sao Paulo is mechanized, with heavy use of fertilizers and chemicals. 17. Despite a nonintegrated pricing policy, sugar output has increased in Mexico in recent years. This growth was facilitated by government assistance that led ultimately to government takeover of some sugar mills to avoid their financial collapse. Current proposals for an integrated sugar pricing policy and rationalization of mills towards their privatization is aimed at overall rationalization of the industry. This should result in higher production, especially in the rainfed Gulf of Mexico region where two-thirds of total production is located. 18. Recent output growth in China and India are results of revised pricing policies. In China, agricultural reform, decentralization, and policy shifts in favor of cash crop cultivation have encouraged small-scale cultivation of sugarcane and sugarbeet. However, while producer prices have been raised, prices to sugar mills have remained unchanged. It is projected that policy reforms extending to the milling stage to redress this imbalance will be introduced, leading eventually to higher sugar recovery. 19. In Tndia, output growth has stemmed from higher statutory minimum prices upon which producer prices are based, and by reduction in the proportion of production sold at the levy price from 60% to 50%. With Indian sugar millers urging a further reduction in this proportion to 40%, a further reduction of the levy sugar share is likely--particularly as income growth over time is expected tc lead to a shift in sugarcane utilization from the noncentrifugal to the centrifugal sector, thereby increasing sugar production. The four-: ear sugar policy introduced for the 1986/87-1990/91 period may therefore be viewed as providing support for such longer-term developments. Besides lowering the levy-to-free market sugar ratio to 50:50, the policy also (i) raised the statutory minimum price for cane by Rs. 10/ton; (ii) allowed the state governments to set their own statutory minimum prices; and (iii) increased the annual levy-sugar quota by 300,000 tons. 20. Output growth in Thailand has been the result of low-cost production reinforced by a domestic sugar pricing policy that minimizes transmission of world price instability. Thai sugar production stems largely from relatively small farms where self-employed, labor-intensive cultivation has resulted in high yields. The use of family labor and low utilization of purchased inputs, such as chemicals and fertilizers, has meant low input costs. To dampen the effects of world price instability, domestic consumer prices are maintained at levels above world prices with a lower preferential price for the sugar-using, food-processing industries on evidence that the processed foods are exported. 21. Although Indonesia's system of individual sugarcane farms has been in place since 1975, output growth has been rapid cnly since 1980. The increased growth has resulted from very labor-intensive cultivation on rainfed farms (more intensive than in India) that has more than offset the negative effects on yields of ratooning adopted by the farmers since 1975. Meanwhile, larger - 54 - sugarcane estates are being established in the outer islands, especially in Sulawesi and Sumatra. Sugar Supply Projections 22. Over the 1987-2000 period, world sugar supply is projected to increase 2% p.a. to 133.2 million tons. The bulk of this growth will be concentrated in the developing countries where supply is projected to grow at 2.7% p.a. Supply growth should be concentrated in Asia and Latin America. Asian supply is projected to grow at 3.4% p.a. to 37.6 million tons, or 28% of total world supply in 2000. Much of this increase will derive from supply growth in Chins (2% p.a.), India (4.4% p.a.), Indonesia (1.6% p.a.), Pakistan (5.2% p.a.), Philippines (4.9% p.a.), and Thailard (3.41 p.a.). 23. The projected long-term output growth for Pakistan is based on policy changes favoring such growth. One recent change was introduced with the 1987/88 crop when the sugar zoning system that mandates the sugarcane delive:y zones was abolished, thereby allowing compLete freedom for cane growers and the sugar mills to sell and purchase cane. Increased flexibility in the cane delivery system should minimize losses through reduced rendement, even though cane growers still feel that the transportation payments system is inferior to that for some other crops such as cotton and rice. Furthermore, higher world prices will likely induce increases in the domestic support prices as has happened recently, by raising the premium for cane quality that exceeds the minimum recovery rates, and where minimum recovery rates are permitted to vary (from 8.3-8.7%) between states. 24. Output growth in the Philippines is projected to resume on the basis of the Land Reform Program that became law in early June 1988. The Program aims to redistribute 5.4 million hectares of land under coconut, corn, rice, and sugarcane to more than 3 million tenant farmers over the next decade. In addition, another 1.3 million hectares of private agricultural land now administered by the corporate plantation sector is being proposed for redistribution to farmers, albeit in a staggered way over a period in excess of six years. 25. The other significant supply growth region is Latin America, where production should grow at 2.1% p.a. from 1987 to 36.3 million tons in 2000 (representing 27% of total supply). Supplies from Cuba (of about 8.5 million tons in 2000) and Brazil (of 11 million tons in 2000) will jointly contribute 53.8% of total Latin American supply. Other countries with strong projected supply growth are Dominican Republic (3.7% p.a.), Colombia (2.2% p.a.), Argentina (1.7S p.a.), and Mexico (3.8% p.a.). 26. Supply in developing Africa and Oceania is projected to grow at 3% and 4.3% p.a., respectively, from relatively small base volumes. 27. Pecsuse of the offsetting growth patterns expected among the industrial market economies, their growth will only be 0.8% p.a., to reach 28.3 million tons by 2000. Given the high domestic consumer costs and foreign policy implications of domestic support programs and declining US sugar quotas, respectively, it is projected that the US loan rates for the domestic - 55 - sugar program will not be raised. Thus, US production is projected to fall to about 6 million tons over the next decade. 28. Assuming continued EEC intransigence in its agricultural policy and continued support of domestic production, EEC production is projected to continue to grow at 0.7% p.a. to 15.5 million tons. Production in Japan is projected to grow at 1.3% annually to 1.1 million by 2000 under assumptions similar to those for the EEC. 29. The highest supply growth rate expected among the industrial countries is 1.7% p.a. for Australia. where supply is projected to increase from 3.5 million tons in 1987 to 4.3 million tons in 2000--despite the move to reduce protection contained in the May 1988 budget. The projected increase in output is based on the supply response to improved world prices that should reinforce the effects of two recent developments that augur well for the Australian sugar industry. These are (i) the 1987 amendment to the "Regulation of Sugarcane Prices Act" that relaxes the "acreage assignment" system by allowing producers to cultivate cane on unassigned land so long as their total cane area does not exceed the assigned base; and (ii) the completion of a major dam in the cane-growing Burdekin region that will provide irrigation for an expanded acreage base. 30. Supply from the non-market industrial countries is projected to grow at 0.8% p.a., with USSR production reaching 10.5 million tons by 2000. 31. Thus. the share of the top 10 countries in global supply should decline from 68.3% in 1986 to 66.5% in 2000. Recent Sugar Consumption Developments 32. The determinants of sugar consumption are income levels, prices (of sugar and its substitutes and complem.ents), and the trade policies of the countries concerned. In the industrial countries, income an-. price elasticities of demand for sugar are very low, and there is no relationship between per capita consumption and per capita production because consumer and producer prices often do not refloct market conditions. In these countries, annual per capita consumption has beei. seen to approach saturation at levels of 45-55 kg. 33. In contrast, sugar consumption in the developing countries is strongly influenced by the level of domestic production and their net sugar trade position. Where they are net sugar exporters, annual consumption exceeds 30 kg; where they are net sugar importers, annual consumption is less than 10 kg. From the concentration of trede among a small group of countries, it is obvious that per capita consumption remains very low in a wide range of developing countries. 34. There is considerable scope for increased sugar consumption from the currently very low levels in Africa and Asia. In Sub-Sahara Africa, 25 out of the 40 countries have annual per capita consumption below 10 kg. The countries include the populous nations of Nigeria, Tanzania, Ethiopia, Uganda, Zaire, and Ghana. Similarly in Asia, 12 out of 30 countries have annual per - 56 - capita consumption below 10 kg. The countries/regions with less than 10 kg per capita include China, Indochina, and India. 35. The positive relationship between per capita consumption and the countries' status as a traditional sugar exporter with access to preferential markets is most clearly manifested in the high per capita consumption in the low-income exporting developing countries except those in Sub-Sahara Africa. Of the 30 countries in Central and South America, all except Haiti, Honduras, El Salvador, and Paraguay have annual per capita consumption higher than 30 kg. This contrasts with the majority of countries in Sub-Saharan Africa and Asia where annual per capita consumption is well below 20 kg. 36. In most net exporting countries, retail prices show little relationship with the world market sugar price so that no response of domestic consumption to international price fluctuations can be measured. But clear responses to world price fluctuations are observed for net importing countries in their domestic retail prices. It has been estimated that more than two- thirds of global sugar consumption is traded under price regimes that are insulated from world price fluctuations. 37. Over the past 20 years, the elasticity of per capita demand with respect to per capita income changes has averaged about 0.2 for most industrial countries. However, the elasticities have been declining rapidly over this period and are now close to zero. The exceptions are Southern Europe and Japan, where elasticities average about 0.7 and where the elasticity decline has been much less marked. An average income elasticity of demuand of 0.4 has been estimated for the European CPEs, albeit also or. a declining trend. 38. The income elasticity of per capita demand is around unity for countries with low per capita consumption (less than 10 kg) and 0.7 for countries with higher per capita consumption (more than 30 kg). Although the income elasticities for developing countries with high consumption levels have exhibited a tendency to decrease, this tendency is less marked than in the industrial countries; this implies a higher saturation level in these countries, probably because sugar is a cheap source of human energy as well as a food substitute. The latter factor is most relevant in traditional cane sugar producing countries as in the Caribbean and India. 39. The consumption prospects presented here are based on analysis of (i) the global distribution of countries by their current per capita sugar consumption, as well as their projected income and population growth rates; (ii) their access to preferential sugar trade with the United States, the EEC, and Comecon; (iii) the evolution of the top 10 consuming countries; and (cv) the inroads Likely to be made by alternative sweeteners. 40. Using 1986 as the benchmark year, Table 2 shows the evolution since 1961 of the top 15 consuming countries in 1986. Since consumption in the developing countries remains much below saturation levels, the longer-term market prospects mainly hinge on consumption growth in the developing countries. It can be seen that countries such as Indonesia, Egypt, Pakistan, and Turkey have experienced rapid consumption growth in recent years. With their relatively larger populations, these countries have higher potential for increased sweetener consumption than the others in the table. TASLI 2i RANKING OF TOP SUGAR COVSU4XSG C041I13 B1 SELECTD YEARS, 1961-66 (MILLION TONS) COUNTRY 1911 1965 1970 1975 1960 1981 1982 1981 1984 I"S it" USSR 8.91 (3) 8.38 (3) 10.25 (3) 11.22 (1) 12.75 (1) 12.72 (1) 15.00 (1) 13.09 (1) 13.20 (1) 12.61 (1) 19.40 (1) EEC 9.72 (1) 10.80 (1) 12.10 (1) 11.17 (2) 12.40 (2) 12.09 (2) 12.19 (2) 11.94 (2) 12.07 (2) 12.02 (2) 12.21 (2) INDIA 2.40 (5) 2.78 (5) 1.77 (4) 3.86 (5) 5.04 (5) 5.95 (4) 6.71 (4) 7.1S (4) 8.24 (3) 8.97 (3) 8,49 (1) UNITED STATES 8.93 (2) 9.35 (2) 10.53 (2) 9.14 (3) 9.33 (3) 8.96 (3) 8.31 (3) 8.07 (3) 7.74 (4) 7.29 (4) 7.09 (4) CHINA, PEOPLE'S REPUBLIC 1.60 (6) 1.15 (8) 1.50 (8) 1.70 (8) 3.60 (6) 4.10 (6) 5.00 (6) 5.50 (6) 5.70 (6) 6.35 (1) 6.70 (5) BRAZIL 2.65 (4) 2.95 (4) 3.50 (5) 4.99 (4) 6.26 (4) 5.87 (5) 6.10 (5) 5.91 (5) *.20 (5) 6.0S (6) 6.3S (6) )4XIcO 1.16 (8) 1.48 (7) 1.99 (7) 2.53 (7) 3.15 (7) 3.26 (7) 3.51 (7) 3.24 (7) 3.34 (7) 3.55 (7) 1.45 (7) JAPAN 1.55 (7) 2.03 (6) 3.03 (6) 2.80 (6) 2.98 (8) 2.75 (8) 2.92 (8) 2.78 (8) 2.75 (8) 2.89 (8) 2.74 (8) INDOESIA 0.59 (15) 0.64 (15) 0.89 (14) 1.18 (11) 1.55 (9) 1.50 (9) 1.65 (9) 1.86 (10) 1.73 (10) 1.79 (9) 2.12 (9) PAKISTAN 0.17 (40) 0.41 (24) 0.63 (20) 0.52 (29) 0.78 (22) 0.95 (19) 1.10 (15) 1.20 (15) 1.10 (14) 1.40 (12) 1.75 (10) EGYPT 0.38 (20) 0.48 (23) 0.52 (26) 0.72 (21) 1.12 (14) 1.34 (11) 1.45 (11) 1.55 (11) 1.60 (11) 1.60 (11) 1.65 (11) POLAND 1.02 (9) 1.14 (9) 1.42 (9) 1.39 (9) 1.33 (10) 1.35 (10) 1.72 (10) 1.67 (9) 2.01 (9) 1.69 (10) 1.45 (12) TuRKEY 0.36 (22) 0.50 (21) 0.66 (17) 0.94 (1S) 1.10 (16) 1.12 (15) 1.33 (12) 1.33 (13) 1.43 (12) 1.25 (14) 1.48 (13) S.(JT APRICA 0.69 (12) 0.84 (12) 0.92 (13) 1.22 (10) 1.29 (11) 1.30 (12) 1.33 (13) 1.34 (12) 1.33 (11) 1.17 (1)) 1.38 (14) I A'M 0.51 (18) 0.57 (17) 0.71 (15) 0.93 (16) 1.15 (13) 1.10 (16) 1.00 (18) 1.00 (19) 1.25 (16) 1.30 (16) 1.30 (15) Lt TOP 10 lu7-JL 38.75 41.21 49.17 50.21 58,60 56.84 61.31 61.45 62.98 63.25 64.74 UONLD TOTAL 53.23 59.13 70,4U 74.44 88.65 89.96 92.76 93.84 96.57 97.70 100.65 TOP 10 SHAR OF WORLD (2) 72.79 69.70 69.76 67.45 66,11 65.41 66.10 65.49 65.21 64.68 64.20 NOTE FIGURES WITHIN PARERTUESES DENOTE COUNTRY RAIK AMON ASLL SUGAR CONSUMING COUNTRIES. SOURCE: ISO YEARS OOK VARIOUS ISSUES. - 58 - '+1. Sugar consumption in Mexico rose continuously from i961 to 1982 but declined slightly thereafter, resulting in per capita consumption rising from 31 kg in 1961 to 43 kg in 1986. This increased consumption was facilitated by growth in production that enabled Mexico to continue exporting some sugar, primarily to the United States. However, rising consumption has been at the cost of decreasing exports since 1961, and by 1980 Mexico had to import sugar to cover produ-Lion shortfalls. This was followed by a government-directed sugar industry rationalization program that eventually led to increased production. Sugar exports were resumed in 1985, and in early 1988 the government announced its intention to divest itself of some of its sugar- related investments. Mexico is thus basically self-sufficient in sugar. 42. In contrast to Mexico, consumption in China stagnated around 1.2-1.7 million tons from 1961 to the mid-1970s. Slow growth in sugar production but rapid growth in population growth caused per capita consumption to fall from 2.5 kg in 1961 to 2.3 kg in 1976. More liberal economic policies since 1978 have precipitated a near doubling of sugar consumption from 3.6 million tons in 1980 to 6.7 million tons in 1986. At the same time per capita consumption has increased from 3.7 kg to 6.3 kg. This increased consumption was facilitated by imports to supplement rising domestic production. However, world sugar price volatility and the country's foreign exchange constraint have necessitated episodic rationing to restrain consumption growth. 43. Indian consumption has grown at a rapid rate--from 2.4 million tons in 1961 to 5.1 million tons in 1980. But from this 5.9Z p.a. growth, consumption growth has escalated to 15.3Z p.a. during the 1980-85 period to reach nearly 9 million tons in 1985. 44. Throughout the 1961-86 period India has been among the top five sugar producing and consuming countries. However, this ranking understates India's position in global terms because of the exclusion of noncentrifugal suga3 (gur and khandsari) that dominates rural sugar consumption. So far, Indian production and consumption of centrifugal and noncentrifugal sugars has been kept in relative balance by a set of policies that includes fixing prices for sugarcane (to the sugar mills) and setting price and quantity levels for the sale of centrifugal sugar at the state-owned outlets. The free market sugar price then results from the influence of these policies, income growth, and sugar imports from the world market. 45. Sugar consumption has therefore been set by prices that have enabled the government to export some sugar (half a million tons or less) when the world price is high. Imports have therefore been infrequent until 1984 when historically low sugar prices allowed substantial imports to compensate domestic production shortfalls that were caused by severe production difficulties (production fell from 9.13 million tons in 1982 to 6.63 million tons in 1984). Since 1984 India has continued importing sugar, thereby enat.ing consumption growth to go from 7.2 million tons in 1983 to 8.9 million tons in 1985 and almost 10 million tons in 1987. 46. Like India, sugar consumption in Pakistan increased very sharply in the 1980-86 period (at 21% p.a.), following rapid growth (at 19% p.a.) for the 1961-80 period. Over this 25-year period Pakistan's per capita consumption has risen from 3.6 kg to 18.5 kg. It is estimated that per capita centrifugal - 59 - and noncentrifugal sugar consumption in 1988 will be 18.8 kg and 10 kg, respectively. 47. The recent high consumption growth in Egypt has basically been facilitated by output growth, supplemented by import growth. Consumption growth in Turkey since 1980 has also been facilitated by output growth resulting from higher productivity. Production costs have fallen to the point where Turkey is one of the three lowest-cost beet sugar producers, with production costs recently in the range of $350-400/ton for white sugar and close to that for France. Exports from Turkey go primarily to Iran, Iraq, and Cyprus. 48. Growth in Indonesian consumption has been facilitated by higher domestic output, resulting in reduced imports. Per capita consumption has increased from 7.6 kg in 1960 to 12 kg in 1987. The outlook seems to be for increased consumption through increased self-sufficiency. Consumption Prospects 49. World consumption is projected to grow at 1.7% p.a. during the 198;- 2000 period to reach 130.7 million tons in 2000. Of this, about 63% should be consumed in the developing countries and the remainder split between the industrial market and non-market economies. About 27% of consumption in the industrial countries will be in the United States, where saturation of substitution by HFCS since 1987 should, in principle, provide scope for resumed growth in sugar consumption along with total sweetener consumption growth. However, it is expected that high-intensity sweeteners will make their inroads in the next decade. US sugar consumption is now projected to rise from 7.4 million tons in 1987 to 7.7 million tons in 2000--0.3 million tons lower than our projection two years ago. 50. Consumption in the EEC-iO is projected to grow at 0.9% p.a. from 11.5 millicn tons in 1987 to 12.6 million tons in 2000, which would be 47% of total consumption in the industrial countries. This growth in consumption is lower than projected two years ago because of the recent French approval of the use of low-calorie sweeteners. 51. Consumption in Japan is also now projected to grow less slowly--at 0.5% p.a. from 2.7 million tons to 2.9 million tons. The lower projection is based on recent declines in consumption (from 2.9 million tons in 1985 to an expected 2.7 million tons in '988) which suggest further scope for substitution by HFCS and the high-intensity sweeteners. Sugar consumption is likely to resume growth in the 1990s. 52. In the non-market industrial countries consumption is projected to grow less slowly than was projected two years ago, with total consumption rising from 19.2 million tons in 1987 to 21.9 million tons in 2000. Some sweetener consumption will be shifting to HFCS, given the plans for investment in HFCS production capacities in Bulgaria, Hungary, Yugoslavia, and the USSR. 53. Consumption is projected to grow fastest in the developing countries. Consumption in these countries is projected to grow from 60.6 - 60 - million tons to 81.7 million tons over the projection period (i.e., at 2.3% p.a.) Slightly more than one-half of the increase should be absorbed by developing Asia, with Africa and Latin America absorbing about 15% and 25%, respectively. 54. Consumption increases in Asia will be dominated by China and India, where consumption in 1987 and 1988 was about i million tons higher than we projected two years ago. For India, our long-term projection of 15.1 million tons remains unchanged. For China, our long-term projection has been marginally revised downwards to 11.5 million tons. Although our per capita sugar consumption forecasts remain at 15.1 kg and 8.8 kg for India and China, respectively, by 2000, total sweetener consumption will be higher given the recent plans by both countries to invest in HFCS production capacities. 55. Consumption in Africa is projected to rise at 2.9% p.a.--from 8.8 million tons in 1988 to 12.2 million tons by 2000. This is 1 million tons higher than was previously projected. Much of the projected growth will be concentrated in the second half of the 1990s when countries in North and West Africa are projected to exhibit higher income growth. 56. The consumption projection for Latin America has been raised from 0.6% p.a. to 1.4% p.a on the premise that some resolution of the debt problem will allow resumption of economic and income growth. Sugar Exports 57. Table 3 presents the evolution of the top 10 sugar-exporting countries during the 1961-86 period, where exports refer to raw and refined sugar in raw sugar terms. This aggregation has a bearing on the dimension of the growing share of the refined and plantation white sugar trade. S8. Notwithstanding the raw-white sugar dichotomy, the evolution of the export market has been characterized by (i) the growing concentration of trade within the top 10 countries and especially the domination of exports by Aust-'pia, Brazil, Cuba, and the EEC; and (ii) the impressive growth in export.t from several developing countries and the United States. 59. Wcrlu exports rose from 22.4 million tons in 1961 to a peak of 30.4 million tons in 1982 before declining to 27 million tons in 1986. During this per,od. the top 10 countries' share rose from 63% to 79%, with a peak of 82% in 1982 just after the last price peak in 1980. Among the top exporting countries, the ranking for Philippine exports has undergone the sharpest change. Until 1981, the Philippines was among the top five exporting countries. Between 1982 and 1985 its ranking slipped to 8th position. By 1986 the ranking had slipped to 18th, and recourse to borrowing sugar from Thailand was necessary in 1988. 60. Besides the decline in exports from the Philippines, two other reasons for the marked change in export ranking since 1970 were (i) the decline in USSR production after 1970; and (ii) the growth in exports from Brazil and the EEC relative to that from Australia after the mid-1970s. The TABLE 3 RAUKNG OIf TOP SUGAR IHPORTING COUNTRIES BY SELECTED YEARS, 1961-U6 (MILLION TONS) _________----- ------------------------------------------------------------------------------------------------------------------------------------------------------____ COUNtRY 1961 1965 1970 1915 1980 1981 1982 1983 1984 1985 196 USSR 3.60 (2) 2.29 (3) 3.00 (2) 3.24 (2) 4.98 (1) 5.20 (1) 7.36 (1) 6.00 (1) 5.70 (1) 4.48 (1) 5.17 (1) EEC 2.79 (3) 3.13 (2) 2.60 (3) 2.95 (3) 1.76 (4) 1.66 (3) 1.89 (5) 1.88 (3) 1.91 (3) 1.95 (5) 1.63 (2) JAPAN 1.31 (5) 1.47 (4) 2.48 (4) 2.55 (4) 2.33 (3) 1.64 (4) 2.24 (4) 1.87 (4) 1.90 (4) 1,99 (4) 1.62 (3) UNITED STATES 4.00 (1) 3.65 (1) 4.80 (1) 3.51 (1) 3.60 (2) 4.65 (2) 2.39 (3) 2.67 (2) 3.02 (2) 2.27 (2) 1.80 (4) CANADA 0.69 (6) 0.88 (5) 1.00 (5) 1.04 (5) 0.91 (6) 0.91 (7) 0.91 (7) 1.00 (6) 1.05 (6) 1.16 (7) 1.28 (5) CHINA, POOPLE S REPUBLIC 1.53 (4) 0.42 (8) 0.53 (6) 0.31 (12) 0.95 (5) 1.19 (5) 2.56 (2) 1.78 (5) 1.35 (5) 2,21 (3) 1.10 (6) INDIA 0.00 (132) 0.00 (134) 0.00 (146) 0.00 (135) 0.20 (24) 0.23 (24) 0.00 (135) 0.00 (136) 0.39 (15) 1.78 (6) 1.05 (7) KOREA, REPUBLIC OF 0.07 (29) 0.05 (47) 0.22 (17) 0.36 (9) 0.80 (7) 0.76 (9) 0.71 (9) 0.78 (10) 0.84 (8) 0.90 (6) 0.97 (a) PAKISTAN 0.06 (37) 0.14 (25) 0.00 (105) 0.01 (68) 0.16 (31) 0.00 (146) 0.00 (136) 0.00 (103) 0.02 (76) 0.04 (50) 0.75 (9) EGYPT 0.07 (32) 0.15 (22) 0.05 (47) 0.22 (15) 0.47 (14) 0.69 (11) 0.78 (8) 0.91 (7) 0.90 (7) 0.71 (9) 0.74 (10) MALAYSIA 0.27 (10) 0.25 (11) 0.41 (9) 0.36 (8) 0.51 (13) 0.46 (16) 0.46 (17) 0.56 (12) 0.58 (11) 0.62 (l1) 0.66 (11) IRAN 0.39 (8) 0.43 (7) 0.08 (36) 0.68 (6) 0.79 (8) 0.70 (10) 0.47 (16) 0.62 (11) 0.61 (9) 0.63 (10) 0.65 (12) NIGERIA 0.07 '34) 0.11 (30) 0.09 (34) 0.11 (31) 0.71 (1) 0.97 (6) 0.94 (6s 0.56 (8) 0.44 (14) 0.52 (15) 0.56 (13) IRAQ 0.25 (13) 0.47 (6) 0.24 (14) 0.33 (11) 0.74 (10) 0.48 (15) 0.54 (13) 0.50 (14) 0.57 (12) 0.51 (12) 0.55 (14) ALGERIA 0.22 (14) 0.20 (15) 0.22 (18) 0.30 (13) 0.58 (12) 0.60 (13) 0.64 (10) 0.55 (13) 0.59 (10) 0.53 (14) 0.49 (15, t' BX!.,GA4fA 0.11 (25) 0.17 (20) 0.40 (10) 0.20 (16) 0.24 (22) 0.27 (21) 0.29 (20) 0.45 (15) 0.37 (16) 0.52 (16) 0 ( 6 SYRIA 0.08 (28) 0.08 (34) 0.12 (29) 0.16 (23) 0.18 (27) 0.29 (19) 0.35 (18) 0.24 (23) 0.2, (26) 0.36 (1?) 0.35 t MOROCOD 0.41 (7) 0.35 (9) 0.28 (11) 0.27 (14) 0.33 (18) 0.31 (18) 0.21 (23) 0.22 (25) 0.32 (1) 0.24 (21) 0.34 (... SRI LANKA 0.22 (15) 0.18 (17) 0.27 (12) 0.06 (43) 0.18 (26) 0.26 (22) 0.16 (32) 0.26 (20) 0.28 t23) 0.34 (1S) 0.32 (19 GERMAN DBrCRATIC REPUBLIC 0.11 (24) 0.16 (21) 0.51 (7) 0.17 (20) 0.19 (25) 0.28 (20) 0.20 (24) 0.25 (22) 0.31 (19) 0.27 (19) 0.30 (20) TOP 10 TOTAL 15.37 13.3/ 16.17 15.43 17.81 18.50 20.42 18.57 17.88 18.08 16.51 WORLD TOTAL 19.52 18.12 21.34 20.50 26.75 28.22 29.59 27.73 2?.97 26.51 27.06 TOF' 10 SRARE OF WORLD (S) 78.72 73.76 75.79 75.27 66.58 65.54 69.)2 66.98 63.92 68.19 60.99 NOTE: YIGURES WITHIR .RAREZIMILESQ DLU3TE COUNTRY RANK AMONG ALL SUGAR IMPURT1NG CO(I(TRIES. SOURCY.; ISO YEARNOOK VARIOUS ISSUES. - 62 - rapid growth in EEC production was such that sugar exports from the EEC outstripped those from Australia. 61. Countries that have made continual and significant improvement in their export ranking since the mid-1960s are Thailand (from 29th to 5th), Swaziland, Guatemala, and Zimbabwe. Swaziland and Zimbabwe are now among the world's lowest-cost producers, while Guatemala and Thailand are ranked among the 20 lowest-cost producers. 62. Although the export position of the United States also improved sharply, this shift needs to be qualified. For the United States, what is significant is its growing exports against falling imports, as a result of its protection policy, even though the country remains a net importer. Similarly, the Republic of Korea remains a net importer of raw sugar with part of its imports re-exported after toll-refining. Export Prospects 63. World sugar expor-s are projected to grow at 0.9% p.a., from 28.2 million tons in 1987 to 31.6 million tons in 2000. About 70% will be from the developing countries and the remainder from the industrial market economies. Given that production in the industrial countries is unlikely to expand as fast as consumption, exports from these countries are projected to grow slowly. Average annuai growth of only 0.3% should increase exports from 8.2 million tons in 1987 to 8.5 million tons in 2000. EEC exports are expected to grow to 5.3 million tons by 2000, contribcting 62% of total exports from the industrial countries. By that time exports from France should reach 2 million tons. The other major industrial country exporter is Australia, where a 0.5% annual growth in exports is projected. 64. The highest export growth projected is tha. for the developing countries, where total exports increase from 18.5 million tons to 22.1 million tons between 1987 and 2000. Of this increase, 63Z will be from Latin America where Cuba and Brazil remain the two largest producing countries. Exports from Cuba are expected to grow relatively slowly to 7.5 million tons under production difficulties that remain to be overcome. Exports from Brazil are projected to grow at 4.4% p.a. from the relative low of 1.9 million tons in 1987 to 3.3 million tons in 2000. This rapid growth in Brazilian exports is predicated on increased market penetration of plantation whites from Brazil that should restrain countries with growing consunptior from establishing refining capacities. 65. Exports from Asia are prcjected to decline slightly at 3.1% p.a. from 4 million tons to 3.9 million toiIs. Thailand should remain the largest exporting country, with projected exports of 2.1 million tons by 2000. In view of the land reform program under way in the Philippines, Philippine exports are now projected to grow to 0.45 million tons tons by 2000. 66. The major African exporters of Mauritius, South Africa, Swaziland, and Zimbabwe should account for 70% of total African exports by 2000. Exports from Mauritius are projected to grow from 0.7 million tons to 1.2 million tons. South Africa's exports, while still important, are projected to decline - 63 - to slightly less than 1 million tois. Exports FroL Swaziland are projected to increase at 0.9X p.a. from 0.45 million tons to 0.5 million tons. In addition, exports from Zimbabwe are projected tz grow at 0.5% p.a. from 280,000 tons in 1987 to 300,000 tons by 2000. Sugar Import s 67. Over the 1961-86 period, total world imports increased from 19.5 to 27.1 million tons. However, over this period the shsre of the top 10 importing c END-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMATE. C/ EXCLUDES TAIWAN, CHINA. SOURCESs FAO, PRODUCTION YEARBOOX TAPES (ACTUAL)i WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE AZ2 SUGAR (CENTRIFUGAL, RAW) - APPARENT CONSUMPTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECrID GROWTN XATES Al COUNTRIES/ 1987 - POOOMIES 1969-71 1979-81 1986 1987/Bl 1988 1989 .1990 1995 2000 1961-86 1970-6S 2000 ----------------------------------('000 TONS)…------------------------------------ ------…( PER ANNUM)-------- INDUSTRIAL 28,660 32,169 24,898 25,202 25,398 25,406 25,525 26,600 27,141 1.2 0.1 0.6 NORTH AMERICA 11,243 10,730 8,154 8,302 8,631 8,523 8,S15 8,528 8,841 -0.3 -1.7 0.3 UNITED STATES 9,794 9,547 7,085 7,415 7,525 7,413 7,401 7,393 7,686 0.0 -1.8 0.3 8EC-10 12,581 16,098 11,597 11,538 11,615 11,711 11,798 12,608 12,643 2.2 1.7 0.7 UNITED KINGDOM 2,986 2,317 1,111 1,109 1,126 1,128 1,131 1,145 1,158 -1.3 -1.4 0.3 JAPAN 2,843 2,932 2,738 2,733 2,703 2,721 2,739 2,b34 2,928 2.2 -0.9 0.5 NON-MARXZT 14,815 15,809 18,839 19,164 19,371 19,770 19,951 20,904 21,858 1.3 1.7 1.0 USSR 10,679 10,948 13,900 14,150 14,272 14,403 14,535 15,229 15,924 1.3 1.6 0.9 EASTERN EUROPE 4,135 4,861 4,939 5,014 5,099 5,367 5,416 3,675 5,934 1.3 2.0 1.3 DEVELOPING 26,783 39,641 57,435 60,615 61,976 63,372 65,064 72,519 81,678 4.7 4.5 2.3 ASIA 10,384 15,817 28,365 30,829 32,213 33,499 34,253 39,248 45,270 5.6 5.4 3.0 INDIA 4,011 5,376 8,875 9,900 10,230 10,300 10,700 12,500 15,050 4.9 4.9 3.3 CHIRA Cl 2,136 3,956 6,650 7,500 7,900 8,152 8,411 9,961 11,510 5.5 7.5 3.3 INDOEESIA 757 1,287 2,123 2,231 2,355 2,370 2,380 2,400 2,420 5.3 5.9 0.6 PAKSTAII 557 738 1,800 1,800 1,930 1,970 2,000 2,200 2,400 9.8 6.9 2.2 AFRICA 3,516 4,850 8,346 8,489 8,779 B,616 8,818 9,769 12,234 4.4 3.9 2.9 EGYPT 564 673 1,650 1,600 1,650 1,680 1,720 1,800 2,100 3.6 2.7 2.1 NIGERIA 595 620 650 660 670 750 800 2.0 APmERiCA 11,330 16,414 17,293 17,803 17,384 17,817 18,220 l9,582 20,307 3.9 3.5 1.0 BRAZIL 3,999 6,278 6,389 6,754 6,100 %,,400 6,500 6,678 6,710 4,5 4.5 -0.1 H£XXCO 1,910 3,194 3,431 3,605 3,688 3,760 3,840 4,450 5,000 4.9 4.5 2.5 SOUTHERN EUROPE 1,351 2,532 3,345 3,411 3,515 3,553 3,685 3,826 3,767 5.2 5.1 0.8 WORLD 70,258 87,619 101,172 104,981 106,745 108,748 110,540 120,024 130,677 2.7 2.4 1.7 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIPU.TE. Cl EXCLUDES TAIWAN, CHINA. SOURCESZ YAO, PRODUCTION AND TRADE YEARBOOK TAPES (ACTUAL.), WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A3i SUCAR (CENrRIFUAL, RAW) - GROSS WORTS BY MAIN COUNTRIES AND ECONOMIC RECIONS ACTUAL PROJ`XCTED GROWTH RATES Al CowNrRP1SI 1987 - ECoNmIss 1969-71 1979-91 1986 198713 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------*----- ('000 TONS) ---------- ----------- ----------------- ----- (X PER ANUM) -------- INDUSTRIAL 3,851 8,465 7,719 8,117 7,285 7,578 7,509 7,952 8,477 2.3 2.7 0.3 NEC-10 2,064 5,397 4,360 4,666 4,04b 4,266 4,563 4,864 5,245 -2.1 0.4 0.9 ""Cs 932 2,624 1,754 1,461 1,588 1,617 1,647 1,813 1,978 -2.6 3.Z 2.4 OCIAIA 1,676 2,203 2,715 2,835 2,694 2,815 2,750 2,880 3,010 4.2 3.3 0.5 N0M-SMA T 1,*90 695 1,212 1,648 1,450 766 781 825 941 0.0 0.0 -4.2 EASTERN EZUROPE 844 497 910 94S 730 536 541 565 641 0.0 0.0 -3.0 DIVELOPDiO 13,072 18,693 18,028 18,461 19,098 19,187 19,427 20,765 22,140 1.6 0.2 1.4 ASIA 2,309 3,549 3,138 3,961 4,011 4,000 3,990 3,938 3,A87 2.0 0.4 -0.1 PqILIPPINES 1,223 1,381 230 170 110 124 139 295 ..0 -1.5 -6.5 7.8 THAILAND 82 921 2,049 2,072 1,700 1,730 1,761 1,930 2.. 4, 28.8 17.9 0.1 KOREA, REPUBLIC OF 0 0 281 303 263 269 276 313 351 ... ... 1.1 AIRICA 1,942 2,141 2,589 2,760 2,743 2,772 2,803 3,010 3,225 2.1 1.0 1.2 AMEICA 10,373 12,407 11,763 11,100 11,692 11,733 11,913 12,968 14,023 1.5 -0.1 1.8 CUBA 5,739 6,716 6,703 6,482 6,800 6,856 6,912 7,206 7,500 2.1 2.1 1.1 BRAZIL 1,162 2,425 2,554 1,895 2,000 2,085 2,174 2,737 3,300 4.7 -0.7 4,4 WORLD 20,913 27,855 26,959 28,226 27,833 27,i30 27,717 29,541 3l,558 1.6 0.5 0.9 AU LEAST SQUARES TRN FM HISTOICAL PERIODS (1961-86)i aMD-POINT FOR PROJECTED jERIODS (1987-2000). B1 ISTIXATE. SOURCESt FAO, TRADE YEARBOOK TAPES (ACTUAL)i WORLD UANK, INTtATIOWAL ECONOMICS DEPARTMN (ROJECTED), TABLE A4s SUGAR (CENTRIFUGAL, RAW) - GOSS IK1ORTS BY YAIdf COUNTRIES AW ECoICIC REGIONS ----------------------------------------------..--------------__-------------__---------------------------------------------------- ACTUAL PROJECTED GROWTH RATES A/ 0OUNTPIXSI 1987 - EcoUwZS 1969-71 1979-61 19e6 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------------------------------------_.-----------__------------------------..-------------------------- ---------------------------------- ('000 TONS) --------------------------------------- ------ (X PER ANNUM) -------- INDUSTRIAL 10,632 9,195 6,749 6,122 5,343 5,798 5,699 5,800 5,695 -0.9 -3.4 -0.6 NORTH A\RICA 5,508 5,111 3,074 2,172 2,0tV ?,493 2,477 2,495 2,512 -0.9 -3.5 1.1 UNITED STATES 4,571 4,202 1,796 1,250 1,000 1,423 1,4;i1 * 1,393 1,386 -1.4 -4.6 0.8 CANADA 937 909 1,278 922 1,060 1,070 I.Un6 1,101 1,1-fi 1.1 0.4 1.6 Z1C-10 2,466 1,616 1,124 987 954 'S7 949 944 925 -3.2 -4.5 -0.5 UNITED KINGDOM 1,953 1,139 1,120 908 878 6?6 874 869 851 -3.4 -4.7 -0.5 JAPAN 2,214 2,147 1,823 2,162 1,769 1,783 1,796 1,840 1,835 1.7 -2.3 -1,3 NWV-MARKET 2,387 4,471 6,326 5,368 6,069 5,360 5,611 6,168 6,798 4.6 6.8 1.8 USSR 1,957 3,932 5,171 4,495 5,063 4,657 4,753 5,228 5,724 4.9 6.9 1.9 EASTENI EUIRPS 430 540 1,154 873 1,006 703 858 940 1,075 3.7 6.5 1.6 DERVLOPING 2,429 4,579 13,883 16,736 16,421 16,372 16,407 17,573 19,064 4.6 5.0 1.0 ASIA 1,554 2,763 S,849 11,016 11,264 11,103 12,247 13,446 13,938 5.6 4.9 1.8 CHIIlA C/ 442 1,004 1,098 1,977 3,297 2,704 3,010 3,885 4,320 3.9 8.4 6.2 INDIA 0 0 1,047 1,698 800 1,106 1,521 361 350 ... ... -11.4 KOREA, REPUBLIC OF 231 718 969 1,027 1,038 1,044 1,050 1,086 1,121 14.5 10.4 0.7 AFRICA 439 712 3,575 3,601 2,709 2,088 2,229 2,184 2,914 1.9 4.1 -1.6 SOCfU1N EUROPE 193 257 958 1,085 1,049 993 1,110 1,154 1,135 3.9 1.3 0.3 WORLD 15,448 18,246 26,958 28,226 27,833 27,530 27,717 29,541 31,558 1.5 0.7 0.9 …..__..____,._____________________________________________________________________ __________________________________________________ A/ LEAST SQUARES TRED fOR HISTORICAL PERIODS (1961-86)] END-POINT FOR PROJECTED PERIODS (1987-2000). S1 ESTIAMT. C/ ZWLUDES TAIWAN, CHINA. SOURCESt FAO, TRADE YEARBOOK TAPES (ACTUAL), 1ORLD LANK, INTERNATIONAL ECO110MICS D)Ph1RWTENT (PROJECTED). 74 - TAILI AS. SOUR - PRIC9S, £ 1950-47 (ACTUAL) AND 1988-2000 (PnOJtCTKD) O/Ton _ Cunrrnt S - 1985 Constant n - Current 5 muV b/ US GNP e/ Actual 1S50 109.8 *63.9 512.8 1951 125.7 460.6 560.2 1952 91.9 321.3 403.4 1953 75.2 270.5 325.0 1954 71.9 264.4 305.8 1955 71.4 257.8 294.1 1956 76.5 266.6 304.9 1957 113.8 388.4 437.9 1958 77.2 259.1 291.0 1959 65.5 222.9 240.7 1960 69.2 230.7 250.1 1961 59.5 195.0 213.0 109.2 1962 61.3 197.0 214.7 93.7 1963 183.9 602.4 635.0 137.0 1964 127.2 409.5 432.1 141.8 1965 44.5 142.2 147.4 1C2.9 1966 39.9 123.2 127.7 101.6 1967 42.3 129.1 131.7 101.0 1968 41.9 129.1 124.2 102.5 1969 70.6 206.4 198.5 111.2 1970 81.1 223.1 215.9 118.3 1971 99.2 258.9 250.1 127.0 1972 160.3 384.0 385.7 152.4 1973 208.3 430.6 470.3 192.7 1974 653.9 1,109.6 1,355.5 427.9 1975 449.1 685.4 847.0 572.6 1976 254.9 383.8 452.1 378.0 1971 179.0 245.3 297.6 294.1 197S 172.0 204.8 266.4 347.9 1979 213.0 224.0 303.3 361.6 1980 632.0 605.9 824.7 557.9 1981 373.7 356.7 445.2 394.6 1982 185.6 179.5 207.6 293.6 1983 !86.7 185.4 201.1 283.0 1984 114.7 115.9 118.9 241.3 1985 89.4 89.4 89.4 223.1 1986 133.5 112.7 130.8 235.0 1987 149.0 114.6 141.9 236.1 Projtected 1988 337.3 239.7 309.0 291.4 1989 401.1 268.3 351.4 350.7 1990 454.7 299.7 379.1 374.1 1"5 405,9 22..3 260.5 307.7 000 574,5 253.5 294.2 429.6 * DevWlOpinS countriea export unit value. a1 %rldw (L5A dmi1y) prico, f.o.b. and stowed main Caribbean ports. b/ Deflated by Manufacturing Uait Value 0(W) index. c/ Deflted by US GNP deflator. Soures: Interntloaal Sugar Organization and FAO Trade Yearbook (actual); World Bank, International teono1ics Dapartment (projected). -75 - SUGAR (CONSTANT 1985 DOLLAR PRICES ) 1600- * 1400 * 1200A. 1000 800 600 - l94S 19S0 13SS 1960 196S 1970 1975 1980 .-38S 1990 l995 2000 D EFLATED BY MANUFACTURINC- UNIT VALUE ( MUV ) INDEX ' ' .'.... ' ' DEFLATED tBY U.S. GNP DEFLATOR. * 1948 -897 ACTUAL ; 1988 -2000 PROJECTED . SOURCE : WORLD BANK , INTERNATIONAL ECONOMICS IDIEPARTMENT . BANANAS Sunmary 1. World trade in bananas is expected to grow by about 1.1% over the period 1987-2000, compared with 4.8X p.a. in the 1960s and 1.6% p.a. in the 1970s. The expected slower growth is a result of slower import demand in industrial countries. The industrial countries are projected to remain the major market for banana imports, accounting for over 85Z of werld imports over the projection period compared with 90X in 1986. Although imports by the centrally planned economies (CPEs) are projected to have the fastest growth, their market share remains quite small--less than 4% of the total. Bananas are almost exclusively exported by the developing countries. In 1986, approximately 78% of banana exports came from Latin American developing counitries and 13% from the Philippines. 2. Banana prices reached record-high levels in 1983 due to adverse weather damage in major producing countries. Prices fell after producFion returned to normal. However, banana prices in June and July of 1988 were abnormally high. This was mainly due to tight supplies resulting from the US rejection of bOO,000 boxes of banana shipments from Colombia because of insec: infestation. Prices fell sharply in August. In the short run, banana prices should increase only slowly in current dollar terms. 3. Over the long run, banana prices will reflect the impact of increasing productivity. The continuing tendency towards excess supplies will keep downward pressure on real banana prices so that the downtrend in real terms of the last three decades should continue. Projected prices in 1985 constant dollars are expected to decrease from the average level of $347/ton in the 1980s to $310/ton in 1995 and $290/ton in the year 2000. Outlook for Import Demand 4. The projections for import demand are mainly based on observed relationships between imports and CDP over the period 1961-e6, Log-inverse functions, with total imports and total income as variables, were used to estimate this relationship for industrial countries. This specification implies that the elasticity of per capita consumption will eventually become negative and was adopted because there is substantial evidence that, after a certain level of income is reached, bananas tend to become an inferior commodity. For the developing countries, double-logarithmic functions with per capita imports and per capita income as variables were used. This specification implies that income elasticity is constant over time and was adopted because per capita imports of bananas in developing countries are still very low. 5. Projecting import demand for the USSR and Eastern Surope is difficult since imports into these countries are controlled by ecoaomic policies and plans and are not determined by free market factors. Projections of import demand based on income growth are of very limited value. Some assumptions - 78 - concerning foreign exchange allocations have been made to forecast import demand for this group of countries. Banana imports into the CPEs grew at 7.2% p.a. between 1961 and 1986, but the growth rate was much lower during 1970-86 (1.7% p.a.). Banana imports have been receiving a rather low priority in foreign exchange allocation. Therefore, it is assumed that import demand in the CPEs will grow at a slower rate than in the past two-and-a-half decades. Since per capita consumption of bananas is extremely low in these countries, there should be some opportunity for banana-exporting countries provided trat they can offer prospects for reciprocal export trade. 6. Of the banana imports into the industrial countries only those of the United States have showr continuously high growth in the past. Import demand in the United States is projected on a conti: ied upward trend but at a much slower rate. This is because per capita consumption is very high, about 11.4 kilograms, and population growth is very low. 7. Import demand by the EEC is projected to stagnate as a result of stagnating import demand in almost exery member country. Japanese import demand is expected to grow very slowly during the projection period. Ir has been assumed that the import duties levied by Japan will be slowlv liberalized. Restrictions and preference crrangements on imports into the protected markets of the United Kingdom, Vrance, and Italy are assumed to continue. 8. Banana imports by Italy have been restricted by an iaport quota and high domestic taxes. Imports of bananias have fluctuated around a level of only 300 tons since 1965 when the state monopoly was abolished. In our forecast, import demand for Italy was kept at the average of the last three years (330 tons). In 1987 the EEC Court of Justice declared illegal the Italian government's tax on bananas imported from other EEC member countries. The banana tax was 525 lire/kg, wvich represents about one-half the import price of bananas. If Italy lifts this domestic tax, import demand should increase. 9. Banana imports have been banned by Greece since 19/4. A recent decision by the European Court has overruled the Greek Government's refusal co allow banana imports. Ne-otiations between the Greek Government and the EEC are now going on. Our forecasts asscme that Greece will lift the ban and that its imports will increase gradually through tbh projection period. 10. The biggest growth in imports is expected in the Middle East. This market has been growing quickly, and growth is expected to continue though at a slower rate. The slowdown is expected because per capita consumption in some c-~=ntries has already reached high lev_ls, and the growth of per capita incomes will slow because of the lower crude oil price forecast. 11. On the basis of the above assumptions, world banana imports are expected to increase from 7.3 million tons in 1987 to 8.4 uillion tons in 2000, representing an average annual growth rate of 1.1X--much lower than the 2.4% growth rate during the 1961-86 period. - 79 - Outlook for Exports 12. Because in most developing countries reliable data on total banana production (as dist;:_- from commercial production for export) are not available, it would h'e most unsatisfactory to project exports as the difference between prc`uction and consumption. Banana exports are mainly determined by import demand, because of the very high elasticity of export supply. TherefoiLe, .rojections for banana exports have been derived from import projections. 13. To illustrate the ease with which banana exports can be increased, under normal circumstances supplies can be varied by 5% to 15% simply by changing export quality standards. The short production cycle (11 to 14 months between plantina and harvesting), together with the very high yield per hectare and the fact that many estates own ample reserves of land, means that banana supplies can be adapted to almost any conceivable development of import demand with a lag of Little over one year. 14. Because of the importance of geographical location and preferential arrangements in the determination of trade flows, the exports of single countries are determined by the development of demand in their export markets. The i983-85 trade matrix (Table 1) has been used to make export projections. It is assumed that the trade pattern existing at that time will re ain unchanged throughout the projection period and, therefore, that the market shares ef the various exporting countries in specific import markets will remain fairly constant. In addition, likely developments in production in particular exporting countries have also been taken into acc unt, such as in Costa Rica, Colombia, Jamaica, Belize, and Cameroon. 15. In Costa Rica, export availabilities are expected to reduce as a resul't of reduced acreage on the Pacific Ocean side of the country due to the pull-out of the Unized Fruit operation in 1984. About 37% of the 8,G00 hectares which were withdrawn from banana plantations by United Fruit have been converted to African oil palm plantations. Export availabilities from Colombia might well be lower than the productien potential because of violence and strikes and lack of infrastructLre in the majLic banana-producing area of Uraba, as -well as the difficulties associated with black si6atoka disease. 16. Banana gro.ers in the Caribbean countries are planning to increase production. The Jamaican Government has developed three banana plantation projects--Eas3tern Banana Estates Limited, Victoria, and St. Mary Banana Estates Limited. The three plantations were expected to produce 86,000 tons of bananas by 1991. T-ne total quantity of bananas available for export from Jamaica should eventually reach 100,000 tons. However, jamaican banana plantations were completel destroyed by hurricane Gilbert which hit Jamaica in September 1988. This disaster should delay for at least two years the acbievement of these goa.,ls. Belize has been expanding acreage for banana production--from 800 acres in 1985 to 1,182 acres in 1987-following a decision by the Government to privatize the industry. The industry plans ~o increase planting to 5,000 acres by 1991 and to produce approximately 100,000 tons for export. There are indications that the rehabilitation of the Jamaican banana industt- and the production expansion in Belize, together with continued growth in banana production in the Windward Islands, will lead to a mi~~~ 1, u~ &e m 15 Us F.3. c Italy tiK U.'bzt 1 . 5zop. JMpm ?alix &mWimm OdJ L. ia. &A k* SI Atlc &9a c4 bu i4.6 - - - - 0. - - 0.1 - - 69.2 - 30.1 - - - - - ola*" 462.3 41.3 85.3 11.6 6L8 71.9 13.0 35.6 25.5 - - - - - - 7.3 0.5 36 77.4 ON" ties 576.3 51.3 11A5 8.5 56.4 8.8 7.3 2.8 81.4 1.4 - 3.6 6.0 - - - 11.1 hAp. 4.6 0.2 - . _ _ _ _ liar 5L.0 92.2 82.5 9.4 03 .7 12.3 4R 8. 10.3 186 I1. 39.9 17.6 9.7 7.3 - 17.6 ml Qwm1 214.8 7.2 3.4 2.8 32.9 1.0 0.1 1.2 1.S - - - - 19.4 6.7 5,9 - - - 538.7 3S.6 669 4.4 4.1 7.0 11.8 14.0 47.7 - - - - 29.6 - 5.6 - - 36.6 1.0 - - - - - - - - - 1.9 - - - - _ 5lL9 7.7 3.8 - - - 0.8 5.6 2.4 - - - - - - - - - - _280 33.2 172.1 4.5 31.2 8.5 28.2 31,8 121.2 - - - - 0.6 23.6 .4.9 - 0.3 0.7 -1 - - - - 14.8 - .2 - - - - - - - - - - - lrmd IS. - - 0.2 - 0.2 12L8 - - - - - - - - - - - - - 3 p S - - - 109.8 - 0.3 - - - - _ _ _ _ _ _ _ 1tine - - 157.6 0.2 2.6 - - - - - - - - - - - - - th.dws_ - - _ _ 1.6 32.7 - - - - - _ _ _ _ _ _ _ _ e m -o- - 40 2.0 1.3 - _ _ _ _ - - - - - 3.3 - - aX d-hirF - - 0.1 79.6 5.4 0.8 - 0.1 - - - - - - - - 9.2 1 - ammau - - - - 26.2 - - - - - - - - - 7.0 1.3 16.6 - - &U.ug,ii 0.3 - - - 5.3 - - - - 64 13.8 - - - 55 114. - - - - - - - - - - - - - 96.2 - - - - 26 0.5 - - - IWc1d 2,7562 270.9 533.0 437.0 331.1 31.5 74.8 162.2 291.V 6463 43.1 80 39.9 102S 119.7 149 29.8 36.1 196.5 Uamms UdtZd F1Aw d 10 M * T and P at WRZ 87/2 %v. f 1967. - 81 - glut on the UK market in three years. It is forecast that banana exports from the traditional suppliers to the UK market could reach 400,000 tons by 1990, 15% more than the estimated import requirement for the UK market by that time. 17. Banana exports from Cameroon are expected to increase as a result of the joint venture by Del Monte Tropical Fruit Co. and the Cameroon Development Corp. wbizh will develop 3,000 acres of new banana plantations in Cameroon. The ne6e banana plantations will produce approximately 45,000 tons of bananas annually. The bananas will be sold to France and other Western European markets. 18. Ecuador, the world's largest banana exporter, has recovered to its historical export levels from the low levels following flood damage in 1983. Exports from Ecuador are projected to continue to grow because of the recent successful new market developments in China, German Democratic Republic, and Japan. Ecuador will remain the world's largest exporter. 11. Exports from the Philippines are constrained by the growth of the Japanese market which takes about 72% of its exports. The Philippines has faced increasing competition from Ecuador and Colombia in the Japanese market in recent years. The competition is expected to increase. 20. Our forecasts assume that the protected markets in the EEC for the Africa, Caribbean, and Pacific (ACP) countries will remain throughout the projection period. These markets in France, the United Kingdom, and Italy account for about 15% of world imports. However, the protection granted under Lome IV expires in 1992. If the protection for the ACP countries terminates after 1992, ACP exporters would face strong competition in these markets from the lower-cost and better quality producers in Latin America. 21. The largest increase in export volume is expected from Ecuador, the largest exporter. The African and Caribbean exporters are expected to recover from the sharp declines in production in recent years and to regain their export markets in the EEC. However, long-term export expansion prospects for Jamaica and the Windward Islands will be tightly constrained by the declining growth in their major export market, the United Kingdom. Price Outlook 22. The adverse weather which prevailed in major banana-producing countries (Ecuador, Guatemala, Honduras, Panama, Colombia, and the PhiUippines) in 1983 result2d in tight export supplies and sent banana prices to a record high of $429/ton. After retreating from the record high in the following year, banana prices have remained around $380/ton over t.ae last three years as a result of increased production in the major exporting countries. In June 1988 prices rose sharply due mainly to the rejection by US authorities of a 600,000 box shipment from Colombia, because of insect iafestation. Prices fell back to previous levels in August. The average price for 1988 shculd be $427/ton and it should stay around this level for the next two years. 23. Since supply can easily be adjusted to market circumstances and since no stocks can be held, the strong long-term cyclical movements that - 82 - characterize so many commodity markets are absent from the banana market. Short-term banana prices can be explained by seasonal factors, export availability, and inflation. Since almost all bananas imported into the United States are from Latin America, the expected fluctuations in export availabilities in Latin America and the MUV were the variables used in deriving short-term price forecasts of US import prices (the indicator price). Over the long run, the trend in banana prices in real terms has reflected the impact of increasing productivity--constant dollar prices have decreased at an average annual rate of 1.8% in the period 1950-87. This downward trend in real prices is expected to continue. The long-run price projections were made on the assumption that yields in Latin America will increase by about 1X p.a., a slightly lower rate than the 1.3% p.a. increase in the period 1961-86. Over the long run, therefore, projected prices in 1985 constant dollars are expected to decrease from the average level of $347/ton for the 1980s to $310/ton in 1995 and $290/ton in 2000. 24. This price projection is for the US market. Banana prices in other markets could easily show different trends because of different developments in the various cost elements, geographical isolation of the market, or the existence of preferential trading arrangements. 25. Export unit values for bananas are closely related to US import prices. The elasticity is 0.94, implying that when prices increase by 10% the unit value of exports for developing countries increases by 9.4%. The historical relationship between US import prices and export unit values for developing countries was used to make e-port unit value projections. 1/ The results are show% in Table A3. I/ The relationship between export unit values for developing countries and Unit-d States import prices is as follows (1961-86): XUV = 7.68 + 0.47P R2 = 0.95 where XUlV = 2sport unit value P = United States import price TABLE A: BANANAS - GROSS EORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECT}'D GROWTH RATES A/ OOUNTRIESJ 1987 - BOONOHIES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS) --------------------------------------- ------( PER AWNJ'H)-- - INDUSTRIAL 444 457 541 553 555 56n 573 577 s82 1.2 0.4 0.4 mm-MAET 1 0 0 0 0 0 0 0 0 0.0 0.0 0.0 DIVILOPING 5,554 6,510 6,961 6,914 6,970 7,124 7,283 7,628 8,025 2.4 0.8 1.2 ASIA 509 1,064 1,005 915 873 947 1,044 1,102 1,162 0.0 3.4 1.9 PHILIPPINES 132 884 856 775 725 810 890 956 992 ... 8.1 1.9 AFRICA 389 247 204 219 232 247 264 301 341 -3.6 -5.7 3.5 AKMICA 4,629 5,192 5,743 5,772 5,856 5,921 5,966 6,216 6,495 2.3 0.9 0.9 ECUADOR 1,262 1,230 1,400 1,456 1,462 1,468 1,474 1,326 1,620 -0.3 -1.3 0.8 COSTA RICA 835 1,023 885 934 943 948 957 990 1,020 6.0 -0.4 0.7 HONDURAS 912 917 932 904 947 954 962 1,015 1,072 2.6 0.5 1.3 PANAMA 604 547 660 680 686 692 697 736 777 3.3 1.0 1.0 COLOMBIA 275 707 989 962 943 952 962 1,001 1,040 7.2 10.9 0.6 OUATU(ALA 213 332 330 335 335 340 347 369 392 6.7 2.5 1.2 WORLD 6,000 6,967 7,: 2 7,467 7,525 7,684 7,856 8,205 8,589 2,3 0.8 1.1 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). 0W Al ESTIMATE. SOURCESt FAG, TRADE YEARJBOO TAPES (ACTUAL), WORLD BANK, INTERNATIONAL ECONOMICS DEPARIMENT (PROJECTED). TANAL A29 "NAM"A - GaRCS Z@0TS *Y MAIN COUTRUSS AND SOOMOIUC RtIONS ACTUAL PROECTED GROWTI RATS A/ couMTIssl 1067 - NCXY0NhRs 199-71 1979-81 1986 19678b 19a6 1949 1990 1995 2000 1961-86 1970-46 2000 -( 000 TOfS) -(2 PER ANNUM)- 1NDV5TRl.L 5,003 5,669 6,571 6,505 6,571 6,610 6,655 6,930 7,255 2.3 1.0 0.s ?MUR AmniCA 1,99i 2,708 3,351 3,244 3,298 3,324 3,355 3,571 3,794 3.1 3.0 1.2 UNIYTD StATUS 1,798 2,455 3.049 2,941 2,993 3.017 3,046 3,253 3,467 3.1 3.1 1.3 CANADA 200 252 301 303 305 307 309 318 327 2.6 2.4 0.6 gEC-lo 1."9 1,892 2,071 2,099 2,101 2,104 2,107 2,129 2,150 0.7 -0.2 0.2 Omw4AJT, TED. UEP. 566 553 661 678 679 680 681 691 701 0.3 -0.6 0.3 FRANCE 445 449 454 455 456 457 458 464 472 0.7 -0.4 0.3 UI-TStD KIUiCO 337 318 341 350 348 347 346 340 332 -0.7 0.2 -0.4 ITALY 290 292 327 330 330 330 330 330 330 2.9 0.5 0.0 0TENE WESTONR EUROPE 256 291 348 352 355 339 363 383 409 2.4 0.7 1.2 JAPAN 857 741 765 773 780 706 792 828 659 5.8 -2.4 0.6 MOM-HAUNt * 106 266 152 176 199 222 245 280 315 7.2 1.7 4.6 DIVLOPIN9 555 917 575 611 630 648 667 765 861 2.7 0.3 2.7 l ASIA 97 337 266 289 296 305 313 5f 421 6.3 6.3 2.9 00 AUNICA 302 423 257 265 269 271 273 ' 0.3 0.2 1.2 i ANTINA 147 184 129 127 126 124 122 -2.3 -1.6 -1.4 WORLD 5,663 6,S52 7,290 7,292 7,400 7,480 7,567 ) , 2.4 1.0 1.1 Al LUAST SQUARES TUEMO PFM HISTORICAL PLIaOOS (1961-86); END-POINT rOR PRiOJCTED PERIODS (1967-2i00). Si MSYDATE. ScURCES: PAO, TRADIE YTEARK TAPES (ACTUAL), WOMW MMSK, INTZRNATIONAL ECOiKNICS DEPARTHZNT (PROJECTED). T.&DLI A3M UIUA I - MIUC, ./ 1950-7 (AcrUL) AnD 1988-2000 (PrIOCTED) ($1?T.) Curreat $ - 1985 Constant Cu- rrent S* MWV bi us8 GP ci Actual 1950 161 682 752 1951 161 592 717 1952 163 572 717 1953 163 588 704 1954 16S 620 715 1955 165 598 681 1956 168 587 670 1957 176 603 677 1958 163 549 614 1959 146 498 537 1960 143 478 517 1961 139 457 497 79 1962 132 427 .63 75 1963 168 551 579 72 1964 170 546 577 80 1965 159 507 526 88 1966 154 476 494 87 1967 159 485 494 88 1968 152 468 451 84 1969 159 464 446 87 197L 165 456 440 81 197t 141 368 356 81 1972 161 386 387 83 1973 165 341 372 87 1974 1S4 313 382 90 1975 247 377 465 116 1976 257 388 456 122 1977 275 376 457 129 1978 287 342 445 138 1979 326 342 464 152 1980 379 363 494 174 1981 401 383 478 185 1982 374 362 419 191 1983 429 426 462 199 1984 370 373 383 198 1985 378 378 378 209 1986 382 323 374 215 1987 377 288 359 186 Projected 1988 427 303 391 208 1989 *20 281 368 205 1990 425 280 354 207 1995 561 310 360 271 2000 657 29 336 316 * Dveloping coutries' export unit value. */ Central and South Amrica, f.o.b. US ports. 1/ Dflated by MIefnacturing UIit Value Index. ei DaflAted by US U? Deflator. Sourcew US Doree of Labor Statistics and 0AO (actual); World Bank, Iaternational Ico-nica Departeamt (projected). - 86 - BANANAS (CONSTANT 1986 DOLLAR PRICES ) 400- *00 ,/\ 200 - 19,45 19SC 1955 1 960 19,65 1970 1975 ii 19 ,83 193 t90 1995 2000 DEFL>ATED IVY MANUFAURING UNFT VALE ( WUV ) INDEX ......-9- DELTED SY U.S. GNP DEFLATOR. 14S - 87 ACTtlAL:; 168 - 2000 PROJ CIE. SOURCE: WORLD BANK. INTERNATIONAL ECONOMICS DEPRTENT .l a ~ ~ ~ ~ ~ ~ ~ ~__. FREW CITtUS FRUITS Sumnary 1. Citrus production and consumption are projected to reach 72 million tons in 1990 and over 100 million tons by the year 2000. 1/ Substantial increases in citrus production are expected in China, Cuba, Spain, and Turkey; production in these countries is being aided by government planting and marketing programs. Production in Japan is expected to decline as a result of the land-use diversion program which is reducing the area under Mikan tangerines. Production in Lebanon and Gaza is also expected to decline further due to the ongoing civil disturbances. 2. Citrus consumption is projected to grow more rapidly in the developing countries than in the industrial countries. This more rapid growth is mainly due to faster growth in income and population in the developing countries and also reflects the more rapid growth in domestic production. 3. Citrus exports are forecast to reach 9 million tons in 1990 and 12 million tons in 2000. This increase represents an average annual growth rate of 3.1% as compared to 2.9% p.a. in the period 1961-86. The large expansion of exports expected from Spain and Cuba is most responsible for this increase in export growth. 4. Imports are expected to show the strongest growth in the developing countries, mainly in Asia where newly industrialized countries will increase their imports significantly as a result of their strong income growth. Although imports into the industrial countries are projected to grow more slowly than in the past, the industrial countries will remain the largest importing area for fresh citrus fruits--accounting for over two-thirds of the world's imports. 5. Orange prices have been on a declining trend in real terms, but prices fluctuate significantly-mainly because of the adverse impact of weather conditions on production in major producing countries. The long-term price projections reflect zhe expectation that supply will continue to have a tendency to grow faster than demand. In 1985 constant dollars, therefore, prices are expected to decline from $351/ton in 1987 to $310/ton in 1995 and to $300/ton in 2000. Supply Outlook 6. The production projections are based on past production trends, modified by information regarding production development plans, plantings, and yields, areas available for expansion of production, introduction of new C Citrus fruits, as used in this report, comprise oranges and tangerines, lemons and lives, and other citrus fruits (mainly grapefruit). _ 88 - varieties, improvements in planting methods, spread or control of diseases, governmental policies, and investment potentiaL in the MaJor producing countries. The projections assume that production trends will not be affected by unusually adverse weather during the projection Petiod. 7. Citrus production in China and Cuba is expected to increase substantially as a result of government-backed erPansion plans. The citrus area ;n China has expanded threefold in the period since 1978, reaching 500,000 hectares in 1986. Over this period productioa increased from 0.4 million tons to 3.2 million tons. This rapid expansion of citrus production was largely a result of major economic reforms which gave individuals more freedom of action in production decisions through the production re.tsponsibility system, decontrolling of citrus m4rketing and prices, and encouragement for regional specialization in casb crops. The regional aivernrments in the main citrus-growing areas have Plans to develop hilly land s itable for orchard development. Currently only about one-third of the planted area is in bearing. As these trees reach matutity, together with new plantings, fu.-ther increases in citrus production in China will be realized. S. The Cuban Government embarked on an extensi.-. planting program in the late 1960s, and the program is continuing. The original producticn target of 2.7 million tons of citrus by 1985 did not materialize because of low yield resulting from poor soil conditions and bad manage-meint. The plans adopted in the early 1980s called for Cuba to produce 1 nillion tons by 1985 and 2.5 million tons by 1990. These production targets are still far too ambitious. However, existing plans are to expand the citrus area to 200,000 hectares. Applying the current yield of about 8.5 tons/hectare, citrus production in Cuba is likely to reach 1.7 million tons by 2000. This production is intended ciainly for export to Eastern and Western European Markets. 9. Our previous expectation of a declining trernd in citrus production in Israel has been reversed as a result cf the new five-vear develo-ment plan for horticultural products. The Israeli Ministry of Agriculture plans a major increase in citrus production and exports. While the area under citrus is expected to remain the same, the replacement of Olcier groves with newer and higher yielding trees will bring a surge in production. 10. Growth in citrus production in Spain is expected to accelerate as a result of its accession to the EEC on January 1, 1986, because Stanish producers now receive the higher EEC price. Spain has not yet enjoyed the full benefits of membership in the EEC as the transition period will not be over until 1995. However, the fu1l impact of accession on citrus production should be realized during the 1990s. Meanwhile, citrus production in Spain will continue to increase, particularly that of clementines and lemons, reflecting recent new plantings. 11. Citrus production in Argentina, Cyprus, Egypt, Turkey, and Uruguay is also expected to grow rapidly because of the ioPlementatiort of government programs for improving production and marketing. Orange production in Brazil is expected to increase substantially because lagre new plantings have been taking place. 12. Citrus production in Japan is expected to decline slightly as a result of the government-sponsored production adjustment programs. Since the - 89 - mid-1970s the Japanese Covernment has sponsored a land diversion program to reduce the satsuma area--from 173,000 hectares in 1973 to 120,700 hectares in 1985 and to 95,000 hectares by 1995. 13. Production in Lebanon is projected to decline further because of ehe ongoing civil disturbances which interfere with crop management and orchard care. Citrus production in Gaza is trending downward due to tight water supplies, higher labor and other input costs, urbanization, and restrictions imposed by Israel on citrus marketing. 14. italy's 1987/88 citrus crop was reduced substantially by freeze damage. It will take several years to recover. The main problems besetting the Italian citrus industry continue to be too many varieties, inability to deal effectively with plant diseases and pests, and general lack of effective technology. Therefore, its citrus production in 2000 is expected to be just somewhat higher than the 1986 level. Lemon production is unlikely to maintain its recent level of around 8C0,000 tons because little new planting has taken rlace in recent years and the danger of further spread of the Mal secco disease in the traditionaL lemon-growing area. 15. The Greek citrus industry was hurt badly by a freeze in March 1987. The resulting damage is e-xpected to have a long-term impact with roughly 6.5 million trees affected, of which about 1 million trees were destroyed. It will take five to six years for the industry to recover to previous production levels. 16. As all citrus groups are expected to grow at about the same rate, the relative shares of the various citrus fruits are not expected to change significantly--about 82% for oranges and tangerines, 9% each for lemons and limes and other citrus. Production growth in the developing countries is expected to be faster than in the industrial countries, and the production share of the developing countries is expected to increase from 66% in 1986 to 69% in 2000. Demand Outlook 1I. Changes in the demand for citrus fruits are dependent upon changes in income, population, and prices. Consumption 1/ projections were made on the basis of the estimated income elasticities of per capita demand in 32 countries and regions. Total consumption was derived by multiplying projected per capita consumption by the expected population levels in each of the 32 countries and regions. These constant price demand projections were then modified by incorporating the effects of the price changes necessary to balance supply and demand. Likely changes in trade policies and processing practices werc also taken into account. 1/ In this section, "consumption" refers to apparent consumption of fresh citrus, including that used for direct human consumption and for industrial processing. - 90 - 18. Citrus consumption demand is income inelastic in most countries. The estimated income elasticities for the industrial countries range from 0.1 to 0.7 while for the developing countries they range from 0.1 to 1.0. Usually, countries with high per caoita consumption have low income elasticities. The price elasticity of demand for citrus is estimated at about -0.8. 19. World per capita consumption is expected to increase from 12.5 kg/annum in 1986 to 16.3 kg/annum by 2000. The percentage increase in per capita consumption is expected to be lower in the developing countries than in the industrial countries or centrally planned economies (CPEs) because consumption in most developing countries is constrained by their domestic production. Also, citrus fruit is a superior foodstuff which low-income earners cannot afford. Regional projections for per capita consumption are shown below: Region 1986 1990 1995 2000 ------------(kg/annum)------- -- Industrial 29.7 34.2 38.4 41.7 Developing 10.0 10.8 12.3 13.2 CPEs 3.6 4.2 4.8 5.5 world 12.5 13.7 i5.3 16.3 20. World consumption of citrus is projected to increase to 100 million tons by 2000, from 61 million tons in 1986. This represents an average growth rate of 3.6% p.a. compared with 4.2% p.a. for the period 1961-86. As a result of their higher population growth, consumption in the developing countries is expected to grow faster than in the industrial countries--4.2Z p.a. over the period 1987-2000 compared to 2.8% p.a. in the industrial countries. Therefore, the share of developing countries in total demand will increase from 62% in 1986 to 65% in 2000, while the share of industrial countries will decrease from 36% to 33%. 21. Consumption in Asia should grow rapidly, largely due to the rapid expansion in citrus production in China. The fast rate of income growth in Asia, particularly in the newly industrialized countries, wili also contribute to the increase in consumption. In the Middle East, consumption is expected to grow rapidly but at a slower rate than in the past because a high level of per capita consumption has already been reached. The USSR and Eastern Europe offer considerable market potential because of their low per capita consumption levels in relation to their income, but the outcome will depend upon foreign exchange allocations and the import policies adopted. It will also depend on the opportunities for bilateral trade with citrus-exporting countries. The rapid citrus production expansion in Cuba could be a factor - 91 contributing to future increases in consumption in the USSR and Eastern Europe because of their trade relationships. Trade Outlook 22. Import requirements and export availabilities were calculated for the 32 countries and regions for each kind of citrus fruit on the basis of the differences between production and consumption. Based on the estimates of import requirements and export availabilities, projections of imports and exports were derived by taking intc account re-exports and intraregional trade. 23. Trade in fresh citrus is expected to reach 11.7 million tons by 2000, consisting of 8.4 million tons of oranges and tangerines, 1.6 million tons of lemons and limes, and 1.7 million tons of other citrus fruit (mainly grapefruit). Spain is expected to remain the world's largest exporter followed by the United States. Exports from Cuba should grow substantially-- Cuba is expected to become the world's third largest exporter of fresh citrus fruits by 2000. Although citrus production in China will increase substantially, exports from China are not expected to increase significantly because of high production costs and the vast domestic market. 24. Although Spain has been a member of the EEC for more than two years, the Spanish citrus industry will receive the fulL economic incentives available to the citrus industries of other EEC member states only after the transition period. Under the terms of the accession agreement, EEC import duties charged on Spanish citrus are being eliminatod gradually over a ten- year period. By January 1991, EEC duties on Spanish citrus will reduce to the same rates charged on citrus imports from Morocco and Algeria--the Mediterranean suppliers currently enjoying the lowest duty levels under the EEC's preferential duty system. Spanish citrus remains subject to countervailing duty charged by the EEC. During the first four years of membership (until end-1989), Spanish exports are not expected to receive EEC export subsidies. Therefore, after the transition period, Spain should be able to boost its exports. Other countries exporting to the EEC, especially Morocco, Israel, Cyprus, and Tunisia will face sharp competition. 25. Citrus exports from the industrial countries are expected to grow at a faster rate than developing country exports, mainly due to the rapid increase in Spanish exports. However, by the year 20C6 regional market shares will be the same as in 1986--the industrial countries accounting for 52% of world exports and the developing countries accountir.g for 48%. 26. Developing countries' citrus imports are expected to show the strongest growth, although growth will be slower than in the past. The newly industrialized countries in Asia in par.icular will -ncr&ase citrus imports significantly because of higher income growth. Import; by the CPEs are expected to grow more slowly than in the period 1961-86. CPE imports mainly depend on government policies including foreign ex:iange allocations. Currently, foreign exchange allocations for citrus imports in CPEs receive low priority. Industrial countries will remain the main importing area. However, the share of the industrial countries is expected to de':rease from 72% of 92- world imports in 1986 to 67Z in 200fl. The import share of the developing countries is expected to increase from 13Z to 17% over the same period, whereas that of the CPEs is expected to increase from 15% to 16Z. 27. The imrort projection for Japan is based on the assumption that Japan will lift its import quota restrictions by 1991, as agreed between Japan and the United States. Japanese orange iaports could increase to 380,000 tons in 1995 and to 500,000 tons by 2000. Price Out!Gok 28. In this report price forecasts are made conly for oranges. Orange prices have been on a declining trend in real terms over the past 30 years. In recent years, however, prices have been increasing in izal terms, reflecting the ti-ht supplies caused by the adverse weather conditions prevailing in some ma,or producing countries. Florida has experienced four severe frosts in the past eight years. Spain's orange crop also suffered severe frost damage in January 1935. Production capacity in these countries has recovered substantially. Supplies are expected to be ample in the short run. Therefore, over the short rur., orange prices in real terms should decline. 29. The long-run declining trend in prices is expected to continue because the slowing growth in consumption will not keep pace with the production growth resulting from the support being given to the citrus industry in many countries. In 1985 constant dollars, orange prices are expected to decline from $351/ton in 1987 to $310/ton in 1995 and to $300/ton in 2000 (see Table Al7). 30. Export unit values received by the developing countries and international prices have shown a close historical relationship. 2/ The estimated regression relationship shown was used for projecting export unit values from the international price forecast. In current dollar terms, the export unit values of the developing countries are expected to increase from $314/ton in 1986 to $429/ton in 1995, and to $516/ton in 2000. 31. The price forecasts made in this report are based on several assumptions: (a) that the increased exports from Cuba will go not only to the USSR and Eastern Euro-.-z but also to Western Eurcpe and North America; (b) that the EEC restrictions on imports from nonassociate members w 11 not be dismantled; and (c) that quantitative restrictions on orange imports into Japan will be phased out by 1991. 2/ XlV = 19.16 + 0.73P R2 = 0.96 (2.3) (23.4) where XUV = export unit value p = price in current doliars - 93 ^ Policy Issues: Tariff and Roc-Tariff Trade Barriers 32. Relaxation of trade barriers in the EEC, Japan, and other industrial courtries offers considerable opportunity for expanding demand for citrus fruits. 33. EEC. The E_ appiies a cocann external tariff to imports of oranges, mandarins, and lemons. The rates for oranges vary seasonally. Higher duties are applied in the winter period (October 16 to March 31) when the citrus supply is abundant in Mediterranean countries. In the summer months the duties are lower, corresponding to lover Mediterranean supply--thus beneficing the suemer suppliers such as the United States, South Africa, and Brazil. The common external tariffs currently in effect are as follows: Oranges April 1 to April 30 13% May 1 to May 15 6% May .6 to October 15 4% October 16 to March 31 20X Mandarins Throughout the year 20% Lemons Throughout the year 8Z Grapefruits Throughout the year 3% 34. Despite the fixed comon external tariffs, the EEC gives significant reductions to most Mediterranean producers and African, Caribbean, and Pacific (ACP) countries. lhe reduced rates vary between 40% reduction of tariffs to duty free. The major pre-ferences granted by the EEC are as follows: Oranges Turkey 1 00 Morocco, Tunisia. Overseas Territories, ACP countries 8%wZ Israel, Malta, Cyprus, Fgypt, Lebanon, Jordan 60% Grapefruit ACP countries and Turkey 100% All Mediterranean citrus suppliers except Turkey 80% Lemons ACP countries and Turkey 100% Algeria, Morocco, Tunisia 80% Israel, Egypt, Jordan, Lebanon, C)prus 40% Limes ACP countries 10ox Egypt, Jordan, Lebanon, and Turkey 80% 35. The reference price system is intended to protect EEC producers against lower-priced imports. EEC reference prices act as minimum import prices. The regime provides for the application of countervailing charges, - 94- uniform in all member states. on imports from third countries whenever entry prices (landed price at EEC border) fall below reference prices. This charge equals the difference betweeu the reference price and the entry price, excluding the import duty. Citrus fruits covered in this systet are oranges, mandarines and lemons. The reference price system applies during the following periods: Oranges (sweet) December 1 to May 31 Mandarins November 1 to February 29 Lemons June 1 to May 31 36. Japan. Japan maintains a quota system for orange imports. The import quota was established by an agreement between Japan and the United States. The agreement expired on March 31, 1988, and a new agreement was concluded in June 1988, which will phase o.t the import quota fur oranges by 1991 and for orange juice by 1992. 37. Japan also imposes import duties on all citrus fruits. Dut-es currently in effect are: Lemons and limes 5% Oranges June 1 - November 30 20% December 1 - May 31 40% Grapefruit June 1 - November 30 12% December 1 - May 31 25% Tangerines and mandarins 20% Tariffs on. fresh grapefruit will be reduced over the next two years. 38. United States. There is no quota restriction on citrus imports into the United St2tes. However, tariffs on citrus imports are imposed as follows: Oranges lc/lb Lemons 1.25c/lb Limes i¢/lb Grapefruit August 1 - September 30 IC/lb October 1 - October 31 0.80/lb November 1 - July 31 1.3¢/lb 39. Imports from Caribbean Basin countries are duty free. Import duties on impor-1s from israel are 20% lower than the general rates. 40. Switzerland. Switzerland imposes duties on citrus imports as follows: - 95 - Oranges, mandarins, and clementines Sw F 10/100 kg Lemons Sw F 2/100 kg Grapefruit Sw F 3/100 kg Austria. Austria imposes duties on citrus imports as follows: Oranges, mandarins, and clementines S40/100 kg Grapefruit S25/100 kg Policy Issues: Governmental Assistance 41. EEC. Italy and Greece, the two major EEC citrus-producing countries other than Spain receive export and processing subsidies frem the EEC's agricultural program. The subsidies for Italy in 1987/88 are shown in the following table. ITALY: EXPORT AND PROCESSINC SUBSIDIES, 1987/88 ______________________________________________________________________________ Penetration --Export Subsidy b/--- --------Processing--------- Fruit Premium a/ Eastern Europe Other Subsidy cf Minimum Price d/ …----------( $ ITon)…-------------------------- Oranges 116-205 107-227 71-160 85-134 149-198 Tangerines 172 97 97 - - Lemons - 133 156 261 a! Paid on exports to EEC countries. b/ Paid on exports to third countries. c/ Paid to proces3ors. d/ Minimum prices processors must pay for fruit in order to be eligible for the subsidy. Source: USDA. 42. The EEC export subsidies granted to Greek citrus are approximately 26% less than the subsidies paid to italy. 43. Spain joined the EEC on January 1, 1986 and is subject to different regulations during the transitional period. According to the terms of accession, the EEC import duty on Spanish citrus will be reduced gradually over ten years. After five years, the EEC duty on Spinish citrus imports will oe lower than for other Mlediterranean suppliers. Spaaish citrus will continue -96- to be subject to countervailing duty charges, but these will be reduced by 21 p.a. during the first four years following accession. During this time, Spain vill not be permitted to grant subsidies to its exporters on exports to other EEC countries. The Spanish exporters anticipate that export subsidies can be granted to them after the four-year transitional period. Spain is expected to boost citrus exports to the EEC which will constitute a threat to other citrus exporters to the EEC market--especially Israel, Morocco, Cyprus, and Tunisia. However, the effect will be significant only after five years because of the transitional period terms set by the EEC. 44. Greece. A modernization of the Greek citrus industry was approved in January 1984. This is - 6-year program which will cost approximately 13 billion Drs. (165 million ECUs), of which one-half will be paid by the EEC. A farmer who proceeds with regrafting of orange trees will receive additional income support of 169,950 Drs./ha every year 2or the first four years and 115,870 Drs./ha the fifth year. In the case of replanting with high-demand varieties, he will receive an additional 77,240 Drs./ha for the sixth and seventh years. For lemons and tangerines, all the above supports, are increased by 10%. 45. Japan. During the 1960s Japan experienced a rapid expansion of its citrus area as the Government encouraged farmers to divert lands devoted to rice cultivation to other crops. As a result, the Mikan tangerine area increased to 173,000 hectares by 1973, about 2.7 times that in 1960. An oversupply of fruit soon became a threat to growers incomes. The Japanese Government sponsored its first land use diversion program out of mandarin oranges in the mid-1970s. A second diversion scheme, enacted in 1979, continued in operation until its scheduled termination date in 1984 at wlich time the total Mikan tangerine area was reduced to 120,700 hectares. Under that program, growers were eligible to receive from the Government up to 663,000 (US$2,763) per hectare for conversion to non-citrus crops and 196,000 (US$817) for conversion to other types of citrus. The area devoted to production of Mikan tangerines continues to decline as a result of the ongoing production adjustment program. It was reduced to 105,000 hectares in 1987 and is expected to reduce to 95,000 hectares by 1995. 46. Turkey. Assistance to citrus production and exports is provided through credit at low interest rates from the Agricuitural Bank of Turkey. Exports of citrus also receive a 5% tax rebate. A World Bank-assisted fruit and vegetable project has just been completed and an irrigation project is under development. The incremental production of citrus from these two projects is expected to be 180,000 tons a year. TABLE Ali TOTAL CITRUS FRUIT - PROCUCTION BY MAIN COUNTRIES AND ECONOMIC RZGIONS ACTUAL PROJECTED CROUIS RAS A/ COUNTRIES/ 1967 - ECONOMIES 1969-71 1979-81 1986 19871J 1968 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS)------------------------------------- ------(S PI AUN4)------- INDUSTRIAL 18,456 23,591 20,978 21,155 21,934 23,048 24,067 27,763 30,813 2.8 0.2 2.9 NRTH AMERICA 10,476 13,623 10,049 11,197 11,520 11,931 12,420 15,013 16,874 2.4 -0.5 3,2 UNITED STATES 10,431 13,583 10,013 11,159 11,482 11,593 12,382 14,975 16,836 2.4 -0.5 3.2 EEC-iO 4,850 5,688 7,436 5,907 6,348 7,041 7,560 8,561 9,628 2.6 1.9 3.6 ITALY 2,502 2,798 3,614 2,119 2,290 2,876 3,287 3,550 3,834 3.0 1.7 4.7 SPAIN 2,334 2,853 3,774 3,741 4,010 4,116 4,222 4,955 5,733 2.6 2.0 3.3 JAPAN 2,775 3,759 2,86S 3 400 3,394 3,386 3,378 3,351 3,320 4.3 -0.8 -0.2 NON-MARKET 76 271 336 346 357 366 378 438 507 11.3 11.2 3.0 DEVELOPING 19,838 33,062 40,664 40,823 43,033 45,345 47,486 58,646 68,800 5.1 4.7 4.1 ASIA 3,827 6,085 9,227 9,499 10,468 11,605 12,775 19,294 24,545 4.8 5.3 7.6 INDIA 1,695 1,738 1,882 1,912 1,937 1,971 1,997 2,069 2,224 1.9 0.4 1.2 CHINA 553 1,224 3,235 3,360 4,171 5,140 6,141 11,819 16,02f 8.2 10.6 12.6 AFRTCA 3,904 4,567 5,228 5,370 5,517 5,653 5,793 6,1,97 7,297 2.8 1.4 2.4 AMERICA 9,194 18,531 21,879 22,282 22,925 23,595 24,298 27,!,34 31,120 6.3 6.2 2.6 BRAZIL 3,572 10,994 14,260 14,272 14,607 14,951 15,303 17,239 19,445 9.2 9.6 2.4 MEXICO 1,943 2,677 2,617 2,692 2,773 2,858 2,949 3,237 3,593 3.8 2.3 2.3 ARGENTINA 1,456 1,436 1,310 1,491 1,570 1,653 1,740 1,947 2,169 2.4 -0.5 2.0 CUBA 149 401 796 853 918 995 1,083 1,407 1,702 8.6 12.6 5.5 5&)UViEE* EUROPE 2,897 3,864 4,313 3;656 4,106 4,375 4,603 .5,304 5,825 3.9 2.0 3.6 WORLD 38,371 56,924 61,978 62,324 65,324 68,659 71,931 86,847 100,127 4.2 2.9 3.7 ------------------------------_.-------------------------------------__------__--------------------------------------------------- Al LEAST SQUARMS TREND FOR HISTORICAL PERIODS (1961-86) END-POINT FOR PROJECTED PgRIODS (1987-2000). BI ESTIMATE. SOURCES: FAO, PRODUCTION YEARBOOK TAPES (ACTUAL)l WORLD BANK, INTERNATIONAL EC'o0oICS DEPARTMENT (PROJECTED). TABLH A2 TOTAL CITRUS FRUIT - APPARENT CONStBMPTION BY MAIN COUNTRIES ARD ECONOMIC RLIONS ACTUAL PROJECTED GROWTH RATES A/ COUNTRIES/ 1967 - ECONOKIES 1969-71 1979-81 1986 1987/B 319i8 1909 1990 1995 2000 1961-06 1970-86 2000 ..---- ----- ---('000 TON) --------------------------------------- ------ PER ANU)- IIIDUSTRIAL 20,149 25,256 21,991 22,721 23,507 24,610 25,853 29,524 32,598 2.6 0.1 2.6 NORTH AMERICA 10,332 13,175 9,666 10,782 11,082 11,473 11,963 14,480 16,262 2.3 -0.7 3.2 UNITED STATES 9,978 12,747 9,238 10,336 10,626 11,004 11,488 13,964 15,708 2.3 -0.7 s.3 ESC-10 6,147 6,966 7,911 6,891 7,269 7,943 8,514 9,298 10,168 2.2 1.2 3.O ITALY 1,995 2,S37 3,315 1,953 2,076 2,649 3,050 3,309 3,606 4.4 2.4 4.8 JAPAN 2,822 4,066 3,276 3,844 3,891 3,950 4,016 4,196 4,374 4.9 -0.2 1.0 NoN-MARKET 792 1,340 1,408 1.,503 1,582 1,638 1,7)3 2,006 2,365 6.5 2.9 3.5 DEVELOPING 17,434 30,377 37,776 38,100 40,236 42,451 44,375 55,317 65,157 5.4 5.2 4.2 ASIA 3,798 6,365 9,600 10,024 11,090 12,271 13,491 20,259 25,707 5.: 5.9 7 5 INDIA 1,695 1,731 1,879 1,912 1,937 1,971 1, 9" 2,069 2,224 1.8 0.4 1.2 CHINA 474 1,157 3,164 3,282 4,091 5,058 A tt 11,70. 15,896 6.8 11.6 12.9 AFRICA 2,779 3,300 3,977 4,143 4,292 4,470 4,5s9 5,171 5,640 3.5 1.8 2.7 AMERICA 9,021 18,111 21,072 21,361 21,932 22,541 23,156 26,114 29,416 6.3 4.1 . 5 BRAZIL 3,513 10,907 14,182 14,189 14,529 14,879 15,237 17,15' 19,316 9,4 9.6 2.4 MEXICO 1,891 2,616 .,,573 2,618 2,678 2,753 2,831 3,122 3,439 3.9 2.S 2.1 ARGENTINA 1,449 1,403 1,195 1,349 1,410 1,491 1,543 1,719 1,752 2.1 -1.0 2.0 SOUTHERN EUROPE 1,822 2,585 3,110 2,566 2,904 3,053 3,172 3,756 4,180 4.0 2.6 3.S WORLD 38,376 56,974 61,176 62,324 65,324 68,659 71,911 66,847 100,127 4.2 2.8 3.7 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)1 END-POINT FOR PROJECTED ?ER10S (1987-2000). B/ ESTIMATE. SOURCES: FAO, PRODUCTION & TRADE YEARBOOK TAPES (ACTUAL)i WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A3i TOTAL CITRUS FRUIT - CROSS EXPORTS BY MAIN COURISES AND iCOPOKIC RLCIONS ACTUAL PROJECTEI' GROW RATIO Af COUNTRIES/ 19B7 - ECONOMIES 1969-71 1979-S1 1986 1987/S 19S8 1989 1990 1995 2000 1941-86 1070-U4 2000 ---------------------------------- (000 TONS)------------------------------------- ------(X PtR AXtM)------- INDUSTRIAL 2,473 3,096 4,'.98 4,068 4,364 4,506 4,610 5,353 6,101 2.7 1.7 3.2 NORTS AMERICA 500 891 856 931 960 1,016 1,031 1,162 1,290 4.$ 2.4 2.3 UNITED STATES 500 891 856 931 980 1,016 1,031 1,162 1,290 4.1 2.6 2.5 EEC- 10 1,928 2,147 3,281 34100 3,365 3,450 3,535 4,131 4,739 2.1 1.4 3.$ OPAIN 1,280 1,643 2,643 2,581 2,796 2,865 2,937 3,522 4,138 2.9 2.0 1.7 ITALY 538 306 345 225 275 291 304 315 307 -2.5 -.O 2.4 DNVELOPINO 2,903 3,794 3,850 3,860 4,046 4,198 4,471 5,028 3,628 3.1 1.4 2.9 ASIA 394 642 467 AS0 483 457 492 527 558 3.9 0.9 1.2 AFRICA 1,140 i,282 1,263 1,251 1,238 1,196 1,263 1,340 1,471 1.0 0.2 1.1 MOROCCO 561 660 573 576 576 581 593 599 600 1.# 0.1 0.1 SOUTH ArRICA 203 406 414 432 454 461 471 509 546 2.0 . O .9 AMERICA itS 473 825 943 1,016 1,077 1,165 1,443 1,727 3.9 9.8 4.8 CUBA 26 203 466 509 557 616 688 921 1,112 21.2 22.2 6.2 SOUTHERN EUROPE 1,180 1,397 1,296 1,186 1,309 1,438 1,553 1,718 1,872 3.7 0.1 3.6 ISRAEL 789 673 532 548 592 645 704 771 $07 1.9 -2.6 3.0 WORLD 5,381 6,891 8,040 7,928 8,430 6,704 9,066 10,381 11,729 2.9 1.6 3.1 A/ LEAST SQUARES TRZED FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PROJZCTED PERIODS (1987-2000). S/ ESTIMATE. SOURCIS, lAO, TRADB YTEAREOR TAPIS (ACTUAL)i WORLD &ANX, INTERNATIONAL ECONOMICS DEPARTMENT (PROJZCTXD). TAbLZ A4i TOTAL CITRUS fRUIT - GROSS "IPORTS BY MAIN COU4TRIES AND SCOUCIIC R11(101 ACTUAL PROJECTED QG%N! RATES Al COUNTRI8S/------------------------------ ------------------------------- ----------------I----- COUNTRtIBsI 207- ICoNO4Igs 1969-71 1979-81 198S 198715 196J 1989 1990 1995 2000 1961-84 1970-84 2000 --------------------('000 TONs)------------------------------------- ------( PR AMM)------- INDUSTRIAL 4,166 4,761 5,211 5,614 5,957 6,128 6,396 7,114 7,6SU 1.S 0.s 2.6 NORTH AHERICA 355 443 472 516 542 558 374 629 67S 2.3 1.4 2.1 CANADA 308 387 391 428 451 465 480 52S S76 2.2 1.5 2.3 10C-10 3,225 3,426 3,737 4,084 4.286 4,352 4,*89 4,868 3,279 1.3 0.3 2.0 GEtMANY, FED. REP. 1,069 990 1,012 1,008 1,137 1,150 1,180 1,273 1,379 0.2 -1.0 1.S PRANCs 926 1,037 1,202 1,294 1,360 1,382 1,427 1,555 1,710 1i5 1.2 2.2 UNITED KINGDOM 587 592 609 666 704 714 737 792 851 0.6 -0.3 1.9 NETHIRLANDS 315 437 537 581 610 621 642 687 732 3.8 2.4 1.8 BELGIUM-LUXDIBoURG 210 234 245 265 277 279 287 311 326 2.1 0.2 1.6 OTER WESTERN EUROPE 507 550 534 582 614 631 65S 714 790 1.3 0.1 2.4 NON-hARKET 721 1,070 1,072 1,157 1.225 1,272 1,325 1,568 1,851 5.6 1.6 7.1 USSR 314 465 520 567 603 629 657 79S 985 8.3 2.9 4.3 XASTERN BUROPE 409 602 553 s3e 617 634 655 738 823 5.1 0.4 2.8 DEVELOPING 499 1,109 963 1,137 1,249 1,304 1,367 1,699 1,935 7.2 4.4 4.4 ASIA 365 923 839 1,005 1,105 1,153 1,208 1,492 2,720 8$. 5.8 4.2 WORLD 5,387 6,941 7,246 7,928 8,430 8,704 9,0 8 10,381 11,729 2.S 1.4 3.1 A! LZAST SUARXS TREND FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMATE. SOURCZS: lAO, TRADE YEARBOOK TAPES (ACTUAL)l WORLD SANK, INTgRNATIONAL ECONOMICS DEPARTMINT (PROJECTED). TABLE A5i ORANGES, TANGERINES - PRODUCTION BY MAIN COUNTUIES MAD ECONOMIC REIONS ACTUAL PROJECTED ROW SATIS A/ COUNTRiESI 1987 - ECONOMIES 1969-71 1979-S1 1986 .987!0 1988 1989 1990 1995 2000 1961i-6 1970-S4 2000 -('000 TONS) -- - -A--- ---- ------ __ INDUSTRIAL 14,715 18,575 16,202 16,090 16,931 17,731 18,490 21,533 23,848 2.8 -0.1 3.1 NIORTH AERICA 7,814 10,183 7,221 7,824 8,234 8,481 J,851 11,071 12,521 2.5 -0.9 3.7 UNITED STATES 7,782 10,152 7rl92 7,79s 8,203 8,450 8,620 11,040 12,490 2.5 -0.9 S17 EEC-10 3,915 4,494 5,957 4,718 5,157 5,718 6,114 6,924 7,757 2.8 1.6 1.9 ITALY 1,688 1,992 2,749 1,495 1,650 2,140 2,465 2,708 2,975 3.6 2.3 5.4 SPAIN 2,216 2,468 3,166 3,181 3,464 3,534 3,604 4,166 4,727 2.1 1.3 3.1 JAPAN 2,680 3,462 2,468 2,998 2,974 2,950 2,926 2,820 2,709 3.9 -1.5 -0.1 NON-MARKET 74 271 336 346 357 366 378 438 507 11.3 11,2 1.0 DMLOPING 16,074 27,375 34,316 34,428 36,285 38,221 39,975 49,238 57,601 5.1 5.0 4.0 ASIA 2,892 4,721 7,566 7,827 8,695 9,701 10,736 16,513 21,145 5.4 5.9 7.9 CHINA 438 1,045 2,897 3,009 3,750 4,622 5,523 10,636 14,425 9.2 11.2 12.8 AnRICA 3,132 3,660 4,118 4,230 4,348 4,469 4,592 5,165 5,614 2.8 1.2 2.5 AMERICA 7,859 16,309 19,461 19,731 20,223 20,735 21,266 23,794 26,601 6.4 6.5 2.3 BRAZIL 3,441 10,760 13,933 13,930 14,250 14,578 14,913 16,780 18,720 9.3 9.6 2.3 MEXcIoO 1,587 1,938 2,032 2,065 2,098 2,131 2,165 2,333 2,500 2.9 1.6 1.5 CUBA 121 281 477 510 550 600 660 815 990 7.3 10.7 5.2 0 SOTEN EUROPE 2,179 2,674 3,139 2,6i8 3,007 3,204 3,367 3,754 4,027 1.5 1.7 3.3 WORLD 30,865 46,221 50,654 50,864 53,573 56,218 58,843 71,209 81,956 4.4 3.0 3.7 Al LZAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86), END-POJIT FOR PROJECTED PERIODS (1987-2000). Z/ ESTIMATE. SOURCES: FAO, PRODUCTION YEARBOOK TAPES (ACTUAL), WORLD LANK, INTERUATIONUL ECODOMICS DEPARERN (PJECTED). TABLE A6: ORANGES, TANGERINE$ - APPARENT =ONSUMPTION BY MAIN COUWTRIES AKD ECONOMIC REGIONS ACTUAL PROJICTED GROWTH RATES Al cOouTRIrSs 1987 - ECCoHUIES 1969-71 1979-81 1986 19871/ 1988 1989 1990 1995 2000 1961-86 1970-86 2000 - ('000 TONS)… ( PER AWM)--- INDUSTRIAL 16,208 19,907 16,864 17,239 18,033 18,875 19,747 22,/04 25,032 2.5 -0.2 2., NORTH AMERICA 7,789 10,085 7,134 7,75aJ 8,179 8,422 8,792 10,9SO 12,393 2.4 -0.9 3.7 UNITSD STATES 7,556 9,771 6,816 7,428 7,842 8,078 8,446 10,610 1,997 2.4 -1.0 3.8 EBC-10 5,029 5,449 6,191 5,347 5;657 6,198 6,637 7,218 7,587 2.0 1.1 3.0 ITALY 1,509 1,873 2,547 1,385 1,489 1,970 2,284 2,508 2,755 4.3 2.6 5.4 JAPAN 2,669 3,511 2,5t8 3,124 3,134 3,160 3,196 3,201 3,225 4.1 -1.2 0.S NON-MARXKT 561 979 1,005 1,089 1,151 1,183 1,228 1,431 1,651 7.3 2.7 3.3 DEVELOPING 14,085 25,409 32,252 32,536 34,390 36,260 37,848 47,074 55,273 5.8 4.5 4.2 ASIA 2,883 4,961 7,907 3,282 9,237 10,267 11,335 17,260 22,010 5.7 6.3 1.S CtUINA 367 982 2,824 2,931 3,670 4,540 5,438 10,526 14,295 9.9 12.4 15.0 AFRICA 2,059 2,493 2,984 3,119 3,259 3,417 3,462 3,981 4,520 3.9 1.$ 2.9 AMERICA *,713 16,042 18,992 19,217 19,683 20,149 20,620 23,036 25,688 6.5 6.4 2.3 bRAZIL 3,383 10,675 13,856 13,851 14,170 14,496 14,S29 16,614 18,616 9.3 9.t 2.3 I8XicO 1,535 1,902 2,013 2,045 2,078 2,111 2,145 2,313 2,480 3.0 1.9 1.5 0 SOUTNEIW EUROPE 1,419 1,901 2,357 1,906 2,199 2,316 2,419 2,765 3,043 3.7 2.5 3.7 WORLD 30,855 46,296 50,122 50,864 53,573 56,218 58,843 71,209 61,958 4.3 2.9 3.7 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-96)t END-POINT FOR PROJECTED PERIODS (1987-2000). Dt ASTDOATI. SOCESt FAD, PRODUCTION 1 TRADE YSEARDOO TAPES (ACTUAL)l WORLD SANK, INTERNATIONAL SCONOMICS DEPARTMENT (PROJECTED). TABLE A7i ORANGES, TANGERINES - GROSS EXPORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COUNrRIES/ 1987 - ECONOMIES 1969-71 1979-81 1986 1987(B 1988 1989 1990 1995 2000 1961-86 1970-66 2000 ----------------------------------('000 TONS)------------------------------------- ------(7 PER ANlM)------- INDUSTRIAL 1,800 2,141 3,174 3,044 3,360 3,426 3,500 4,050 4,592 2.1 1.5 3.2 NORTH AIWRICA 268 414 417 433 444 456 468 532 605 3.8 2.7 2.6 UNITED STATES 268 414 417 433 444 456 468 532 605 3.8 2.7 2.6 BUC-10 1,488 1,673 2,703 2,553 2,857 2,909 2,966 3,437 3,896 2.1 1.2 3.3 SPAIN 1,222 1,414 2,298 2,270 2,523 2,566 2,612 3,064 3,503 2.2 1.1 3.4 ITALY 179 122 202 110 161 170 ll 200 220 -1.1 0.1 5.5 DEVELOPING 2,408 2,894 2,874 2,854 2,957 3,054 3,260 3,509 3,856 2.5 0.7 2.3 ASIA 334 558 406 418 420 422 425 450 470 6.5 0.8 0.9 AFRICA 1,083 1,178 1,140 1,117 1,096 1,099 1,137 1,191 1,301 0.9 -0.1 1.2 MOROCCO 558 658 572 576 376 581 593 599 600 1.9 0.1 0.3 SOUTH AMRICA 181 329 315 323 337 350 366 388 408 1.i 3.9 1.8 AMERICA 157 311 484 530 557 603 663 775 932 4.2 7.4 4.4 CUBA 25 141 270 293 322 363 414 514 624 18.3 18.0 6.w SOUTHERN EUROPE 832 846 844 789 884 9)30 1,035 1,093 1,153 2.7 -0.4 3.0 ISRAEL 586 538 378 405 439 477 516 520 525 1.1 -2.7 2.0 WORLD 4,213 5,035 6,048 5,898 6,317 6,480 6,760 7,559 8,448 2.4 1.1 2.8 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1962-86)s END-POINT FOR PROJECTED PERIODS (1987-2000). 2t ESTIMATE. SOVRCES, PAO, TRADE YEARBOOK TAPES (ACTUAL)i WORLD USNK, INTXRNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE ASi ORANGE$ TANGRINBS - GROSS IMPORTS BY MAIN CVAThIEIS AND ZOOoSIIC RZ4IONS ACTUAL PROJZCTED CROWTH tATSS A/ ZWoi>WIES 1969-71 1979-$1 1986 1987/1 19$8 1969 1990 1995 1000 1961-86 1170-84 2000 -('000 TONS)- (I P ANXUt - INDUSTRIAL 3.293 3,474 3,836 6,193 4,462 4,570 4,777 5,221 53776 11 0.4 2.5 jORTfl AI6RICA 242 317 310 367 369 397 409 441 477 2.4 1.8 2.0 CARADA 201 282 287 319 339 347 354 389 425 2.- 2.3 2.2 ZEC-10 2,603 2,627 2,937 3,211 S 336 3,416 3,51S 3,760 4,053 0.9 0.0 1.S GE(ANY, YED. RIP. 863 763 805 677 922 926 952 1,016 1,096 0.0 -1.S 1.7 FRANCZ 764 806 930 1,014 1,072 1,082 1,114 1,199 1,S13 1.0 0.7 2.0 UNITSD KINGDOM 446 440 476 527 539 56) 380 612 652 0.3 -0.2 1.6 NEZTHELANDS 282 355 441 483 309 517 534 567 601 3.1 1.S 1.7 3XLGZUM-LUX25POURG 177 189 19S 216 227 229 235 251 267 1.J -0.2 1.4 OTHER WESTERN EUROPE 428 447 434 411 510 322 543 354 643 1.1 -0.2 2.3 NON-HMAXLT 490 709 669 743 794 617 S30 993 1,144 6.2 0.7 3.4 USSR 257 361 331 373 402 417 436 529 629 0.0 1.1 4*1 EASTIRN EuRoPE 233 348 338 370 392 400 414 464 516 6.3 0.3 2.5 DEVELOPING 419 92i $11 962 1,062 1,093 1,133 1,345 1328 7.5 4.2 5.6 ASIA 323 798 726 $73 962 98 1,022 1,197 1,335 8.6 3.3 ) .3 WORLD 4,203 5,110 3,316 3,S98 6,317 6,480 6,760 7,359 *,448 2.3 0.9 2.8 A/ LZAST SQUARES TREND FOR HISTORICAL PERIODS (191-86)i END-POINTOR PROJZCTED PERIOOS (1907-2000). 3/ STIMATE. SOURCES i FAO, TRADE YLAM TAPES (ACTUAL). WORLD DANK, EONOMIC AMALYSIS 4 PROJECTIONS DEPARSTRZT (ROJZCTID). TABLE A9i LIPOAS 6 LIHZS - PRODUCTION BY KA6Y COUNTRIKS AND ECONOMIC REGIONS _CUAAL P_ROJZCT2D OAOWTN RATh& A/ COUNTRIES) 1*57- t500UW4Ig 1969-71 1979 81 t966 1987/8 198U 1969 1990 1993 2000 1941-84 1*70-66 2000 ~~~~~~~~~~~~~~------------ --------------t--------OIIS)---------------- ---- ------------ ---- ------ t)- --- ------------------------ ------------------ ----'000 TONS)-................... ...(Z MU AMI) -.... TKDUSTML 1,495 2,039 2,131 2,212 2,061 2,263 2.497 2,173 1.102 2.9 2.1 2.0 ORTH AfnICA S76 864 694 1,047 873 93 4 1,056 1,149 1,250 2.4 2 2 1.4 UNITED STATES 372 840 690 1,04) 069 960 i,052 1145 i,246 2.4 2.2 1.4 UC-10 *67 1,129 1,413 ),134 1,135 1,265 1,386 1,564 1,767 1.3 2.1 3.J ITALY 773 752 615 585 600 495 780 792 604 t.7 0.0 2.$ SP.4II 112 375 593 544 530 565 600 766 977 8.1 9.2 4t 6 DEVRLOPINW 2,142 3,111 3,455 3,411 3,603 1,804 4,006 4,946 53903 . C 3.2 4.3 ASIA 661 S52 900 906 952 1,00S I,0!'6 1,344 1,571 1.4 1.6 4.3 INDIA 433 4S 451 454 456 459 4t . 476 490 U.6 0.5 0.6 CHINA 43 70 123 129 163 201 2.1 465 610 4.9 *.4 13.0 AYRICA 216 259 365 397 409 422 436 510 397 3.1 4.5 ).2 AMERICA 891 1,446 1,526 1,614 1,708 1,600 1,913 2,310 2,794 $,I 3.9 6 3 MZXIOO 326 577 301 536 572 609 650 740 $41 7.1 4.0 3.5 AhO3tINLi 196 369 340 371 404 440 480 567 670 7.7 4.2 *.7 CUIA 10 25 59 64 69 75 SO 106 132 8.6 12.3 S.7 SOIJSRN EUROPB 132 569 641 490 510 567 595 760 941 4.2 3.1 5.1 TURKtY 130 284 310 270 235 300 310 399 513 7. 457 1.1 WORLD 5,637 5,170 5,607 5, 6*3 5,664 6,067 6,503 7,721 9,011 1J4 2.9 J.7 Al LS AT SQUARS S TREND FOR SISTORICAL PZtIOOS (1961-66) END-POINT FOR PtOJVTZD PERIODS (1967-2000). RI ISTIMATI. SCURC25 ?AD, PROCUCTION YBAR=ooK TAPES (ACYltAL)s WORLD UAK, INTNkRATIOUAL ECONOMICS 0"' ; TINT (PROJECTED). TABLE Al0Q LEM*$ & LIHWS - APPARZIWT cousu9wriOm aY mAIN COVNTRIES Aio r lONOHIO A16of ACTUAL PROJIECTED GROWTH RATES Al COUNTRIES/ 1987 - KC00RM0E8 1969-71 1979-81 1986 1987/L 1988 1959 1990 1995 2000 1961-86 1970-66 2000 __________________--_-__-__-------('000 TONS)-----------------------------.------- ------li p AI). . INDUSTRIAL 1,378 1,971 2,117 2,249 2,110 2,321 2,536 2,747 2,99B 3.1 2.7 2.2 NORTH AMERICA 470 729 607 940 751 646 9)3 1,046 1,150 2.5 3.3 1.6 UNITED STATES 450 704 577 909 720 833 910 1,011 1,113 2,5 I.1 1.6 EEC-10 769 1,036 1,279 1,073 1,116 1,221 1,328 1,404 1,515 3.3 2.3 2.7 ITALY 415 570 673 470 486 574 657 671 717 5.0 2.1 3.3 NON-MARKET 225 317 275 279 287 301 3,2 359 452 3. 11 385 EASTERN EUROPE 170 227 170 172 177 1S5 1)0 213 237 2.9 -1.0 2.5 DEVELOPING 2,019 2,905 3,150 3,115 3,267 3,463 '. iS 4,615 5,557 3.6 3.1 4.5 ASIA 659 879 937 962 1,016 1,085 1,155 1,531 1,S29 1.8 2.4 5.1 INDIA 433 hee 451 454 456 459 462 476 *90 0.6 0.5 0,6 CHINA 43 70 123 129 163 201 241 465 630 4.3 3.4 13,0 AIVRICA 205 233 35C 360 372 385 399 J69 552 3.1 4.1 3.3 AMERICA 890 1,392 1,423 1,460 1,523 1,626 1,730 2,093 2,552 5.4 3.5 4.4. MEXICO 327 565 481 489 S11 549 S37 683 799 6.9 3.8 3.9 0 ARGENTINA 198 345 300 303 313 350 382 434 500 7.2 3.5 3.9 Ch SOUTHERN EUROPE 261 398 435 329 352 365 367 516 824 3.1 2.5 5.0 WORLD 3,622 5,192 5,542 5,643 5,664 6,087 6,503 7,721 9,011 3.4 2.9 3.7 …--___ ---__ ---___ -------------------------_ ------------------------------------__ ---___ --___ ---__ _, -___ --_ , ---__ _--- __--- ___-- Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)1 F1.dD-POINT FOR PROJECTED PERIODS (1987 2000). Bt ESTIMATE. SOURCES FAO, PRODUCTION & TRADE YEARBOOK TAPES (ACTUAL) i WORLD BANK, INTERNATIONAL FCONO*ICS DEPARTMENT (PROJECTED). TABLE All LZMO0S & LIMES - GROSS EXPORTS BY MAIN COUNTRIES AND ECONOMIC RUGIOKS ACTuAL PROJECTKO GIIOTf 7tAVEl Al COUNTRIES/ 1981 - 1ECQNOMIES 1969-71 1979-81 1986 1981/5 i9s8 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------------------('000 TONS)------------------------------------- ------(X PER AhflJ)------- INDUSTRIAL 548 599 658 622 600 630 652 773 919 1.8 0.9 3.0 NGRt A)zRIrA 124 174 148 170 186 185 181 178 17S 2.7 -0.6 0.4 UNITED STATES 124 174 148 170 186 185 181 178 17l 2.7 -0.6 0.4 EBC-10 423 422 505 444 405 437 464 587 731 1.5 1.6 3.9 ITALY 358 182 141 115 114 121 123 115 87 -3.7 -5,4 -2.1 SPAIN 56 2,t4 336 301 263 288 313 444 616 11.6 10.7 5.7 D M LOPING 182 353 416 426 473 496 527 607 703 6.3 5.3 3.9 ASIA 47 57 44 45 45 46 47 52 58 2.8 1.3 2.0 AMERICA 2 59 105 159 190 187 190 222 247 17.9 24.2 3.4 CUBA 0 4 18 21 25 28 30 45 56 ... .. 7.8 SOUTHERN EUROPE 122 211 231 185 201 226 253 292 353 6.6 3.5 5,1 TURKEY 30 105 83 80 80 96 123 132 164 12.7 6.6 5.7 GREECE 53 53 90 50 65 74 78 87 97 3.2 0.4 5.2 WORLD 730 952 1,074 1,048 1,073 1,126 1,179 1,380 1,622 3.1 2.4 3.4 Al LYAST SQUARES TREND POR HI6TORICAL PERIODS (1961-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). B1 ESTIMATE. SOURCES, FAO, TRADE YEARBOOK TAPES (ACTUAL)i WORLD BANK, INTERNATIONAL ECONOMIcS DEPARTMENT (PROJECTED). TABI A12: LEMUS & LINES - GROSS IMPMTS BY KAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED CROWITH RATtS Al COU11TRIES/ 187 - ECONSIES 1969-71 1979-81 1986 198718 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ('000 TONS)- ( PER AN-UM-- INDUSTRIAL 431 530 625 639 649 668 691 747 815 2.5 2.4 1.9 NORTH AMERICA 18 39 61 62 64 67 68 75 78 5.6 8.7 1.7 gEC-10 305 328 171 383 386 393 406 427 459 1.2 1.4 1.4 GZPANY, P?D. REP. 129 116 120 121 121 123 126 133 143 -0.4 -0.1 1.3 FRANCE 100 116 132 134 135 139 144 151 162 2.2 1.9 1.5 UWITED KINGDOM 37 44 S1 52 53 54 56 57 61. 1.7 2.6 1.2 OTHER WESTERN EUROPE 56 58 64 64 65 67 70 75 82 1.0 1.2 1.9 JAPAN 52 104 126 129 134 141 147 170 196 13.8 4.3 3.3 iON-MARXZT 225 317 275 279 287 301 312 339 452 3.7 1.1 3.8 USSR 55 89 104 107 110 116 122 146 215 5.4 5.6 5.5 EASTERN EURuPE 170 227 170 172 177 185 190 213 237 2.9 -1.0 2.5 DEVELOPING 59 128 110 130 137 157 176 274 355 6.2 6.6 8.0 ASIA 25 85 82 101 109 128 146 239 314 9.7 12.8 9.1 SOUTUERN EUROPE 31 40 26 24 23 24 25 30 36 2.2 -1.2 3.2 YUGOSLAVIA 31 40 24 24 23 24 25 30 36 2.1 -1.5 3.2 WORLD 715 975 1,010 1,048 1,073 1,126 1,179 1,380 1,622 3.2 2.4 1.4 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86) i END-POINT FOR PROJECTED PERIODS (1987-2000). J I ESTIrMTE. SOURCES: FAO, TRADE YEARBOOK TAPES (ACTUAL), IORLD 11EIK, INTERNATIONAL ECONOMICS DEPARTMET (PROJECTED). TABLE A13t OTHBR CITRUS FRUIT - PRODUCTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACIVAL PROJECTED GROWTH RATES Al COUNTRIES/ 1987 - EcOboM@ES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS) ------------------------------------- ------( PER ANNUM)------ INDUSTRIAL 2,247 2,977 2,624 2,833 2,942 3,034 3,080 3,457 3,863 2.6 0.6 2.4 NOTH AMERICA 2,086 2,577 2,134 2Z,426 2,413 2,486 2,513 2,793 3,103 2.1 -0.3 2.2 UNITED STATES 2,077 2,371 2,1.1 2,323 2,410 2,483 2,510 2,790 3,100 2.1 -0.3 2.2 JAPAN 94 297 380 402 420 436 452 531 611 9.9 8.9 3.3 DEVLmOPING 1,622 2,556 2,893 2,984 3,145 3,320 3,505 4,460 5,294 4.7 3.7 4.5 ASIA 255 512 741 766 821 901 981 1,437 1,827 6.1 8.3 6.9 CBINA 72 109 236 222 258 317 377 718 971 4.5 8.1 12.0 ArRICA 556 648 725 743 760 762 765 822 886 2.3 0.8 1.4 AM RICA 444 774 892 937 994 1,052 1,117 1,430 1,723 4.9 4.6 4.8 ARGMNTINA I29 149 160 160 166 173 180 225 270 5.0 -0.1 4.1 CUBA 17 95 260 279 299 320 343 486 580 14.6 20.5 5.6 SOUTC ERN EUROPE 366 621 531 537 569 604 641 770 857 7,2 2.4 3.7 ISRAEL 303 510 394 392 418 446 476 579 639 7.0 1.7 3.8 WORLD 3,869 5,533 5,517 5,817 6,087 6,354 6,585 7,917 9,157 3.5 2.0 3.6 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)i EtTD-POINT FOR 2'ROJECTED PERIODS (1987-2000). Di ESTIMATE. SOURCES: PAO, PRODUCTION YEARBOOK TAPES (ACTUAL), WORLD BANK, INTERNATIONAL ECONOMICS DEPARfM&MT (PROJECTED). 10-6-88 TABLE A14, OTHER CITRUS FRUIT - APPARENT CONSUMPTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES A/ COUNTRIES/ 1987 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-06 1970-86 2000 ----------------------------------('000 TONS)-------------------*----------------- (X PER ANNUM)------ INDUSTRIAL 2,563 3,378 3,009 3,233 3,364 3,474 3,550 4,073 4,568 2.8 0.6 2.7 NORTH AMERICA 2,073 2,361 1,925 2,084 2,152 2,205 2,228 2,454 2,719 1.6 -0.8 2.1. UNITED STATES 1,972 2,271 1,843 1,999 2,064 2,113 2,132 2,343 2,596 1.7 -0.8 2.0 EEC-10 349 482 441 471 496 524 549 676 766 9.7 0.9 3.8 JAPAN 100 451 562 591 623 649 673 827 953 12.3 9.0 3.7 NON-MARKET 6 AS 128 135 144 154 163 216 262 14.9 22.1 5.2 DEVELOPING 1,331 2,063 2,375 2,449 2,579 2,726 2,872 3,628 4,327 A..5 3.8 4.5 ASIA 256 524 756 780 837 919 1,001 1,468 1,868 6.2 8.3 7.0 CHINA 65 105 218 222 258 317 377 718 971 4.9 8.8 12.0 AMRICA 515 574 643 652 661 668 678 721 768 2.3 0.5 1.3 AMERICA 417 677 657 684 726 766 806 985 1,176 4.0 3.1 3.9 ARGENTINA 128 142 131 136 143 149 155 181 206 4.2 -1.0 3.3 SOUTHERN EUROPE 141 287 318 331 353 372 386 453 513 9.0 6.1 3.4 H ISRAEL 119 232 258 268 284 296 307 352 387 9.7 6.3 2.9 0 WORLD 3,899 5,486 5,512 5,817 6,087 6,354 6,585 7,917 9,157 3.5 1.9 3.6 …----------------------------------..------------------. -------------_-------------------------_________ __________________________ Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86), END-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMATE. SOURCESt FAO, PRODUCTION & TRADE YEARBOOK TAPES (ACTUAL); WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). 10-6-88 ?A&B3 Ah5v Oa CITUJ 1"UIT - 06OS EWFORS BY MAIX CCUWRTIRS AND ECONOMIC RISIONS --------------------------------------------------_----------__--------------__---------------_-__,-__--_----_------_,_.---------- ACTUAL PROJECTED GROWTH RAIS Al ------------------------------------ ------------------------------------------- --------------------------- OOUKTIRIZSI 1987 - EOO.LHIBS 1969-71 1979-81 1986 1987/B 1988 1989 1990 1993 2000 1961-86 1970-86 2000 ----------------------------------------------------------------__-------,---__-----------------------------------------..------- ----------------------------------('000 TONS)------------------------------------- ------(X PER ANNUM)------ INDUSTRIAL 126 356 366 402 424 450 458 530 590 7.3 3.7 3.0 NORTH AMERICA 108 303 291 328 350 375 38Z 452 507 6.3 5.0 3.4 UNITED STATES 108 303 291 328 350 375 382 432 507 6.5 5.0 3.4 BEC-10 17 52 73 74 74 75 76 78 83 14.1 9.8 0.9 DEVELOPING 313 547 560 580 626 648 691 912 1,069 5.9 3.1 4.8 ASIA 13 27 16 17 18 19 20 25 30 4.7 3.8 4.5 AFRICA 45 78 87 97 105 100 94 108 125 2.6 3.6 2.0 SOUTH AFRICA 16 54 67 76 84 78 72 84 99 4.6 10.8 2.1 AMERICA 28 102 236 25' 269 287 7.12 446 548 10.0 14.6 6.1 CUBA 1 58 180 195 210 225 244 362 432 ... 43.9 6.3 SOUTHEIRN U UROPE 227 340 220 212 224 242 265 333 366 5.6 -0.8 4.3 ISRAEL 184 257 136 124 134 150 16S 227 252 4.5 -2.8 5.6 CYPWUS 39 72 70 74 76 78 81 87 91 E.3 4.0 1.6 WORLD 439 903 925 982 1.040 1,098 1,149 1.442 1,659 6.3 3.9 4.4 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86): EXD-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMAT.E. SOURCES: AO, TRADE YEARBOOK TAPES (ACTUAL)s WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). 10-6-88 W ,~~ - - - - ._ _ _ _ - .- . -- _ _ _ _ _ _ _ _ _ _ TABXLE A6, OtHER CITRUS FRUIT - CROSS IMPORTS BY MAIN CONTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COUwTRIES/ 1987 - EC8z4IES 1969-71 1979-31 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-B6 2000 ----------------------------------('000 TONS)------------------------------------- ------(X *ER .4*Im)------ INDUSTRIAL 442 757 751 802 846 890 928 1,146 1,295 5.7 2.2 3.8 NORTH AMERICA 95 88 82. 86 89 94 97 113 123 1.1 -1.4 2.8 CANADA 90 84 78 82 85 89 93 108 118 0.9 -1.1 2.8 EEC-10 318 470 449 490 514 541 565 681 765 5.1 1.6 3.5 EUNIED UNGDcM 105 108 82 87 92 97 101 123 138 1,3 -1.9 3.6 CERXANY, FED. REP. 77 112 87 90 94 99 102 124 140 4.5 0.0 3.5 PRANCE 62 113 140 146 153 161 169 205 235 6.8 4.8 3.7 RETRERLANDS 20 60 61 63 65 68 71 81 89 9.7 6.1 2.7 ITALY 31 41 46 61 64 69 74 90 99 21.6 1.4 3.8 OTHER WE6STERB 81P0E 23 45 35 37 39 42 45 56 65 4.6 2.4 4.4 JAPAN 6 154 182 189 203 213 221 296 342 34.4 14.3 4.7 NON-MARKET 6 45 128 135 144 154 163 216 262 14.5 22.1 5.2 DEVZLOPING 22 34 42 45 50 54 58 80 102 5.2 3.7 6.5 WORLDi 469 856 921 982 1,040 1,098 1,149 1,442 1,659 6.1 3.2 4.1 Al LEAST SQUARES TREND FOR HISIORICAL PgRIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). I/ ESTIMATE. SOURCESt lAO, TRADE YEARBOOK TAPES (ACTUAL); WORLD BANK, INTERNATIOHAL ECONOMICS DEPARTMENT (PROJECTED). 10-6-88 ~~~~~~-13 TAMA3 A17. 0UM - M1n.. / 1947 (AC-TUAL) AND 1088-2M0 (1mSC33) Attua-l$to* Cort S -1$45 COMO_tt C XrretS mu A s GM Ig C ActwA 1950 185 74 864 1951 201 739 896 1952 i70 59f 74 1953 I" 718 860 1954 221 816 940 1955 239 866 986 1956 223 70 8a9 1957 238 815 916 1958 195 657 735 1959 173 590 636 1960 192 642 694 1961 160 526 573 130 1962 186 600 651 126 1363 131 431 452 137 1964 168 540 571 125 1965 163 521 540 129 1966 140 451 467 134 1967 159 486 495 130 1968 168 5i 498 122 1"69 170 497 478 13. 1970 168 463 447 119 1971 153 39S 386 133 1972 155 372 373 138 1973 163 337 368 159 1974 189 321 192 162 1975 228 348 430 198 1976 216 325 383 212 1977 254 38 422 223 1978 299 356 463 253 1979 400 421 569 299 1980 391 375 509 319 1981 405 386 462 316 1982 385 372 430 299 1983 373 371 402 296 1984 352 356 365 269 1985 398 398 398 289 1986 394 333 386 314 1987 458 350 434 352 Projected 1988 410 291 376 318 1989 432 289 378 335 1990 450 297 375 348 1995 561 310 360 429 2000 680 300 348 516 Devloping co:ntrIe export &nIt value. a Navel orange* Mediterr&nean exporters EIC 1-dicative Import Price, c.f.f. PaF. b/ Deflated by Wamifacturiag UuIt Value Index. Z/ Deflated by US GN Deflator- Sources: NsrcbA* EBeans des Fruits et !Egea (actual); Wo-ld Bank, Internatim0 a EconwAcs Departmen (projected). - 114 - ORANGES (CONSTANT 1985 DOULAR PRICES ) 1400 - 1 200 - 1200 1945 19Sd 1955 tS60 1965 1970 1975 1980 1985 1990 199S 2000 DEFLAtED BY MANUFACTURING UNIT VALUE ( iUV ) INDEX -..... D EFLATED EIY U.S. GNP DEFLTOR. *194 - 87 ACTUAL; 1988 -2000 PROJECTED . SOURCE : WORVCLD BANK, INTERNATIONAL ECONOMiCS DEPARTMIENT . GIAINS Sumary 1. World grains prices have risen sharply from the low levels experienced over the period 1985-87. Thai rice prices increased from less than US$200/ton in early 1987 to more than US$300/ton in 1988. US wheat prices rose from US$112/ton in 198? to over US$148/ton, and maize prices rose from US$76/ton to US$108/ton over the same period. The drought conditions in the United States accounted for much of the increase, but prices were rising before the drought began. 2. The upturn in prices was caused by a combination of factors, including the response of both demand and supply to the low prices of 1985 and 1986, the large supply control program legislated in the United States, and drought conditions in Asia in 187 and in the United States in 1988. The behavior of prices since '1986 has been in line with our forecasts made in 1986, but because of the droughts experienced over the past 12 months the increases it prices have been larger than forecast. 3. The effects of the current upturn in prices are expected to dissipate within three years unless further weather-related production shortfalls occur. The current price upswing is not viewed as the beginning of a period of price increases such as occurred during the 1970s; rather it is viewed as the result of a temporary production shortfall. Therefore, our long-term outlook for grains prices has been revised only slightly from the 1986 forecast. Maize and sorghum prices have been lowered relative tz wheat and rice prices because of the slower-than-expected recovery of wc- d import demand and the apparent shift of import denmnd to wheat in preterence to coarse grains. The continuing abundance of maize production capacity and the large stocks in the United States also reduces the long-term price outlook. 4. The forecasts of wheat and rice prices for the period 1989-2000 are slightly higher than in our 1986 forecast for several reasons. First, import demand for wheat has recovered in the last two years, and countries such as China appear to be resuming their earlier import growth paths. Secondly, rice production growth in Asia has slowed in recent years reflecting the maturing of the "Green Revolution" and the lack of investment in new irrigation systems. This will cause rice, but more especially wheat, imports to increase over the next decade as population and income growth exert pressure on domestic production. Because of the small quantities of rice available from the world market and because of the relatively lower price of wheat to rice, most countries will increase wheat imports faster than rice imports. A third factor leading to higher wheat and rice prices is related to US policy. The Conservation Reserve Program of the 1985 Farm Bill has already removed 10 million hectares from crop production and is scheduled to remove an additional 10 million hectares by 1990. Under the program rules, this cropland cannot be returned to production for ten years. Although the program was not targeted at wheat land, the majority of the land entered inao the program has been wheat land, and this will lead to higher relative wheat prices until the program ends in 1996-2000. -116- Recent Developments in the Grains Economy 5. The world grains economy went through a boom-to-bust cycle from the early 1970s to the mid-1980s. After more than doubling in the early 1970s, in 1986-87 world grains prices reached their lowest levels in real terms in at least 50 years. At that time the real prices of wheat, maize, and rice had declined 70%, 81%, and 71%, respectively, relative to the highs reached in 1974. World grains stocks climbed to an unprecedented 27.9% of annual use in the 1986-87 crop year. The previous highest stocks-to-use ratio in the last several decades was 23.9X in 1968-69. 6. Some of the most important factors underlying these changes were closely tied to the rise and fall of energy prices from the early 1970s to the mid-1980s. 1/ When energy prices rose, incomes in the oil-exporting developing countries rose substantially, leading to higher grain import demand by these countries. Higher energy prices also caused fertilizer prices to rise, thus reducing application rates and yields. During the 1980s the reverse occurred. Energy prices declined, leading to sharply lower grain import demand--for some countries due to higher yields resulting from lower fertilizer prices and for others due to the lower oil-based incomes. Nitrogen fertilizer prices fell 54% in real terms from 1981 to 1986. Other factors contributed to the price swings of the 1970s and early 1980s, including policy changes in a number of important grains-producing and consuming countries, a severe world recession in the early 1980s, and the fluctuations in exchange rates. 7. World grains import demand approximately doubled between 1970 and l9&0--from 110 million tons in 1970 to 215 million tons in 1980. Since then, imports have fluctuated between 180 million tons and 220 million tons. World consumption, however, has continued to rise every year (it has increased 12.5% since 1980). Thus, the slowdown in imports has not led to a slowdown in consumption, and the data suggest that domestic production has displaced imports. Figure 1, which shows world grain production, consumption, and stocks in the left panels and area harvested and yields in the right panels for the period 1961-87, supports this conclusion. Consumption growth has not slowed; moreover, production surged in 1984-86 leading to a buildup in stocks. The right panels show that the production growth has come from yields rather than area. Since 1981 area harvested has declined, due largely to the supply control programs in the United States--beginning in 1983 with the payment-in-kind (PIK) program. 8. Unusually favorable weather conditions may have contributed to the three years of high yields during 1984-86, but the low fertilizer prices were probably more important. India, for example, increased total fertilizer consumption by 93% from 1980 to 1986. Indonesia increased total fertilizer use by 105% during the same period. (See the section on fertilizers for full detail3.) 1/ Donald 0. Mitchell, "Factors Affecting Grains Prices, 1970-84," Division Working 1Aper No. 1987-10, International Commodity Markets Division, International Economics Department, World Bank, November 1987. - 117 - FIGURE 1: WGRLD GRAIN DAT4, 1961-67 WORLD GRAIN PRCOUC'!CN iVr\P'-D 3 ! A ;AVETZ- _M 39a1a e cr.s 3~ ~ ~ ~~~~~~~~~~~~~~-3 -.0-- 04 I % 2 4 / i -~~~~~~~~~~~~~~~~~~~~~~~2^ 9 03 0 3 02 j 0 *' o I4. .,., . ,, .~ .0 ,0 !7 xo8 '9 '4W , ,. -I- WORLD ORA!N 9A NSUMPThGN WORLD GRAIN YIELD '30 ', 0 o, 3 , _ 08~~~~~~~ ! '--I xco ~ WRL IRI SO 3301.... . 250j17 "s - 118 - 9. In response to the slow growth of its exports d;.- - :e 1980s and the resulting stock buildup, the United States radicall its farm policy in 1985. The new legislation, The Food Security a:., made a number of changes which will affect the grains markets - ears to come. First, it altered the long-standing link between US supp;- - - s and world market prices. For rice this was done with a marketing lca: .-ram and for wheat and coarse grains it was done with direct export subsidies. 2/ World grains prices subsequently fell by 25-401 during the 1986-87 crop years. Secondly, it began a massive land diversion program intended to sharply curtail production. The two components of the program include a one-year acreage-reduction program which is adjusted based on stock levels and expected demand and a long-term Conservation Reserve Program designed to remove highly erodible land from crop production for a ten-year period. At the same time it maintained producer incomes through high target prices. The Bill effectively breaks the link between market prices and producer incomes and encourages the export of surplus production at prices which have been as low as one-half the cost of production. 10. Developing country exporters such as Thailand and Argentina have been severely hurt by the US action. On the other hand, the policy has been a boon to the countries which have besn grains importers in recent years. 11. We pointed out two years ago that supply control policies are difficult to manage and a substantial risk existed that the United States would "overshoot" in its objective of reducing its stocks. We said there was a strong possibility there could be a period of high prices such as occurred in the 1970s following a similar massive supply controi program began in 1968- 69. Our concern came c'lose to realization as a combination of drought and acreage-reduction programs, on top of a substantial decline in stocks, sent prices of grains and oilseeds up sharply in the second half of 1988. 12. A consequence of the 1985 Act, which was also pointed out two years ago, could be to "increase substantially the volatility of crop prices following a production shortfall. Lower stock levels increase the probability of a shortfall, and the Cornservation Reserve Program limits the ability of production to respond. This suggests that prices will increase further under the new Act than under the previous legislaticn, and because production cannot increase as rapidly the period of high prices will last longer". 3/ 13. US farm policy is now faced with the problem of how much it should reduce the acreage reduction program in 1989. The Administration reduced the rice set aside from 35% to 25Z in 1988 in response to current high rice prices and it has already announced a lower wheat set-aside for 1989, down from 27.5% to 10%. However, the drought in the United States has caused prices to rise 2/ These changes are described more fully in the subsequent section on the US 1985 Farm Bill. 3/ Price Prospects for Major Primary Commodities, Commodity Studies and Projections Division, World Bank, Report 814/86, October 1986, Vol.1I, p.189 - 119 - and vill lead to calls for a smaller set-aside in all crops. If the United States reduces the set-aside too much, prices vill plunge in 1989-90; much the #arn happened in 1984 following the large supply control program in 1983 (Pit). If the United States does not reduce the set-aside enough or if drought conditions persist in 1989, then prices will continue to rise. Price Forecasts 14. Price forecasts for wheat, maize, and rice are shown in Table 1. In the short term the drought in the United States accelerated the Drice increase- which began in 1987. Maize production was most affected because the drought was centered in the region which accounts for the major share of the saise crop. The US maize crop is estimated by the USDA to be 372 below the 1986 level. The whevt harvest was less affected, with a projected harvest ,which is 14t below 1987. The US rice crop is mostly irrigated, and drought conditions are not expected to lower US yields in 1988. TABLE 1: ILA:1GS PRICE FOQECASTS Wheat Rice Maize Sorghum Wid US GDP -------(Nominal $/Ton)--------- Deflator Deflator 1985=100 1985=i00 Actual 1987 133.5 230.3 75.7 72.8 129.97 104.98 Forecast 1988 176.1 303.0 107.8 100.2 140.72 109.16 1989 186.7 296.6 109.5 102.2 149.52 114.14 1990 156.5 250.0 98.4 90.5 151.74 119.94 1995 192.3 312.8 123.1 112.0 180.95 '55.80 2000 255.5 377.0 166.0 154.9 226.61 195.28 Prices are for the calendar year in nominal dollars per ton and refer to the following: Wheat (Canadian), No. 1, Western Red Spring (CWRS), in Store, Thunder Bay; Rice (Thal), White, Milled, 5Z Broken, Governwent Standard, Export Price, f.o.b. Bangkok; Maize (US), No. 2, Yellow, f.o.b. Gulf Ports; Sotg''um, Grain, (US), No. 2, Milo Yellow, f.o.b. Gulf Ports. 15. Wheat prices are projected to rise from US$133.50/ton in 1987 to US$176.10/ton in 1988 and US$186/ton in 1989 and then decline to US$156.50/ton in 1990 as supply increases. Prices should decline through the early 1990s as income growth slows after the rapid increase of the 1983-89 period. A cyclical low will likely occur about 1992 followed by price increases during the last half of the decade until about 1998 when the US Conservation Reserve - 120- PLrogras begins to release cropland for production. In constant 1985 dollars cc.puted relative to the US GNP deflator shown in Table 1, wheat prices are empected to reach US$161.30/ton in 1988 tad fall to US$131/ton by 2000. 16. Rice pr.ies are expected to average near US$303/ton in 1988 and then decliae to US$250/ton by 1990 as production increases from the drought affected (in Asia) 1987/88 harvest. Higher wheat prices in 1988 will slow the pr-ice decline as the margin between wbeat and rice prices narrows. By 2000, rice prices should be approximately US$193/ton in 1985 constant dollars. 17. After recovering from the very low levels of 1987, maize and sorghum pr-ices should remain near US$100/ton in nominal terms through the early 1990s. Maize and sorghum prices are projected to remain at low leveLs through tbhe middle of the 1990s as US capacity remains large and with import dea-nd not increasing fast enough to absorb the extra prodcctLon. Stock levels should remain high except for the impact of weather-related shocks such as occurred in 1988. Towards the end of the decade, prices should rise as the growth in import demand catches up with production capacity. In real terms, aLaize prices should fall from US$98.90/ton in 1988 to US$81.70/ton in 1990 and to US$79/ton in 1995. By 2000, real maize prices should rise to US$85/ton in 1985 constant dollars. Comparison of the 1988 Forecasts with the 1986 Forecasts 18. Comparisons of the 1986 forecasts with actual 1986-88 prices and comparisons of the 1986 and 1988 forecasts for the years 1988-90 are shown in Table 2. The general direction and turning points were correctly forecast for wtdeat and rice prices in the 1986 forecast. However, in 1986 and 1987, maize aand sorghum prices declined further than forecast before rising in 1988. l9. The 1986 forecast of wheat prices was very close to the actual 1986 and 1987 prices, and the turnaround of prices in 1987 was correctly forecast; however, actual 1988 prices should exceed the 1986 forecast (as reflected in the 1988 forecast). The 1989 forecast has also been increased as the impact of the 1988 US drought should flow over into 1989. The 1990 forecast is lowered due to an expected increase in supply in response to the high 1988-89 p-rices. 20. The 1986 rice price iorecast was very close for 1986 and 1987, and the turnaround of prices was correctly predicted. However, the forecast of 1988 prices was well below the actual prices due to the 1987 drought which affected India, Thailand, and many other Asian countriesi This drought caused prices to increase to more than US$300/ton and leads to a revised 1989 and 1990 forecast. Rice prices are now expected to decline in 1989 and 1990 as producers respond to the high prices. 21. The 1986 maize and sorghum price forecasts were significantly above the actual 1986-87 prices, and the 1988 forecasts for the period 1988-90 have been reduced. The turnaround in prices also occurred a year later than forecast in 1986. The lower-than-expected prices can be primarily attributed to US policy which sought to reduce stock levels quickly. - 121 - TABLE 2: CaKPARISONS Oi 1986 AiD 1988 FOMEfASTS AND ACTI-A_ 1986-87 PkUCES. 1985 1986 1987 1988 1989 1990 ------~------------- (UJS$/Ton) --------------------- Wheat Actual Price 173.3 161.0 133.5 167.8* 1986 Forecast 159.8 138.3 152.8 168.7 177.6 1988 Forecast 176.1 186.7 156.5 Rice Actual Price 215.9 210.5 230.3 301.6* 1986 Forecast 209.5 220.1 243.0 267.4 281.8 1988 Forecast 303.0 296.6 250.0 Maize Actual Price 112.2 87.6 75.7 101.1 1986 Forecast 98.7 116.8 123.1 123.1 120.7 1988 Forecast 107.8 109.5 98.4 Sorghum Actual Price 103.0 82.4 72.8 94.2 1986 Forecast 93.7 110.8 116.7 116.7 114.5 1988 Forecast 100.2 102.2 90.5 * January-August Average. 22. The 1988 forecasts for the long term are very nearly the same as the 1986 forecasts. The long-term forecasts for wheat and rice prices are slightly higher due to the increasing evidence of the slowdown of the growth of yields in many developing countries. This slowdown is further evidence of the maturing of the "Green Revolution" and the lack of new breakthroughs in high-yielding varieties. The long-term forecasts for wheat are also slightly higher than our previous forecasts because of the influence of provisions of the 1985 US Farm Bill. The Conservation Reserve provision of this legislation has disproportionately impacted on wheat land relative to other crops, reducing future US wheat supplies until the late 1990s. Maize and sorghum prices are forecast to remain depressed relative to wheat for most of the forecast period. By the end of the 1990s, maize and sorghum prices should begin to rise relative to wheat and rice as feed demand grows more rapidly than food demand. Relative to the 1986 forecasts in constant 1985 US dollar terms, wheat is 8.2% higher, rice is 2.8% higher, maize is 0.4X lower, and sorghum is 2% lower. Spectral Forecast 23. Commodity prices tend to follow cycles extending over several years. The best known example of this phenomenon is the hog cycle in the - 122 - United States. In this case, prices tend to go up for two years and then down for two years with the cause of the cycle generally believed to be the lag between price changes and the producers' ability to adjust supplies. Cycles are also present in other commodity markets but are generally not as readily apparent. An application of Spectral analysis has recently been completed on the cycles within and between various commodity price series. 4/ 24. The Spectral analysis was appLied to annual deflated US producer prices of wheat, rice, and maize during the period 1870-1987. The results show an important cycle of approximately eight years with prices rising for four years and declining for four years. The causes of the cycle may be linked to the US business cycle, the presidential election cycle, or to demand-supply dynamics. Whatever the cause, these cycles exist in the historical ddta and will likely occur in the future. In our 1986 forecasts we used this information along with the econometric model forecasts to identify a strong cyclical uptrend in grains prices beginning in 1988. These forecast events subsequently occurred. 25. The historical prices and the Spectral forecasts are shown for wheat, rice, and maize in Figure 2. 5/ The forecast for 1988-2000 projects a recovery of prices from the 1986-87 lows which extends through 1991 followed by a decline in the 1994-96 period and a further price increase in the latter part of the decade. 26. In reviewing the relationship between the historical price movements and the Spectral forecast it is evident that the forecast does not capture the extreme levels of prices reached at certain times--such as 1973-74. It appears that 1986-87 is also an extreme period, especially for rice and maize prices. The extremes in price levels have historically been associated with major economic shocks. The large ircreases in petroleum prices in 1973-74 associated with the formation of OPEC and, consequentLy, in nitrogen fertilizer prices, gave a large shock to grains prices; and in 1986-87 the grains markets were shocked by the dramatic shift in US agricultural policy as incorporated in the provisions of the 1985 Food Security Act which lowered support levels for wheat and maize by approximately 25%. 27. Our econometric forecasts of grains prices are broadly onsistent with the Spectral forecasts. Both correctly forecast the recovery of grains prices in 1988, and both suggest a cyclical downturn in prices in the 1990-92 period. The econometric model, however, does not project prices rising above 4/ Buchinsky, Moshe, "Leads and Lags in Commodity Prices: An Application of Cross-Spectral Analysis,'t Division Working Paper No. 1987-7. International Commodity Markets Division, International Economics Department, The World Bank, August 1987. 5/ The simulated price series uses the five most important frequencies identified. Inclusion of a larger number of frequencies would enhance the tracking ability of the simulated series, but this would mean the inclusion of short-term frequencies, which would have dubious merit for making such long-term forecasts. sf * X I I 2 1 X X 1 A k~I il t 4 § $ §1 | ;t~~~~~~~~~~~~~~~~ i1 C- g i A_ 91 X ON~ | < .. _ | -Z_ | N - 124 - the 1980-81 peaks. Since the Spectral model is regarded as better suited to identifying cycles rather than price levels, the econometric model has been relied upon more to forecast the price level, while the Spectral model results were used to refine the cycles in the forecasts. Production, Consumption, Trade, and Stocks 28. Forecasts for production, consumption, and ending stock levels are shown in Figures 3-5 for wheat, rice, and coarse grains and for the major regions. Additional country detail is presented in the Annex tables. The graphs show a number of trends which have eme-ged over the period since 1970 and which are expected to continue. These trends would have important implications for trade levels, food security, export earnings, and expenditures. 29. One of the most important trends which emerges fruz! the historical edita .nd the forecasts is the widening gap between grains production and consump:ion in both the developing countries and the CPEs. This gap is supplic. primarily by exports from the industrial countri2s. 30. In the developing countries the wheat deficit is already large and projected to grow larger in the future. The level of wheat net imports in the developing countries has grown from 27.2 million tons in 1970 to 53.2 million tons in 1980. By 1990 it is projie ted -o rise to 76 million tons and to 130.9 million tons by 2000. The developing countries were net exporters of 11.5 million tons of coarse grains in 1970, but only 1.4 million tons by 1980. They are proj_cted to be net importers of 59 million tons of coarse grains by 2000. The rice deficit of the developing countries is relatively smalL because production is concentrated in the developing countries. 31. The CPEs have also faced a widening import gap since the 1970s. In 1970 the CPEs imported 7.4 million tons of wheat and 2.9 million tons of coarse grains. By 1980 imports of wheat reached 19.9 million tons and coarse grains reached 29.2 million tons. By the year 2000, wheat and coarse grain imports are irojected to rise to 24.5 milLion tons and 45.1 million tons, respectively. 32. Coarse grains imports by the CPEs have slowed in recent years. For example, during 1978-80 imports averaged 29.9 million tons while they declined to 19.2 million tons on sverage during the period 1984-86. The decline reflected higher prod,.ctior- bzt probably also a policy change towards lower grains imports. The consequence has been to reduce per capita pork and poultry meat consumption in Eastern Europe nLd allow only small growth in the USSR. Pork and poultry conrmption felL by 8.6% on a per capita basis in Eastern Europe from 1979 to 1986 while consumption increased 10.1% in the USSR but still remained less thar 60% of the levels in Eastern Europe. Over the longer term, pressure from consumers for improved diets will likely lead to greater coarse grains imports unless coarse grains production can grow faster than in the past. 33. The reasons for the divergence between consumption and production are different for the developing countries and the CPEs. The developing countries - 125 - FIGURE 3: WHEAT PRODUCTION, CONSUMPTION AND TRADE TRENDS WHfEAT- INDUSTRIAL COUNTRIES go ii 0 4 0 a I~ glrl' lwS S t9*5 t9J0 195 two WHEAT -CPE COUTRIES (EUROPE) Ito w , 30 1 ?ttltS i5 1;3 am 1 WHA DVLPIGCUNRE - 126 - FIGURE 4: RICE PRODUCTION, CONSUMPTION AND TRADE TRENDS RICE- INDUSTRIAL COUNTRIES 430 14 I. 12 12 4 3 t 190 97 1 1 f5 1I90 19" 0 RICE PEV COUNTRIES ( Z 3 00 O -*vr. . L 5,|| 0 190 JIS'S 110 1905 1990 t£l5 21 O RCE - DEVELOPING COUNTR IE 419 - 127 - FIGURE 5: COARSE GRAINS FRODUCTION, CONSUMPTION AND TRADE TRENDS COARSE G!L4]NS - INDUSTRIAL COUNTRIES COARSE GRAINS - CPE COUNTRIES (EUROPE) o -, oo - so - 140 o 140 COARSE GRAINS -DEVELOPING COUNVTRfES 440 3. sm 12 n , o PoVXTU * Vo fro - 128 - have increased imports in spite of very rapid increases in domestic grains production. For example, from 1970 to 1984 grains production grew at 3.1% p.a. while consumption grew at 3.5% p.a. Income growth permitted both greater quantities of grains to be consumed and also a different mix of grains. In many developing countries imports are the only source of wheat because it cannot be grown in many of the tropical areas. The demand for wheat imports has grown more rapidly than the demand for rice or coarse grains. This trend is expected to continue until 2000, but can be expected to change when consumers in developing countries are able to afford more livestock and poultry products. k / 34. Unlike the developing countries, increasing grains imports by the CPEs reflect stagnant production more than rapid demand growth. From 1970 to 1984, total gra-n production grew at 0.75% p.a. while consumption grew at 1.7% p.a. Over the longer term, the demand for coarse grains is projected to grow faster than wheat to satisfy the derand for livestock and poultry products. 35. A second trend projected is the slowing of the growth rates of production in the developing countries. Total grains production is projected to grow at 2.2% p.a. from 1990-2000 compared to 2.9% p.a. from 1970-86. This slowdown reflects a number of factors which primarily relate to the growth of yields and the maturing of the "Green Revolution." Since the first high- yielding varieties were released in 1965, rice and wheat production has grown much faster than. population. This was possible because the improved crop varieties were able to yield twice as much as traditional varieties when heavily fertilized and properly irrigated. The technology has now been extended to nearly all the best land, and further expansion will be difficult. Investments in new irrigation sys,ems have also slowed. 36. With the potential for rice output growth from the planting of existing hybrid varieties appearing to be on the wane and with yield responses from new varieties still to he proven, it is timely to examine the potential contribution to output growth from all sources. Perhaps the single most important factor in rice production is the quantity and quality of irrigated areas. Given the slowdown in growth from the development of new varieties, irrigation may assume even greater importance. Certainly, other factors such as improved varieties and fertilizers have been key components of the "Green Revolution," but the area served by irrigation is often the limiting constraint to expanding rice production. Irrigation infrastructure requires very large investments and has a long gestation phase, unlike some other factors of production. Fertilizer applications, for example, can be quickly adjusted, and the production effect will occur in the same growing season. 37. The slowdown in the growth of world irrigated area over the last 15 years can be seen in Table 3. In Asia, which contains nearly two-thirds of the irrigated area in the world, the growth rate in irrigated area has slowed from 10.8% p.a. over the period 1970 to 1975 to 8.8% p.a. during the period 1915-80 and to 4.6% p.a. from 1980 to 1985. Growth has not slowed in all regions, however (Africa, for example, maintained a high rate of growth during the period 1980-85), but the worldwide trend is clear. Such a slowdown may reflect recent price trends or other factors such as the decline in areas suitable for irrigation. Research is needed on this issue. - 129 - TAALB 3: IRRIGATED AREA, BY HAJOR REGION 1970 1975 1980 1985 1970-75 1975-80 1980-85 ---'000 hectares ---- … change---…-- Africa 7,620 8,159 9,340 10,626 7.2 14.3 13.8 North America 20,955 22,853 27,671 25,361 9.1 21.1 -8.3 South America 5,681 6,587 7,386 8,131 15.9 12.1 10.1 Asia 109,727 121,578 132,217 138,279 10.8 8.8 4.6 Europe 10,728 12,755 14,658 16,093 18.9 14.9 9.8 Oceania 1,588 1,620 1,684 1,871 2.5 4.0 11.1 USSR 11,100 14,486 17,487 19,951 30.5 20.7 14.1 World Total 167,399 188,048 210,443 220,312 12.3 11.9 4.7 Source: FAO, Production Yearbook. 38. Much of the slowdown in the growth of grsins production will be in Asian rice production. This leads to an in?ere3ting question: will rice imports and prices increase sharply as countries t.rn to the -world market to supplement domestic rice production? In our view this will not be the outcome. Instead, countries will turn to wheat imports to satisfy domestic demand because wheat prices are typically 50-60% of rice prices and because consumers in many developing countries now prefer wheat to rice to add variety to the diet. Wheat is also readily available from a number of major exporting countries. Rice impo.ts are further complicated by the large number of types and qualities of rice and the difficulty of matching consumer preferences and market supplies. Update on the US 1985 Food Security Act 39. The five-year farm bill legislated by the United States in December 1985 has had major market imUaccs. Levels of price support for grains were reduced sharply, exports were increased, and large areas of cropland were idled. World prices were depressed by these actions and have only recently begun to recover. - 130 - 40. The 1985 legislation contained numerous provisions which allows the Secretary of Agriculture considerable discretion. one major area of discretion is the authority to lower loan rates. 6/ By 1988, wheat loan rates had been lowered from their 1985 level of $3.30/bushel, prior to the new legislation, to $2.21/bushel. Corn loan rates were lowered from $2.55/bushel in 1985 to $1.77/bushel in 1988. Rice loan rates were lowered from $8/cwt for rough rice in 1985 to $6.63/cwt in 1988. Since the US loan rates have acted as a floor to both US and world prices in recent years, these reductions also lowered world prices. 41. Other provisions further weakened the link between US and world prices. Rice producers are allowed to repay their loans at below loan rate levels at the higher of the world market price (as determined by the Secretary) or 60% of the loan rate in 1988 and 70% in 1989 and 1990. This provision is called the marketing loan program and it is intended to sell US rice at low levels in the world market. The marketing loan program effectively prevents the US loan rate from acting as a price floor to rice prices. The wheat and coarse grains program does not have a marketing loan provision, but tte commodity certificates have served a similar role. 42. The commodity certificates can be used to acquire stocks of government-held commodities. They are called "generic c!rtificates" because they can be exchanged for any commodity held under government storage. Once the certificates are redeemed, the commodity can be sold at the market price. The consequence of this program was to force commodities out of government storage programs and into the market. Not all commodities have beer. equally affected because the incentive to redeem the certificate has been greatest for the commodit; trading at the greatest discount to the loan rate. Since maize prices have been more depressed than wheat prices, the redemptions have favored corn--with 65% of all redemptions for maize stocks, 25% for wheat, and the remainder primarily exchanged for rice, grain, sorghum, and barley. Hence, corn prices have been under strong pressure, primarily accounting for the severely depressed corn prices since 1985. 43. The 1985 Farm Bill also provided mechanisms to stimulate exports of grains held in government programs. These programs included targeted export assistance, subsidized credit, assistance f3r export market expansion, a pilot barter program, and foreign food-aid assistance (P.L.480). The targeted export assistance has been under the Export Enhancement Program (EEP) although the program has been used so widely that it could be described as a general export assistance program. Under the EEP, grains merchants are issued certificates which can be exchanged for comnodities held by the government. The certificates are generic because they can be exchanged for many different commodities held by the government. The merchant can then exchange the certificate for additional supplies of the same or another commodity and export them. The additional supplies permit merchants to discount prices and expand exports. 6/ The loan rates are the prices at which producers can borrow against their crop to enable them to hold their crops for later sale. - 131 - 44. Target prices 7/ were also lowered, but by much smaller amounts than the loan rates. The target price for wheat fell from $4.38/bushel in 1985 to $4.23/bushel in 1988, white the corn target price fell from $3.25/bushel to $2.93/bushel over the same period. The rice target price fell from $11.9Olcwt in 1985 to $11.15/cwt in 1988. The spread between the target prices and loan rates protected the incomes of US producers while forcing market prices down. 45. Loan rates for the 1989 and 1990 crops are to be determined by the US Secretary of Agriculture, within certain restrictions. For wheat, as well as corn and other feed grains, the formula loan rate will be between 75% and 85% of the average of the middle three prices of the previous five years, i.e., excluding the highest and lowest price. (Note that this procedure implies two years of high prices before loan rates rise.) Ihe formula loan rate may not be reduced by more than 5% p.a. from the previous year. However, the Secretary of Agriculture can on an ad hoc basis reduce the loan rate by up to 20% in any year--as, in fact, was done for the period 1986-88. For rice, the loan rate is calculated as the higher of (i) 85% of the three-year moving average of the middle three of the previous five years' prices, excluding the highest and lowest prices, or (ii) $6.50/cwt ($143.30/ton). The rice loan rate cannot be reduced by more than 5% from the rate of the previous year. 46. Cropland idled under the government programs in 1987 totaled 31 million hectares or 18% of the total US cropland base. This area exceeded the 29.5 million heccares idled during .hc early 1960s and is second only to the 35.3 million hectares idled in 1983 under the PIK program. Two sets of programs accounted for the large area idled. One-year programs, including the acreage-reduction program and the Paid Land Diversion Program, diverted 20.6 million hectares from crop production, and the multiyear Conservation Reserve Program idled 10.4 million hectares. The one-year programs can be adjusted annually based on estimated production requirements and stock levels, while the multiyear Conservation Reserve Program removes land from crop production for ten years. 47. The combination of increased exports and lower production lowered US grain stocks as shown in Table 4. However, coarse grains stocks were still very high at the beginning of the 1988/89 crop year by historical standards. The 1985 Farm Bill had reduced wheat and rice stock levels to near target levels by the beginning of the 1988/89 crop year. The drought sharply lowered estimated 1989/90 beginning stock levels. 48. As noted above the program removes a large amount of cropland for a ten-year period under the Conservation Reserve Program. This program is biased against wheat production with nearly 60% of the area currently enrolled in the program in the primary wheat areas. Given the likefihnnd of wheat demand increasit.g steadily, the long-term implication is pressure for wheat prices to increase during the period the Conservation Reserve Program is in operation. 7/ The target price is the price which the US government guarantees to producers for the eligible portion of their crop. - 132 - TAhBL 4: US BECINNIG-YEAR GRAIN STOCKS, 1980-88 -------------------------------------------------------------__---------- Year Wheat Coarse Grains Rice Total 1980/81 24.5 64.1 0.8 89.4 1981/82 26.9 44.3 0.5 71.7 1982183 31.5 78.0 1.6 111.1 1983/84 41.2 108.7 2.3 152.2 1984/85 38.1 39.9 1.5 79.5 1985/86 38.8 58.0 2.1 98.9 1986/87 51.8 126.9 2.5 181.2 1987/88 49.6 152.6 1.6 203.8 1988/89 34.5 138.1 1.0 173.6 1989/90 (estimate) 16.3 59.6 0.9 76.8 --------------------------------------------------------------------__-------_ Source: USDA, "World Grain Situation and Outlook," August 1988. CATT 49. A final topic to discuss is the US Administration's proposal in mid- 1987 to delegates to the 93-nation negotiations of the GATT to the effect that all countries drop all forms of production-encouraging assistance to their farm sectors by 2000. A ten-year phase-out was proposed by the United States beginning about 1990 but with agreement on the plan to be reached i.y the end of 1988 when the current US Administration ends. 50. The current US farm programs would be dismantled under the proposal and replaced with programs of food aid and direct payments to farmers which would not be tied to crop production or marketing. These changes would de- link agricultural support p^ograms from the level of production--removing the incentive to increase production in order to receive government support payments. 51. Both industrial and developing countries belonging to the GATT are included in the proposal, although differential treatment would probably be afforded the developing countries. The current levels of assistance paid to the farm sectors in the industrial countries have been quantified in studies by the OECD in Paris and the USDA. Direct and indirect government support for agriculture has been measured by Producer Subsidy Equivalents (PSEs) and - 133 - Consumer Subsidy Equivalents (CSEs). These calCUlations are designed to suumarize in a single measure the effect of a vide range of agricultural policies on producers and consumers. PSEs attempt r0 teasure the payment that would be required to compensate farmers for the o1073 4f income resulting from the removal of all government support for a partiCtd1r commodity at existing production levels. CSEs attempt to measure the i-mpticit tax on consumers resulting from the product price support element of the PSE after allowing for any subsidies to consumption. PSEs for selected countries are shown for wheat, maize, and rice for 1982-86 in Table 5. tie estimates indicate, for example, that in the case of Japan 98X of the i'come received by wheat producers comes from governme;.t support programs- In the case of India, government policy taxes agriculture to the point where agriculture value addee is 35% less than it otherwise would be. 52. The full implications of the dramatic chaOgeS which would result from the US proposal are very difficult to assess, tl-'L the directions of the changes can be deduced. Both the location of prOdduction and the levels of trade would shift. Some commodities such as sugar llOld shift away from sugar beet production in the industrial countries to cheaPer sugarcane production in the tropical developing countries, leadIng to all increased flow of sugar imports to the industrial countries. Likewisep countries which heavily subsidize grain producers, such as Japan, would mov'e towards lower production and larger imports. Production would also increase irn countries such as India which currently taxes wheat production, accordirg cO USDA calculations. Many developing countries would benefit from suwh r-'Ot°-s because markets for exports of agricultural products would be opened in the United States, Japan, and Europe. Or, the other hand, the prices of certain commodities imported by developing countries, such as wheat, would likeLY rise as the subsidized production level would fall in the industrial count`ies. 53. Approval of the US proposal is very uncectain at this point. Given the political strength of agricultural interests in -he industrial countries, our judgment is that while some progress will be maOOK TAPES (ACTUAL) WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). ?*Az. AS, COPRA ( OIL BQ4JIV. ) RVODUCT!O* By mAIN COUNTRIgS MIfD EropOKIC MI(0O5 ACTUAL MRJECTED CRNIT UATE A/ couaisi its? ECOUOKIZS ±~969-71 1979-81 1986 198713 1988 1989 1990 1995 2000 1961-86 1970-66 2000 - ----('000 TON)----------- S----------)--- (% 1'L AK.JW INDUSTRIAL 28 32 27 27 2 7 27 30 30 30 0.3 0.4 O.S ornwpypo ~~2,295 2,799 3,293 3,173 2,942 3,039 3,169 3,294 3,455 1.5 1.2 0.7 ASIA 1,891 2,371 2,872 2,772 2,523 2,610 2,712 2,805 2,942 1.8 1.3 0.5 PHXLIPPIEES 847 1,205 1,483 1,565 1,270 1,387 1,445 1,456 1,300 2.0 1.2 -0.3 IND NESIA 509 666 788 714 762 720 750 780 840 3.2 2.7 1.3 INDIA 228 237 243 248 241 241 243 250 263 1.1 0.4 0.5 MAL,AYSIA 136 134 137 124 130 134 1 34 134 134 0.6 -0.1 0.6 SRI LANKA 129 87 146 86 85 93 100 150 170 -3.3 -2.1 5.4 AFRICA 95 112 133 120 124 122 13U 140 135 1.5 2.2 2.0 A)URICA 145 142 117 91 100 110 130 135 135 -0.8 -0.3 3.1 OCEANIA 163 173 172 190o 195 191 197 2123 01. 0.5 1.3 PAPUA NEWJ GUINKA 83 92 92 102 105 106 106 120 1.0 0.9 1.3 WORLD 2,323 2,A31 3,320 3,200 2,969 3,06C' 3,199 .3 1.5 1.2 0.7 …-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - A/ LEAST SQUARES TREND FORt HISTORtICAL. PERIODS (1961-86). END-POINT FOR PROJECTED) PLRIODS (1987-2UOO). Bl ESTIMATE. 0 5OURCESS LIA, PRODUCTION YEA8BOO TAPES (ACTVAL)e WORLD BANK, INTENtNATIOIIAL EcowNrSIC DEPA.RThE?lT (PROJECTED). TAWL A6 COPRA ( OIL EQUIV. ) - APPARENT CONSUMPTION BY MAIN COU(NTRIS AND ECONOMIC REGIONS ACTUAL PROJECTED CROWTH RATES Al CoUTRXlSt 19$7 - sOOSWEJs 1969-71 1979-81 1986 1987/1 1988 IS89 1990 1995 2000 1961-86 1970-" 2000 _------- --(0 0too TONS) --(X PER A)I)- ZTUOSTRIAL 979 1,112 1,258 1,208 1,158 1,212 1,234 1,332 1,472 0.4 0.4 1.5 VWTH A#MRZCA 411 468 551 534 300 530 340 590 646 1.3 8.9 0 .3 UNITED STATES 386 439 517 476 445 472 481 525 575 1.3 0.9 1.5 UtC-1o 403 505 577 542 543 562 572 610 680 0.2 0.8 1.8 NOW-MARKET 3S 84 69 63 67 70 72 87 105 4.3 4.0 4.0 DRYLUiNG 1,292 1,636 1,904 1,698 1,799 1,635 1,623 1,715 1,791 2.3 1.6 0.4 ASIA 1,058 1,367 1,575 1,386 1,485 1,332 1,318 1.385 1,448 2.8 2.0 0.3 IUDOUUSIA 416 646 848 687 762 607 570 580 600 4.5 3.2 -1.0 INDIA 238 256 256 246 256 262 2z4 299 310 0.4 0.6 1.7 PHILIP?TMES 176 205 156 175 170 175 178 196 210 0.0 1.7 1.4 KALAY8IA 92 61 76 108 115 124 134 140 150 -0.6 -3.0 2,6 AJZRICA 155 155 146 158 150 155 158 174 180 -1.3 -0.6 1.0 WORLD 2,307 2,833 3,231 3,005 3,024 2,917 2,930 3.13. 3,367 1.5 1.3 0.9 Al LEST SQUARES TRED FOR HISTORICAL PERIODS (1961-86)i 31-POIXT FOR PROJECTED PERIODS (1987-2000). t 3/ ESTIATE. SOURCES: ?AO, PRODUCTIOW & TRADE YEARBOOK TAPES (ACTUAL), WORLD LANK, IIFRTAATIONAL ECONOMICS DEPARTMENT (PROJECTED). TAILE A?7 COPRA ( OII. IQUIV. ) - GROSS EXPORTS bY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROTH R.ATES Al COUXTRINS/ 1987 - CtoNomIEs 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS)------------------------------------- ------(I PER AMMUW)- INDUSTRIAL 93 90 79 105 105 100 100 100 100 1.6 -3.3 -0.4 nEC-lo 75 62 53 58 50 54 54 54 54 0,6 -4.9 -0.5 DEVELOPING 1,165 1,426 1,820 1,563 1,553 1,686 1,732 1,723 1,748 0,6 1.0 0.0 ASIA 936 1,203 1,588 1,383 1,353 1,482 1;526 1,502 1,510 0.7 1.1 0.7 PHILIPPINES 671 1,000 1,329 1,130 1,100 1,212 1,267 1,260 1,290 1.4 O.J 1.0 SRI LANKA 73 18 88 22 35 50 40 35 30 -7.1 -3.5 2.4 MALAYSIA 54 86 81 56 44 35 35 30 20 1.4 4.4 -7.6 SINGAPORE 44 64 64 41 51 51 45 40 40 3.7 5.4 -0.2 OCEMNIA 157 177 179 180 200 204 206 221 230 0.9 1.5 1.9 PAPUA NEW GUINEA 81 92 loo 97 103 104 10o 113 118 1.5 1.6 1.5 WORLD 1,258 1,517 1,699 1,734 1,65t, 1,786 1,832 1,823 1,848 0.7 0.7 0,5 Al LEAST SQUARES TREND FOR HISTORICAL PERXODS (1961-86), END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOURCES: ?AO, TRADS YLJUOODK TAPES (ACTUAL)i :n WORLD USAK, INTERNATIONAL ZCONOMICS DEPARTMENT (PROJZCTED). I TAILE A8t COPRA ( OIL EQUZY. ) - GROSS INPORTS BY bAIN COUNTRIES AND ECONCSIC RECIONS ACTUAL PROJECTED GROWTH RATES A/ COUWNTRIES/ 1987 - ZCOGQIUS 1969-71 1979-81 1986 1987/B 1988 1989. 1990 1995 2000 1961-86 1910-86 2000 -____________ ----------------------------------------------------------------------------------------------------------- ----------------------------- ('000 TONS) --------------------------------------- ------ (X PER AltMIM) ---- INDUSTRIAL 1,043 *,171 1,310 1,305 1,133 1,162 1,182 1,210 1,396 0.5 0.0 0.5 NMRTH AMERICA 413 475 558 534 500 530 540 590 646 1.4 1.0 1.5 UUITED STATES 392 452 534 507 445 472 481 525 575 1.4 1.1 1.0 EEC-10 462 556 620 599 593 612 622 660 730 0.3 -0.1 1.5 NN-KAWT 36 85 69 91 67 70 72 87 105 4.2 4.0 1.1 DEVELOPING 162 263 431 338 478 554 f78 466 400 1.0 3.4 1.3 ASIA 103 199 291 264 390 467 507 382 314 1.9 5.5 1.3 APRICA 29 26 65 39 38 42 43 45 48 1.1 -0.7 1..6 AZERICA 18 19 34 35 50 45 28 39 38 -4.4 -3.3 0.6 WORLD 1,241 1,519 1,810 1,734 1,658 1,786 1,832 1,823 1,901 0.7 0.7 0.7 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). E/ ESTIMATE. 0' SOURCESs FAO, TRADE YEARBOOK TAPES (ACTUAL)i WORLD LAUX, INTR!NATIONAL ECONICS DEPARTMENT (PROJECTED). TA75L A9z ROUNDRUTS (OIL EQUIV.) - PUoUCTION BY MAI$ COUNTRIES ArD BCO4UhC REGIOPS ACTUAL PRO3ICTED GROWTH RATES A/ COWEMIES/ 1967 - EcoasK 1969-71 1979-81 1986 1987/3 1908 1989 1990 1995 2000 1961-b6 1970-86 2000 ----------------------------------- (000 TONS)-------------------------------------- ------(X Pnt ANN) ------… INDUSTRIAL 344 397 422 445 435 449 458 510 560 2.5 0.7 1.6 IORTH AMERICA 307 369 400 440 431 445 453 505 555 3.2 1.1 1.8 UNITED STATES 307 369 400 440 431 445 453 505 555 3.2 1.1 1.8 DEVELOPING 3,914 4,024 4,667 4,248 3,768 4,381 4,368 4,214 5,740 1.1 1.2 2.3 ASIA 2,212 2,639 3,363 3,009 2,550 3,249 3,318 3,919 4,600 2.4 3.1 3.3 INDIA 1,382 1,428 1,464 1,485 910 1,400 1,420 1,500 1,575 1.0 0.e 0.5 CUINA 518 833 1,418 1,295 1,380 1,575 1,623 2,122 2,690 5.2 7.1 5.8 INHOESIA 110 181 182 219 210 210 210 220 245 3.2 3.6 0.9 AFRICA 1,356 1,086 1,082 1,080 1,070 980 900 950 1,000 -1.3 -7.0 -0.6 NIGERIA 395 130 167 140 160 160 160 160 160 -6.6 -2.6 1.0 SENEGAL 189 164 200 196 200 200 200 200 200 -1.4 -1.1 0,2 SUDAN 88 181 108 112 100 100 100 105 110 2.6 -1.7 -0.1 AMERICA 329 278 201 159 148 152 150 145 140 -1.4 -3.1 -1.0 BRAZIL 208 103 S1 45 38 44 44 43 45 -4.3 -7.6 0.0 wRLD 4,259 4,422 5,091 4,693 4,203 4,830 4,826 4,724 6,300 1.2 1.2 2.3 1 -------------------------------------------------------------------------------- --------- ---------------------------------------- 04 -J Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)1 END-POINT FOR PROJECTED PERIODS (1987-2000). 31 ESTIMATE. SOURCBS, PAO, PRODUCTION YEARBOOK TAPES eACTUAL) WORLD SANK, INTERNATIONAL ECONOKICS DEPARTMENT (PROJECTED). TABLE AIO i GSOUNDMUU (OIL IQUIV.) - APPARZ COtISUMPTIOM BY MAIN COW#'IZS AND ZZOUIC UGIOIS ----------------------------------------_------------.---------__------------__----------------------_-----_.-,_-.____---___--___ ACTUAL PROJECTED GROWTH RATES Al c0IJ1Jr14Es/ 1967 - IoOnUI2 1969-71 1979-81 198M 196711 198R 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------------- --- ('000 ToNs) -( YU AnU4N --)… INDW TRT,l 932 1,016 809 1,011 842 833 822 917 960 0.6 -0.9 -0.2 NOSET AHItCA 276 344 335 3" 327 336 344 39* 441 2.8 1 6 1 4 UNITMD STATES 261 333 324 350 311 320 326 375 420 3.1 1.6 1.4 XIC-10 576 603 422 452 425 406 390 425 434 -0.3 -2.3 -0.3 FRAUFCX 236 393 245 255 240 230 220 240 245 1.3 0.2 -0.3 MOm-HARMhT 1 4 3 4 4 4 5 6 8 ... 3.0 5.9 DEVSLOPINO 3,362 3,422 4,290 4,414 3,357 3,993 3,999 3,800 5,312 1.4 1.7 1.4 ASIA 2,218 2,630 3,284 3,120 2,193 2,915 3,000 3,240 4,189 2.5 2.9 2.3 INDIA 1,362 1,422 1,464 1,391 910 1,400 1,420 1,500 1,575 1.2 0.6 1.0 CSItA 492 770 1,272 1,437 1,380 1,563 1,574 2,058 2,609 5.1 6,9 .7 INDOUESIA 109 160 182 219 210 210 210 220 245 3.3 3.6 0.9 AFRIGA 903 824 895 1,199 1,070 980 900 940 1,000 -0.4 -0.2 -1.4 AMSRCA 214 50 91 95 94 98 99 120 123 00 0.0 2.0 WORLD 4,295 4,441 5,102 5,102 4,203 4,830 4,826 4,724 6,300 1.2 1.2 1.6 1 Al LEST SQUARES TRND FOR HISTMICAL PUIOOS (1961-86): ED-POINT FOR PROJECTED PERIODS (1987-2000). t A/ X8?I)4TE. SOURCESt AO. PRODUCTION & TRADE YEARBOOK TAPES (ACTUAL)i WUOLD MAJE, INTERNATIOKAL ECONOCICS DEPALZtxMEN (PROJECTED). TAJLZ Alls GROUUNDWTS (OIL QUIV.) - GROSS ZXPORTS BY KAIN COW1lTis MND BcOHl 1c P.xtdoNs ACTUAL PRCJECT8D GROIWTH RATES Al CCXW'R,ZS, 19t7 - OOCInmuS 1969-71 1979-81 1986 1987/, 1988 1989 1990 1995 2000 1961-86 1970-86 2000 - (000 TONS) -(X PER A)U)- INDUSTRIAL 119 178 195 148 174 175 170 170 155 3.5 1.7 0.4 UORTU AMRXCA 46 36 140 90 120 125 125 130 *35 8.2 -4.4 3.2 UNITED STATIS 46 36 140 90 120 125 125 130 135 8.2 -4.4 3.2 NBC-10 72 140 54 57 54 50 45 40 20 3.2 4.1 -7.7 h9ANO 33 29 7 7 7 7 6 4 2 -1.3 -5.5 -9.2 DZIllPING 682 720 510 527 419 421 426 519 594 -0.7 -2.2 0.9 ASIA 47 87 236 210 140 150 150 220 270 1.0 8.0 1.7 AIRICA 482 290 120 148 149 136 137 150 164 -3.2 -5.9 0.8 USEUL 223 155 el 97 110 100 100 110 120 -2.2 -4.1t 1.7 SOUTH ARICA 27 47 19 14 10 a 8 10 12 2.5 1.7 -1.2 SUDAX 4 48 6 11 9 8 9 10 12 9.1 7.4 0.7 AHZRTCA 146 340 96 144 130 135 139 149 160 5.5 -0.8 0.8 ARGENTINA 84 168 77 105 110 112 114 120 130 16.0 22.2 1.7 WORLD So,8 898 670 673 593 596 596 689 749 0.0 -1.5 0.B I Al LEAST SQT ARS TREND FOR HISTORICAL PERIODS (1961-86) a END-POINT FOR PROJEC1'8D PERIODS (1987-2000). B/ ISTD4ATR. SOURCESt FD, TRADE YAOOK TAPES (ACTUAL), WORLD lAK, IlTlRATIORAL ECOWVICS DEPARThUT (PROJECTED). TABLE A12: GROUHDNUTS (OIL WQUIV.) - GROSS IWMPOTS SY MAIN COUNTRIES AND ECONOMIC REGION$ ACTUAL PROJECTPO GROWTH RATES Al OOUNTRXES/ 1987 - ECONOOMIES 1969-71 1979-aL 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------( 000 TONS)----------------------- ------ ---- ------(X PER AUfU)------- INDUsTRIAL 707 797 472 501 470 454 439 510 544 0.1 .1.4 0.6 EC-10 646 741 385 407 436 419 403 470 499 0.3 -1.3 1.6 OTHEIR WESTERN EUROPE 32 43 30 33 34 35 36 40 45 0.4 -0.7 2.4 ON-tARUtT 0 2 3 4 4 4 5 6 a -0.4 -0.8 5.9 DENVLOPING 130 lS 188 128 119 138 152 173 197 0.6 -1.5 3.4 ASIA 53 77 94 102 93 110 113 124 130 2.2 4.3 1.9 APRICA 28 28 31 20 20 22 31 40 55 0.8 -1.0 8.1 AMERICA 31 9 11 6 6 6 8 9 12 -5.6 *20.1 5.5 WORLD 838 917 663 698 593 596 596 669 749 0.2 -1.5 0.5 A/ LEAST SQUARES TREND FOR 8ISTORICAL PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). RI tSTIMT TEA. SOURCESt FAO, TRADE YEUARBOOK TAPES (ACTUAL); WORLD BANK, INTERNATIONAL EZ00NOMICS DEPARTMENT (;%JECTED). TASLX A1lS SOTZULS (OIL 3QUkV.) - PIOOUC1ION NV AIN COUVtUr AND ZCOOS4IC 33I0101 ACTUAL MROJECTED ooqjnRIzsI 19" - *co"awxzs 1969-71 1979-81 1986 1967/3 1988 1989 1990 1995 2000 1961-06 1970-46 2000 - ('000 IOMS)- ( PER ANM)-- IKDIWSTRIAL 5,366 9,490 9,943 9,227 9,213 9,317 9,979 11,004 11,047 5.0 3.9 1.4 PORTH AMERICA 5,343 9,437 9,887 9,071 8,936 9,050 9,786 10,727 10,751 S 0 3.10 a a UNITEO STATES 5,300 9,326 9,709 8,908 8,721 8,840 9,604 10,522 10,530 4.9 3,; ,.1 NON-HARKET 107 174 189 236 237 265 271 316 341 4.5 3 ? .0 DOVELOPING 1,966 4,953 6,307 7,115 7,647 7,819 7,621 8,877 10,804 7.6 8.3 3.3 ASIA 1,606 1,724 2,529 2,319 2,346 2,355 2,360 ?,633 2,937 2.1 2.9 1.8 CHINA 1,425 1,405 1,788 1,974 2,023 1,9e9 1,948 2,173 2,624 1.4 2.1 2.2 AMERICA 341 3,161 3,772 4,033 4,522 4,720 4,956 5,872 6,052 21.9 15.5 4.) BRAZIL 263 2,290 2,397 2,911 3,026 3,188 3,314 3,951 4,762 21 2 13.3 3.9 WORLD 7,439 14,63.7 16,439 16,578 17,097 17,401 17,873 20,197 22,198 5.8 5.3 2.3 Al LEAST SQUARES TREND FOR HISTORICAI, PERIODS (1961-86), END-POINT FOR "ROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOURCESi U8 DEPARTMEHT OF WRICULTVJRE, FOREIGN AORICULTLRAL SERVICE (ACTUAL), WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A14 SOYBEANS (OIL ZQUIV.) - CONSUXPTION BY MAIN COUNTRIES AND ECON(OHIC RZrGIONS ACTUAL PROJECTED OEROIfl RATIS Al _ _ _.__._. _ _., _ __ _ ._ _ ....................----------------_-__------_-_--_,--_--_-__-_--_-__-_.-_--_ __-_--_--_-__-_--_-..-__-_--_-_,-_--_- COUNTRIES/ I ai - ECONOMIES 1969-71 1979-81 1986 1987lS 1988 1989 1990 1995 2000 1961-56 1970-66t 2000 --------N----------- ( Tos) ------------------- ------ (x PER ^tN1J) - *----- INDUSTRIAL 6,453 7,159 6,867 7,283 7,223 6,661 7,179 8,723 10,649 14.1 3.2 1.0 NORTH AMERICA 2,982 4,848 4,792 3,121 5,240 4,917 5,250 6,256 7,708 3.9 3.s 3.2 UNITED STATES 2,879 4,681 4,621 4.950 4,978 4,671 3,050 5,943 7,323 3.9 3.5 3.1 E3C-1o 948 1,554 1,353 1,497 1,301 1,243 1,214 1,676 2,129 5.2 2.5 2.7 JAPAN 525 757 720 665 682 701 715 791 612 5.0 3.2 1.5 RON-MARET 173 641 604 736 780 827 877 1,120 1,429 6.4 9.7 5.2 DVEVLOPINO 2,706 6,778 6,515 7,137 7,677 7,013 7,544 9,667 11,642 7.6 7.8 3.6 ASIA 463 1,322 2,471 3,192 3,382 3,300 3,356 6,254 5,700 5.1 5.8 4.6 CHINA 340 658 706 1,174 1,244 1,160 1,200 1,521 1,922 2.6 2.6 )3. AMtERICA 169 1,418 2,883 2,695 3,803 3,196 3,646 4,841 5,342 16.5 12.5 5.4 BRAZIL 166 1,365 2,021 1-777 1,850 1,940 2,033 2,130 2,250 18.9 12.7 1.8 SOUTHERN EUROPE 129 319 406 469 492 517 542 572 600 7.1 7.6 1.9 WORLD 7,414 14,578 13,986 15,176 15,680 14,701 15,600 19,510 23,720 5.8 5.4 3.5 Al LAST suARES TEN POR HISTORICAL PERIODS (1961-86)s END-POINT FOR PROJECTED PERIODS (1987-2000). SI ESTIMATE. SOURCEHS US DEPARTHNT OF AGRICULTURE, FOREIGN AGRICULTURAL SERVICE (ACTUAL)i WORLD BANK, IlfTERNATIONAL ECONICS DEPARTMENT (PROJECTED). TABLE A13, SOtMEAMS (OIL EQUIV.) - GROSS MXFCRTS BY KAIN COUnTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATEb Al COWUTRIES/ 1967 - soEoomzs 1969-71 1979-81 19S6 19871B 1988 1989 1990 1993 2000 1961-86 1970-86 2000 ----------------------------------- 000 TONS)------------------------------------- (t FIR AliUH)------- INDUSTR.IAL 2,811 5,921 ',378 5,697 5,296 5,720 6,220 6,550 6,800 7.2 4.7 1.4 FORTB AMERICA 2,452 4,673 4,208 4,200 3,796 4,200 4,590 4,670 4,500 6,2 4.0 0.5 UNITED STATES 2,421 4,646 4,181 4 156 3,743 4,169 4,554 4,579 4,300 6.3 4.0 0.3 NEC-I0 344 1,223 1,147 1,409 1,500 1,520 1,630 1,880 2,300 15.2 8.3 3.$ DIV5LOPING 166 1,729 2,244 2,693 2,740 2,458 2,180 2,943 5,430 17.2 18.3 5.5 AKMRICA 51 1,627 1,822 2,600 2,306 Z,407 2,528 2,995 3,546 34.9 23.2 2.4 ZAZIL 49 1,057 586 1,500 1,452 1,530 1,591 1,896 2,800 ... 17.0 4,9 SOUThERN EUROPE 20 39 122 93 90 90 90 100 130 7.8 28.7 2.6 WORLD 2,983 7,656 7,638 7,931 8,036 8,178 f,400 9,493 12,230 8.8 6.9 3.4 Al LEAST SOVARIS TRZND J(U HIMSTfRICAL PERIODS (1961-86)i END-POINI FCR PROJECTED PZRIODS (1987-2000). S/ ESflHATI. SOURCESi US DEPARTiHUT or AGRICULTuRE, FOREIGN AGRICULTURAL SERVICE (ACTUAL)g WORLD BANK, INTERJATIONAL ECONOMICS DEPARTHEZT (PROJECTED). 'D TABLE A16i SOYBEAYS (OIL EQUIV.) - GROSS IMPORTS BY MAIN CO'JXilRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATE6 Al COUNTRIES/ 1987 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TomS)------------------------------------- ------t( PER AINUM)------- INDUSTRIAL 2,012 3,954 3,440 3,728 3,600 3,700 3,900 4,3)0 4,730 6.8 3.9 1.6 EEC-10 1,292 2,913 2,548 2,828 2,750 2,800 3,000 3,300 3.500 7.6 4.4 1.7 OTnER WESTERN EUROPE 104 195 178 192 180 190 195 226 266 6.9 2.9 2.5 JAPAN 515 731 819 815 817 823 830 954 1,090 5.5 3.0 2.3 NOW-MARKET 73 484 570 637 640 700 760 1,200 1,970 11.2 14.2 9.1 DEVELOPING 874 3,189 3,175 3,258 3,526 3,510 3,984 6,657 10,410 11.6 11.3 9.3 ASIA 455 1,772 1,917 2,030 2,256 2,120 2,544 4,100 5,670 13.5 11.5 8.2 INDIA 80 652 241 747 830 780 936 2,427 4,500 28.5 21.6 14.8 AMERICA 123 654 818 747 830 890 900 1,800 3,620 14.2 15.4 12.9 SOUTHERN EUROPE 146 346 440 481 440 500 540 757 1,120 7.1 8.7 6.7 WORLD 2,959 7,627 7,780 9,051 8,036 8,178 8,400 9,493 12,230 8.7 7.1 2.3 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86), END-POINT FOR PROJECTED PERrODS (1987-2000,. 3/ ESTIMATE. SOURCES, US DEPARTMENT OF AGRICULTURE, P)REIGN AGRICULTURAL SERVICE (ACTUAL)l WORLD BANK, INTERNiATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A17: SOYBEAS (MzAL EQUIV.) - RODUCTION BY MAIN COUIrRIES AND EOoKr6IC REGIONS ACTUAL MOJECTED GROWTH RATZ Al COUESRIs 19J7 - ICOW3hIEs 1969-71 1979-81 1986 1987/2 1988 1989 1990 1995 2000 1061-86 1970-86 2000 -('000 TONS)- (X PZR AfM)… IMNUSTRIAL 25,411 44,936 44,289 43,693 43,626 44,119 47,254 52,107 52,311 5.0 3.9 1.4 3OTH AHBICA 25,302 44,688 46,818 42,954 42,315 42,854 46,340 50,796 50,909 5.0 1 . 1.5 UNITED STATES 25,095 44,163 45,975 42,182 41,297 41,860 45,478 49,825 49,663 4.9 3.7 1.3 NON-MANXET 508 823 895 1,118 1,122 1,256 1,293 1,496 1,643 4.5 3.2 3.0 DGEVOEP1NG 9,305 23,458 30,486 30,079 32,52a 33,502 34,643 40,274 45,894 7.6 6.3 3.3 ASIA 7,604 8,164 11,976 10,981 11,109 11,.52 11,175 12,468 13,908 2.1 2.9 1.8 CHINA 6,747 6,654 8,467 9,347 9,580 9,419 9,224 10,290 11,478 1.4 2.1 1.6 AMZICA 1,613 14,967 17,862 19,097 21,413 22,351 23,468 27,606 31,987 21.9 15.5 4.0 BRAZIL 1,246 10,842 11,351 13,784 14,329 15,096 15,693 16,709 21,617 21.2 13.3 3.5 wRLD 35,224 69,217 77,844 78,502 80,960 82,399 84,634 95,639 101,430 5.8 5.3 2.0 Al LEAST SQUARES TREND FOR RISTORICAL PERIODS (1961-86)t END-POINT FOR PROJECTED PERIODS (1987-2000). |E ESTIMATE. SOURCESs US DEPARTIMT OF ARICULTURE, FORBIGN AGRICULTURAL SERVICE (ACTUAL)ig L/ WORLD BANK, INTEatIIATIONhL ECOWCMICS DEPARTMENT (PROJECTED). TABL- A18: SOYBZANS (MEAL ZQUlV.) - OONSU8MZION BY MAIN COUWNRIES AND ECONOFIC REGIONS ACTUAL PROJECTED GROWTH RATES Al C0OVXTRIS1/ 1967 - VA)KqO xsS 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 -('000 TONS)- ( PER ANM)- ZXDUSTRtAL 2A,462 44,043 46,346 45,194 *4,666 45,550 47,108 50,022 53,680 5.2 4.4 1.3 NMT5 AXEICA 13,592 21,506 20,701 21,334 20,766 21,000 22,208 23,583 26,7B0 3.1 3.3 1.2 UNITED STATES 12,972 20,361 19,352 20,318 19,777 20,000 21,150 22,460 23,600 3.0 3.2 1.2 EZC-10 7,861 17,711 20,323 19,460 19,400 20,000 20,200 20,939 22,500 9.0 6.1 1.1 JAPAN 2,576 3,844 4,303 4,400 4,500 4,550 4,700 5,500 6,400 5.0 3.2 2.9 WON-MARIE? 1,599 6,391 6,432 6,400 6,900 7,534 8,130 11,945 14,000 13.3 8.2 6.2 DEVELOPxNG 9,385 18,868 24,131 26,908 29,391 29,315 29,397 33,672 33,750 6.1 6.8 1.8 ASIA 7,804 10,907 14,553 15,042 15,417 15,158 14,844 17,200 19,000 3.6 4.3 1.8 CHIRA 6,784 7,754 9,043 9,347 9,580 9,419 9,224 11,290 12,500 1.9 1.9 2.3 AMERICA 1,041 6,290 6,623 10,216 12,278 12,427 12,742 14,542 16,500 16.7 13.1 3.8 SOUTHERN EUROPE 466 1,192 1,710 1,650 1,699 1,730 1,810 1,930 2,110 9.9 9.1 1.9 WORLD 35,446 69,303 76,909 78,502 80,960 82,399 84,634 95,639 101,430 5.9 5.4 2.0 -----------------------------------------------------_, I_ --------------------------------------------------------------------------- Al LEAST SqUARES TENED FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTINATN. SOURCZS: US DEPARTMENT OF ACRICULTURE, FOREIGN AGRICULTURAL SERVICE (ACTUAL): WORLD BANK, INTBNATIONAL ECONONICS DEPARMENT (PROJECTED), TABLE A^19: BOTYhAs (MEAL EQuIv.) - GROSS ExPORTs BY MAlEt COUNTRRE6 AMD l!COl?IC RCIOWS ACTUAL PROJECTED GROWTH RATES Al COUNTRIES/ 1987 - ZOOSES 1969-71 1979-81 1986 19871B 190fl 1989 1990 1995 2000 1961-86 1970-86 2000 -('000 ..) ------------------------------------------( PER ANN)- INDUSTRIAL 13,214 27,561 27,268 28,569 28,076 28,553 3i,184 34,521 33,' 1 7.8 4.8 1.3 WIORTH AMRICA 12,280 23,927 23,329 23,257 22,596 22,953 25,544 28,733 27,376 7.2 4.1 1.3 UNITED STATES 12,123 23,806 23,168 23,000 21,520 21,860 24,328 27,365 26,263 7.4 4.1 1.0 SEC-lO 86s 3,478 3,786 5,100 5,480 5,600 5,640 5,788 6,100 12.3 10.6 1.4 DEVELOPING 1,297 11,124 16,286 19,574 24,400 25,500 27,100 31,400 38,200 19.0 16.5 5.3 ASIA 417 446 2,586 3,478 3,100 3,400 3,800 5,100 7,200 4.6 12.1 5.8 AMERICA 823 10,608 13,502 16,096 21,300 22,100 23,300 26,300 31,000 27.2 17.7 5.2 BRAZIL 792 7,859 7,508 10,500 14,329 15,096 15,693 18,709 21,617 25.1 13.9 5.7 WORLD 14,525 38,702 43,580 48,833 52,476 54,053 58,284 65,921 71,876 9.8 7.4 3.0 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)i S1D-POINT FOR PROJECTE-) PERIODS (1987-2000). B1 ESTIMATE. MOUECFS: US DEPARTMENT OF AGRICVLTURE, FOREIGN AGRICULLTURAL SERVICE (ACTUAL) i WORLD BANIK, INTERIATIONAL ECO*0141CS DEPARTMENT (PROJECTED). TABU ao, BOYsUAS (MIML ZWJIV.) - RoS sti'ORTS BY MlAi COMITRIO AND SCOEWEIC REGIONS ACTUAL PROJECTED GROWTH RATE$ Al COUNTRIES/ 1907 - EoOU(oAIsE 1969-71 1979-81 1986 198711 1966 1989 1990 1995 2000 1961-66 1970-06 2000 -----------------------------------( 000 TONS)A--------------------------…- -- - PCR )------- YWDU8TRIAL 12,265 26,669 29,293 30,026 30,019 30,835 31,5i4 32,;u^- 1',35S 8.3 3.S 1.3 WORTS AERICA 571 746 151 811 750 600 613 9Ue 950 1.9 3,0 1.2 zBC-1o 6,724 21,164 23,379 23,900 24,069 24,735 25,286 25,628 27,096 9.4 6.7 1.0 orDER WISTERN EUROPE 467 1,042 1,057 1,230 1,180 1,200 1,355 1,680 2,100 6.9 4.4 4.2 JAPAN 2,473 3,690 4,106 4,085 4,000 4,100 4,100 4,600 5,210 5.7 3.0 1.9 NON-MARIST 1,105 5,585 5,564 8,358 6,900 7,534 6,130 11,945 14,000 18.4 9.4 4.0 DEVELOPING 1,376 6,534 9,933 10,449 15,557 15,684 18,600 21,276 22,516 15.2 14.4 6.1 ASIA 617 3,189 5,16! 6,093 5,200 5,,900 7,000 9,b00 12,000 16.6 14.7 5.4 AMERICA 251 1,931 2,263 3,057 8,769 8,164 9,950 9,556 6,408 19.2 10.2 8.1 SOUT£ERN EUROPE 499 1,175 1,555 1,622 1,588 1,600 1,650 1,920 2,110 9.8 8.2 2.0 WORLD 14,747 38,788 44,820 48,833 52,476 54,053 58,284 65,921 71,876 9.9 7.4 1.0 Al LEAST SQUARES TREND FOR [ISTORICAL PERIODS (1961-86)s END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOuRCESt US DEFARTMENT OF ACRICULTURE, FOREIGN AGRICULTURAL SERVICE (ACTUAL)i WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMSNI (PROJECTED). - 199 - Y*N.I A21; IOlhAU OIU - P3IM. / 1950-47 (MCTOL) AMD 198-2000 (PAJ3CVM) trreet $ -116 Ctat $- Currn $ MT 1 I!S CWP ef Aet 19S0 314 1,327 1,46? 1951 375 1.374 1,671 *ff2 3* 1,32, 1, S68 illS 410 1,475 1,772 1954 333 1, 25 1,416 1955 294 1,061 1,211 1956 339 1,181 1,351 1957 306 1,044 1,177 1958 254 852 957 1959 235 800 864 1960 225 750 813 1961 287 941 1,028 273 1962 228 732 799 216 1963 224 734 713 219 1964 205 660 696 243 1965 270 863 894 278 1946 262 809 838 270 1967 217 662 675 2 4 1968 178 549 528 215 1969 228 667 641 208 1970 307 845 817 320 1971 323 843 814 388 1972 270 647 650 259 1973 465 961 1.050 383 1974 795 1,349 1,648 711 1975 619 945 1,167 583 1976 438 659 776 404 1977 576 789 958 567 1978 607 723 940 587 1979 662 696 942 633 1980 597 572 779 576 1981 507 484 604 515 1982 447 432 500 456 1983 527 523 568 453 1984 724 73i 751 703 1985 572 572 572 543 1986 342 Z89 335 340 1967 334 257 318 333 1988 478 340 438 460 1989 486 325 426 435 I990 480 316 400 440 1995 850 470 546 661 2000 840 371 430 737 *D avloptqg countries- expott unit value. J Crud-, Dutch, f.o.b. ex-sill. b Deflated by Manufactaring Unlit Value (MUV) index. cJ Deflated by US GNP Deflator. Sources: Oil World. Hamburg 90 (actual); World Bank, InterctionfLl Economics Deptmt (projected). - 200 - SOYBEAN OIL (CONSTANT 1985 DOLLAR PR CEM 2500- 2000 Soo -~~~ 0 1945 19so 1955 1960 196s 1970 1975 1980 198S 1990 1995 2a DE'LiVD BY MANUFACtURING UNIT VALUE ( YUJV ) INDEX .........- DErLATtD BY U.S. ¢NP DE)PA-R. * " 14- St ACrUAL; 1988 -2000 P*tOJECTEt; . SOURCE : WORLD BANK, INTERNATONAL ECONOMICS DEPATET . TM1& A*2: SOTWAM - P lCt, 4l 10-47 (ACTO1) A 1I-2000 (?3WCT=D) Ct*re*t $ -ltS1965 Coa 5- CUtt $ t M1 b/ US CUP cI 1950 114 482 532 1951 146 535 651 1952 112 392 492 1953 119 428 514 1954 122 449 519 1955 III 401 457 1956 116 404 462 1957 106 362 408 1958 95 319 358 1959 94 320 345 1960 92 306 332 1961 111 364 397 118 1962 100 321 350 113 1963 110 360 380 124 1964 110 354 374 122 1965 117 374 387 128 1966 126 389 403 122 1967 112 342 349 116 1968 106 327 314 123 1969 103 301 290 107 1970 117 322 311 109 1971 126 329 318 119 1972 140 335 337 124 1973 290 600 655 258 1974 277 470 574 215 1975 220 336 415 210 1976 231 348 410 215 1977 280 384 466 277 1978 268 319 415 236 1979 298 313 424 258 1980 296 284 386 235 M981 288 275 343 270 1982 245 237 274 228 1983 282 280 304 224 1984 282 285 292 284 1985 224 224 224 205 1986 208 176 204 195 1987 216 166 206 201 Projected 1988 316 225 289 276 1989 313 209 274 257 1990 282 186 235 239 1995 358 198 230 262 2000 336 148 172 277 *Developing cocntri*s^ export unit value. &/ United States, c.l.f. Rotterdam. V/ Deflated by Manufacturiug Unit Value (HUV) Index. c/ Deflated by US GNP D3f1ator. Sources: 011 World, HRaburg 90 (actual); World Bawk, Internatloasl Economlcs Deportum-t (projected). - 202 - SOYBEANS (CONSTANT 1985 DOLLAR R Sa ) 800 700 600 B. 0 . . . . . . . 1945 1950 195S 1960 1965 1970 1975' 1980' 19^5 t990 19,95 2000 DEFLATED BY MANUFACTURING UNIT VALUE ( xUV ) INOEX ..--------- DE1UsT£D SY U.S. ONP DELTOR, t 1t9 - 7 ACTUAL ; t§88 -2000 PiOJETD . SOURCE: WORLD BANK, INTERNAONAL ECONOM IC D*PAF . 203 - UNU AZ3: SO11M AJL - PMCS. ad 1950-47 (ACTMAL) AM I0-ZOG (i*UtTIO) Curret S -IS co.t_t - Currt $ NUT bJ US Cm cI Actuel 1950 95 401 44 1951 125 458 557 1952 100 350 439 1953 108 388 437 1954 89 327 379 1955 77 278 317 1956 76 265 303 1957 78 266 300 1958 74 248 27) 1959 73 248 268 1960 81 270 293 1961 97 318 347 52 1962 89 286 312 66 1963 91 298 314 67 1964 89 287 302 64 1965 97 310 321 72 1966 107 330 342 79 1967 99 302 308 78 1968 98 302 291 78 1969 95 278 267 79 1970 104 286 274 84 1971 105 274 257 91 1972 129 309 310 108 19?3 302 624 682 260 1974 184 312 381 150 1975 1 55 237 292 148 1976 198 298 351 180 1977 230 315 382 213 1978 213 254 330 193 1979 243 256 346 219 1980 262 251 342 223 1981 253 241 301 241 1982 219 212 245 209 1983 238 236 256 214 1984 197 199 204 198 1985 157 157 157 135 1986 185 156 181 143 1987 203 156 193 140 Plrojected 1988 282 200 258 259 1989 281 188 246 237 1990 253 167 211 217 1995 266 147 171 197 2000 254 12 130 217 ftelopIng countries' export unit value. a/ 441, United States, c.i.f. lotterd,u. b/ Deflated by Maufacturing Unit Value (MV). c Deflated by US CIP Deflator. Source: oil world. Raiburgh 90 (actual); World bank, Interftional tconomice Departunt (projected). - 204 - SOYF.AN MEAL CONSTANT M.. DOLLA PRIS ) gOO - J00 100 {]-- . ., '.. ..., 194 1950 1955 t90 1963 1970 t9 1990 1985 1990 1995 2000 DELTED BY "UfACTURlC UMFt VAU ( W-,V ) INDE ' ' ' ' ' '- ' ' DEFLATD nY U.S. r.HP DErLATOR. 0 194-8 ACPJAL 1988-2000 P*0JECT . SOURCE: WOWRD BANK. ITRNnoNA ECONOMCS DICA N . - 25 - LtA &h. PA L - MICS ^. 193-7 (CML AM1I Z (ra w ) t $ea -IMS Cmtat S t S* NTwn US G el kctv*l 1950 277 1 .170 1.294 19M 294 1," 19 .3-s 1952 M9 1 .028 .291 19S3 22? &17 98t 1954 225 U89 95 1955 240 S66 964 1956 246 ke. I "O 1951 259 8S 9"7 l95S 232 779 874 1959 ~~~ ~ ~~2488 911 1960 228 760 824 196t 232 760 831 212 l9qi2 216 694 757 192 1963 2^:7 727 767 ;87 * 94 240 773 81S 2 1965 273 $72 904 235 166 236 729 755 205 11967 224 6,S4 697 194 1968 169 521 501 146 1969 181 S29 509 141 .1970 260 715 692 219 1.971 261 681 658 220 1972 2-17 520 522 183 t1S73 378 181 853 246 1974 S69 1,135 1,3Z7 Sl9 1S975 434 662 819 452 t1976 407 613 722 35 1 977 530 726 881 5063 1978 600 715 929 543 2979 654 698 931 609 1 m -w5w 762 552 19S1 571 545 680 5Si 1982 i45 430 498 435 1983 501 4397 540 435 194 729 737 7546 657 1995 5m 501 Sm "I 1S86 257 217 252 222 1987 3.43 264 326 301 Pro Atcted :1988 464 330 425 413 1989 441 295 386 392 1990 446 294 372 392 1LSS 592 327 38t 437 20D0 S71 296 34 570 *Dveopin cutries exor unt vaue A/ pkayim 5S. c.i.f. N.W. hsrooe. b/ Deflated by Nan cturing UnitValue CMY) Index. c/ Deflsted by US (MlP Deflstor. Sources' ll an FAO ''rd Tearbook factl-*); World Ban,IternAtional lSconodico Depiartseut (prootoyted). - 206 - PALM OIL (CONSTANT 1985 DOLLAR PRICES ) 2000- 1500 t600 u 1400 800 S.- t 600 1200 ' . 1945 1950' 1I ... 1960 1965, 1970' 197,5 lq8o 1985 1990 1995 2000 - ~~~DEFLATED BY MANUFACTURING UFtf VALUE ( MUY ) INDEX ' ' ' '- ' ' DEFLATED BY U.S. GNP DEFLATOR. IS -9S 87 ACTUAL; 1988-200 PROJECE. SOURCE: WORLD BANK . INTERNAFIONAL ECONOMIC DEPARE * AS_ - 207 - TABU A25: PALA KnNElS - PUC8S. a/ 1950-87 (ACTUAL) AnD 1988-2000 (PROJECTED) --(S/Ton) Current S -1985 Constt a Current $* MNV b/ US GNP c/ Actual 1950 189 798 883 1951 220 806 980 1952 151 528 663 1953 176 633 76>1 1954 146 537 621 1955 143 516 589 1956 146 509 582 1957 141 481 543 1958 154 517 580 1959 194 660 713 1960 144 480 520 1961 137 449 491 124 1962 136 437 476 118 1963 153 501 528 134 1964 151 486 513 136 1965 179 572 593 166 1966 155 478 496 147 1967 162 494 504 126 1968 t76 542 522 164 1969 3 447 430 139 1970 168 462 447 151 1971 145 378 366 140 1972 116 278 279 107 1973 259 535 585 179 1974 465 789 964 363 1975 207 316 390i 178 1976 230 346 4C8 159 1977 326 447 542 266 1978 364 433 564 261 1979 500 526 712 358 1980 345 331 450 266 1981 317 302 377 233 1982 265 256 296 227 1983 365 362 393 22S 1984 528 534 547 375 1985 291 291 291 246 1986 142 120 139 129 1987 181 139 172 154 1988 253 180 232 200 1989 288 193 252 222 1990 302 199 252 231 1995 373 206 239 276 2000 406 179 208 297 *Developing countriec export unit value. a/ Nigerian, c.i.f. United Xingdom. b/ Deflated by Manufacturtag Unit Value (KUV) Index. c/ Deflated by US GhC Deflator. Sources: Oil World, Easburg 90 (actual); World Bank, International Econo' cs Department (projected). - 208 - PALM KERNELS (CONSTANT 1985 DOLLAR PRICES ) 1200- 1000 19S igS0 19S5 19S0 1965 1970 197S' 1980' 1985 199C 1995 2000 DEFLATED BY MANUfACTURING. UNIT VALUE t MUV j INDEX weZ96ss@ DEFLTM SY U.S. ONP DEFATR. 1" 14- 87 ACTUAL: ; 188 -2000 PROJECT£D . SOURCE , WORLD BANK,. INTERNATIONAL ECONOMICS DESPARTMERT . TARL A2U6: COMA- ?I:S. .1 1950-47 ,ACTUAL) AND 198-2000 (ptoJKuCD) ($/Too) Current S -1985 Constant S Oarrent 5^ IV b/ US GClP c/ Actual 1950 226 95i4 1,056 1951 243 890 .,083 1952 163 570 716 1953 221 795 955 1954 196 721 834 1955 181 653 746 1956 177 617 705 1957 172 587 662 1958 203 681 765 1959 251 854 922 1960 207 690 729 1961 170 557 596 141 1962 166 533 574 143 1963 186 609 634 157 1964 194 _25 660 164 1965 227 725 750 189 1966 185 571 592 170 1967 204 623 635 164 1968 232 715 688 196 1969 202 591 568 168 1970 225 619 599 178 2971 189 493 476 166 1972 141 338 339 118 1973 353 730 797 212 1974 662 1,123 i,372 512 1975 256 391 483 237 1976 275 414 488 183 1977 402 551 668 314 19.S 470 560 726 372 1979 6?3 708 958 573 1980 453 435 592 397 1981 379 361 451 303 1982 314 304 351 260 1983 496 493 534 398 1984 710 717 736 560 1985 386 386 386 311 1986 198 167 194 163 1987 309 238 294 250 198S 397 282 364 319 1989 427 286 374 342 1990 449 296 374 341 1995 552 305 354 367 2000 603 266 309 455 *Developing countrie' export Unit value. a/ Philippines/Indouusia, lulk, c.i.f. N.W. Europe. b/ Deflated by Manufacturing Unit Value (WUV) Index. c/ Deflated by US GIP Deflator. Sources: 011 World, laburg 90 (-ctual); World Bank, Interuational Economics Department, (projected). - 210 - COPRA (CONSTANT '985 DOLLAR PRICES ) 1600- 1400 I 1200A 100 -''-,V 194S 19S0 19S5 1960 196S 1970 t975 19a0 198S 19§C 1995 2000 DEFLATED BY MANUFACTURING UNIT VALUE ( mUV ) *.YD£X ........... DEAE BY U.S. GNP 3EFLARl. 0 '948 - 7 ACTUAL; 1988- 2000 PR20JCED . SOURCE : WORLD BANK, INTERNATIONAL ECONOMICS DEPARTME' . - 211 - TAUZ A27: G*U*DNUr OIL - PRICES, ./ 1950-87 (ACrtUAL) AND 1988-2000 (PIOJECTD) ($/ton) Curreet $ -1985 Constant - Current S* YUV b/ US GNP C/ Actual 1950 418 l,766 1,952 1951 476 1.744 2,121 1952 364 1,273 1,598 1953 386 1,388 1,668 19)4 371 1,364 1,578 1955 288 1,040 1,186 1956 369 1,286 1,471 1957 360 1,229 1,385 1958 276 926 1,040 1959 300 1,021 1,103 1960 326 1,087 1,178 1961 331 1,085 1,185 345 1962 275 884 963 299 1963 268 878 925 306 1964 315 1,014 1,070 328 1965 324 1,035 1,073 324 1966 296 914 947 309 1967 283 864 881 318 1968 271 835 803 269 1969 332 971 934 312 1970 379 1,043 1, )09 334 1971 441 1,i15 1,i12 377 !972 426 1,020 1, ,25 362 1973 546 1,129 1,233 421 1974 1,077 1,828 2,233 902 1975 857 1,308 1,616 754 1976 741 1,116 1,314 679 1977 852 1,168 1,416 796 1978 i,079 1,285 1,671 901 1979 888 934 1,264 925 1980 859 824 1,121 723 1981 1,043 995 1,242 933 i9B2 585 566 654 608 1983 711 706 766 575 1984 1,017 1,028 1,054 969 1985 905 905 905 807 1986 569 481 558 526 1987 500 385 476 468 Project 1988 547 389 501 507 1989 624 417 547 572 1990 653 430 544 567 1995 957 529 614 713 200 1,034 456 529 867 *Detvloping countries' export unit v.alue. a/ Any origin, c.i.'. Rotterdam. b/ Deflated by Manufactring Unit Value (HUV) Index. tl Deflated by US GNP Deflator. Sourcea: Oil World, HEburg 90 (actual); World Sank, International bconouics Department (projected). - 213 - TAux A2zs C@03T mRAL - 4acts. 195/4-87 (ACTL1AL) An I!%W-ZOOO (kW0CXTh) - -S $/To.) Current - 1985 Conatant - Current $ IV b/ US = c/ Actual 1950 95 401 444 1951 I11 407 495 !952 98 343 430 1953 102 367 441 1954 98 36h 417 1955 93 336 383 1956 92 321 367 19S7 85 290 327 1958 74 248 279 1959 86 293 316 1960 84 280 304 1961 79 258 283 65 1962 87 2g0 305 73 1963 91 298 314 78 1964 93 299 316 80 1965 102 326 338 85 1966 95 233 304 82 19t.7 95 290 296 83 1968 90 2'7 267 82 1969 96 281 270 82 1970 102 281 271 86 1971 98 256 247 81 1972 122 292 294 87 1973 266 550 601 185 1974 174 295 361 156 1975 140 214 264 120 1976 176 265 312 123 1977 218 299 362 183 1978 205 244 318 164 1979 211 222 300 178 1980 240 230 313 178 1981 238 227 283 183 1982 189 183 211 157 1983 200 199 215 146 1984 187 189 196 151 1985 143 143 143 115 1986 165 139 162 131 1987 162 125 154 129 Project 1988 194 138 178 152 1989 229 153 200 177 1990 223 147 186 164 1995 233 129 150 152 2000 235 104 12C 172 *Developing countries- export unit value. a/ 48t Indian, c.i.f. Rotterdam. b/ Deflated by Manufacturing Unit Value (WUV) Index. c/ Deflated by US GiQ Deflator. Sources: Oil World, Haab,arg 90 (actual); World Bank, International Economic. Department (projected). - 214 - GROUNDNUT MEAL { CONSTANT 1985 DOLLAR PRICES') 700 - 600 °.9s5 1950 '955 19830 1965 197o 1975 1980 1985 1990 1995 2000 -DEFLATIED BY WANUFACTURING UNIT VALUE ( MUUV ) INDEX *'''''''-' DEfLATIM BY U.S. GNP DErLAtOR. * 1948 -S8 ACTAL; 1988 -2000 PROJECTED . SOURCE: -.ORL B ANK , INERNATlONAL ECOMISDPREN £~. - 215 - TAL A2T: COCONUT OIL - PRICES. a/ 195087 (ACTUAL) AND 1988-2000 (Pt(1jCTED) - ' ~~~~($/Ton) Current $ -1985 Conotant - Current S* MUV b/ US GNP c/ Actual 1950 292 1,236 1,364 1951 338 1,239 1,506 1952 263 920 1,155 1953 339 1,219 1,465 1954 306 1,125 1,302 1955 259 935 1,067 1956 265 923 1,056 1957 275 939 1,058 1958 312 1,047 1,176 1959 378 1,286 1,389 1960 312 1,040 1,128 1961 254 833 909 227 1962 251 807 879 219 1963 286 937 988 255 1964 297 956 1,009 277 1965 348 1,112 1,152 305 1966 324 1,000 1,037 258 1967 328 1,001 1,021 260 1968 399 1,230 1,183 306 1969 361 1,056 1,015 269 1970 397 1,092 1,057 301 1971 371 968 935 280 1972 234 560 563 194 1973 513 1,061 1,158 350 1974 998 1,694 2,069 909 1975 394 601 743 400 1976 418 629 741 352 1977 578 792 961 547 1978 683 813 1,058 618 1979 984 1,035 1,401 927 1980 674 646 880 636 1981 570 544 679 526 1982 464 449 519 450 1983 730 725 786 547 1984 1,155 1,167 1,198 1,019 1985 590 590 590 517 i986 297 251 291 247 1987 442 340 421 381 Projected 1988 580 412 531 508 1989 598 400 524 525 1990 628 414 524 522 1995 769 425 494 561 2000 847 374 434 711 *Developing countries' export unit value. a/ Philippirtes/Indonesia, bulk, c.i.f. Rotterdam; before 1973, Sri Lanka 1S c.4.f. Europe. b/ Deflated by Manufacturing Unit Value (HUV) Index. c/ Deflated by US GNP Deflator. Sources: Oil World, Hamburg 90 (actual); World Bank, International Economics Departmnt (projected). - 216 - COCONUT OIL I CONSTANT 1985 DOLLAR PRICES ) 250 -_ U 2000 1500 : 5°o1 ~ ~ ; O 6 , , * v* , - ,* , * ] *.]r 1945 19SO 19SS 1960 196S lq70 197S 1980 1935 1990 199S 2000 DEFLATEID BY MiANUFACTURING UNIT VALUE ( MiUV ) INDEX ,, *.-----6* EFATED BY U.S. GNP DEFLATOR. 0 1948 - 87 ACTUAL* 1;I'-2000 PROJECTED . SOtURCE : WORLD BANK, INTERNATIONAL ECONOMICS DEPARTET . I~~~ _ 1. US beef prices are now at the highest level in nomin-: -:-s s-nce 1980. Because of the US drought, which forced some slaughteri:- . --ised feed costs, further price increases are expected. The US price z_ported beef for 1988 is estimated to reach USC249/kg followed by an increase to USC257/kg in 1989. Prices are then expezted to decline marginally in nominal US dollars as feed prices decline and production of pork and poultry meat increases. Over t9he longer term, prices are expected to rise slightly in constant 1985 US dollars, reaching USC200/kg by the year 2000. This price would still be below the USc264/kg in 1980 and well below the 1970 price of '3Se357/kg. 2. A combination of factors suggest that beef prices are likely to remain h.gh for several years before giving way to increased supplies. The US drought will reduce supplies of all meats in the intermediate term because of higher feed costs and, in the longer term, because of reduced herd size. In the very short term, however, the US drought pushed all meat prices lower because of the reduction in pasture availability ana the heat stress which led to forced slaughterings. Higher feed costs over the next 1-2 years will reduce pork and poultry supplies as profitability declines in these sectors. Smaller supplies of dairy beef will, also be available during the next several years in both the United States and the EEC following policy-induced reductions in herd sizes. Increased import demand for beef in Japan can also be eypected following the recent liberalization of Japanese import restrictions. The greatest impact will occur after 1991 when the new importing rules are fully implemented. Finally, the current expansion in beef herds appears to be progressing very slowly in the United States, Canada, and Australia, suggesting a lengthening of the cattle cycle. Supply Outlook 3. On July 1, 1988 the US cattle and calf population was down 1Z from 1987 and recorded the lowest mid-year inventory since numbers were first collected in 1973. Cow numbers were also down 1%, and this suggests that the cattle inventory will decline through 1989 and possibly into 1990. The peak in cow numbers for this cycle occurred in 1981 at 51 million head, and the cow herd now stands at 44 million head. The liquidation phase is into the seventh year, making this the longest in modern agriculture. The percentage of the herd liquidated will also be larger than everage. These changes suggest that, in the peak of the next cattle cycle, cow numbers will not reach the level of the 1981 peak. 4. Another change which is occurring in the United States is a shift towards fewer dairy cows relative to beef cows. -his change largely reflects prcductivity gains in milk production which have not been duplicated in meat production. The proportion of dairy cows has decreased from more than 50% of the cow herd in the 1950s to 25% in 1988. Since dairy calves are a major source of veal, the number of animals slaughtered as calves has also decreased. -218- 5. The main incertainty about the developeent of the US cattle cycle is when will producers begin to retain replacement heifers to expand the breeding herd. A reduction in cow slaughter has already occurred and this is the first sign of the rebuilding process; but a reduction in heifer slaughter has not yet occurred. The drought will cause some producers to delay their plans to expand herd size because of poor pasture and hay conditions and high feed prices. 6. Continued productivity gains in milk production should further reduce dairy herds and hence beef and veal production from the dairy sector. The two-year program in the EEC to cut milk production by 9.5Z (which began in April 1987) has reduced cow numbers and milk production substantially. The EEC quota system called for a 6.5% decline in milk production in 1987/88 and a 3% decline in 1988/89. The 1987 US program to reduce milk production, the Dairy Termination Program, sought to reduce production by reducing cow numbers. Production controls in Canada have stabilized cow numbers and milk production. 7. The Dairy Termination Program in the United States concluded in September 1987. The program was designed to adjust milk production to a level consistent with national demand by providing a one-time buvout for dairy producers. The producers submitted bids to dispose of their dairy herds, and a total of 8.7% of the 1985 US milk production capacity wa. retired. The female animals purchased under the program were required to be slaughtered or exported. Of the 1.5 million cows, heifers, and calves purchased, about 95% were sold for slaughter and 5% were exported. Me.ico and Canada were the largest buyers of live animals with purchases of 58% and 26%, respectively. 8. Australian cattle slaughter increased in 1987/88 in response to drought conditions and favorable export opportunities caused by high world prices and the weak US dollar. However, exports to the United States are expected to slow as Australian producers hold cattle from slaughter to rebuild herds. Since 1985 when herd rebuilding began, the average annual rate of increase has been about 2Z p.a. compared to an average of 6.5% p.a. during the last period of herd expansion from 1967 to 1976. 9. Canadian cattle and calf numbers have begun tc expand following a ten-year period of liquidation. Slaughtering was down in 1987, suggesting clearly that herd rebuilding was under way, encouraged by significantly higher cattle prices. Demand Outlook 10. Over the longer term, lower feed prices will increase the profitability of pork and poultry and lead to increased supplies and lower prices. This will likely reduce the demand for beef as consumers shift to the lower cost meats. In the past consumers in the industrial countries have shifted away from beef and veal to the other meats. Part of this shift ves due to lower prices but some may also have been due to health concerns. Recent trends suggest this aspect of demand may have stabilized in the industrial countries with per capita beef consumption increasing in recent years. The income elasticity of demand for beef in the industrial countries - 219 - is approxinately 0.4. Exceptiocs to these trends exist-such as Japan-wbere the incom elasticity of demand is near unity and where receat import restrictions have been liberalized and are expected to lead to more rapid demand grovtb thAn in the past. The low-income developing countries have an income elesa:icity of about 0.7 tkaile the middle-income developing countries and the CPEs have an income elasticity of demand of about 0.4 for beef. Among developing countries, per capita consumption is highest in Latin America. Substantial potential for increased per capita consumption exists in the developing countries. - 2- 0 - T?A8 1: MV AMi DKL - PUCSS. a/ 1950-47 (ActuAL) AM) 1986-200o (PKoUCTD) (Ct3k - - < 700. Current $ -1985 Coastant Current WV b/ US GPc/ ctuea 1950 69.4 291.5 322.3 1951 75.0 274.8 334.2 1952 67.0 234.3 294.1 1953 66.5 239.2 287.4 1954 66.2 243.5 281.6 1955 63.2 228.2 260.3 1956 57.2 199.3 228.0 1957 61.5 209.9 236.6 1958 65.3 219.1 246.1 1959 72.2 245.8 265.3 1960 73.7 245.7 266.4 1961 68.2 223.5 244.2 447.8 1962 71.4 229.4 250.1 410.0 1963 66.7 218.5 230.3 441.4 1964 84.1 27C.8 285.7 565.7 1965 88.2 281.9 292.1 686.1 1966 102.2 313.5 327.0 663.1 .967 104.1 317.8 324.0 630.6 1968 108.5 334.4 321.7 641.9 1969 122.3 357.6 344.0 650.0 1970 130.4 358.7 347.1 735.6 1971 134.6 351.3 339.3 963.1 1972 148.0 3i4.5 356.1 1,114.9 1973 201.1 415.8 454.1 1,517.5 1974 158.2 268.5 327.9 1,338.8 1975 132.7 202.5 250.3 1,228.3 1976 15S.1 238.0 280.4 1,147.1 1977 150.6 206.4 250.4 1,263.9 1978 213.8 254.6 331.2 1,406.5 1979 288.4 303.3 410.6 2,040.4 1980 276.0 264.6 360.2 2,262.4 1981 247.5 236.0 294.6 2,136.8 1982 239.0 231.1 267.3 1,889.6 1983 244.0 242.3 262.8 1,747.9 1984 227.0 229.4 235.4 1,780.6 1985 215.0 215.0 215.0 1,682.2 1986 209.2 176.8 205.1 1,560.0 1987 238.6 183.6 227.3 1,832.7 d/ Pro jected 1988 249.0 177.0 228.1 1,918.9 1989 257.0 171.9 225.2 1,985.2 1990 254.0 167.4 211.8 1,960.3 1"5 342.0 189.0 219.5 2,689.8 2000 453.0 199.9 232.0 3,609.9 *Developing countries' export uit value. a/ US imported, frosen, boneleus, 90t visible lean, f.o.b. port of entry. b/ Deflated by Amnufacturing UIht Va.lue (NW) Index. c! Deflated by 0&L:D US$ M Deflator. d Estimate. Soarces: Iff and FA0 Trade Yearbooks (actual); World Bank, International Economics Department (projected). -221 - BEEF (CONSTANT dO8S DOLLAR PRICES ) 500 - gI~~~~~~~~~~~~~ 200- * U 1945 1950 19;5, 1960, 194, 1970 1975. . . e0 19i;5 '9oo 19;5 2000 DEFLATED 8YMUANUFACTRING UNIT VAUE (Mi'JVU) INDEX *-i*'@a""'" DEFLAEI BY U.S. GNP DEF ATOR. 1,948 $7 ACTUAL; 198S - 2000 PROJECTED . SOURCE : WORLD EtANK,. INTERNATIONAL ECONOMICS DEPARTENt . U. l DAIRY PRODUCTS 1. International prices for milk powders have been .ncreasing sharply in 1988. In fact, there has been a steady increase in prices since the lows of 1984 and 1985 (as can be seen in the figure below reproduced from GATT). More recent price movements are given below which show 45% increases for skimned milk power (SMP) prices in February 1988 from average prices for the second half of 1987 and 34% increases for whole milk powder (WMP) prices over the same period. Reflecting these market price movements, the members of the International GATT Arrangement on Dairy Products raised minimum export prices for all dairy products in March and September 1988 (the minimum export prices in effect from September 21, 1988 are SMP-US$1,050/ton f.o.b. and WMP- US$1,150/ton f.o.b.). SMP WMP …--…------(US$/Ton)--------- 1987 (Jan.-June) 742 941 (July-Dec.) 929 1,155 1988 (Jan.) 1,200 1,550 (Feb.) 1,350 1,550 Source: Zentrale Market, Bonn, Germany. f.o.b. prices for West European ports. 2. The direct relationship between these price movements and changes in stock levels can be seen in Table 1 on stocks of SMP and WMP. Stocks of SMP rose to a peak at the end of 1983; stocks held in the EEC and the United States reached 1,616,000 tons. By the end of 1986, when prices began to increase significantly, world stocks bad fallen by over 30Z from the 1983 peak. Since then there has been an even sharper decline. As of January 1, 1987, US stocks of SMP were 312,000 tons. By October 1, 1987 they had fallen to 142,000 tons. Stocks held by the US Ccmmodity Credit Corporation (CCC) totaled 211,000 tons on January 1 1987 and by December 31, 1987 totaled only 24,300 tons. EEC publicly available stocks of SMP fell from 772,000 tons on January 1, 1987 to 13,000 tons in August 1988. 3. The main holders of WMP stocks have been New Zealand and Australia. Their combined stock level fell from 66,800 tons on January 1, 1987 to 18,00(' tons on July 1, 1987. World stocks of WMP could have been down to around 10,000 tons at the end of the first quarter of 1988 since reports indicate Australia and New Zealand had withdrawn from the market in early March 1988. Given stock levels of that order, prices can be expected to rise even further in the short run as countries scramble for supplies. - 224 - TABLE 1: STOCKS OF SNP AND WI SMP WMP - ----('000 Tons)----- At End of: 1977 1,616 (1,274) a/ 1978 1,259 t 939) 81 1979 756 t 447) 73 1980 809 ( 497) 81 1981 1,039 ( 683) 86 1982 1,485 (1,157) 91 1983 1,863 (1,616) 81 1984 1,397 (1,176) 74 1985 1,206 ( 979) 81 1986 1,247 (1,084) _--________________---------------------------- Source: GATT, oo. cit., and earlier issues. / The numbers in parentheses are the stocks held in the United States and EEC. 4. The question of longer-run price movements has to be answered in terms of future trends in productiort and consumption. Before going on to these topics it is of interest to retrace briefly the movements in production, consumption, and trade, as well as policy, which led to the existing low stocks/high prices situation. 5. The recent changes in US and EEC dairy policies are held to be the main factors leading to the present situation, in particular the policies to restrict production and to reduce publicly held stocks. In the United States the Dairy Herd Termination Program was introduced in 1986 and concluded on September 30, 1987. The Program was a one-time buy out of dairy cattle, as well as the tying of dairy price support levels to estimated CCC net dairy purchases until 1990. All female dairy animals owned by farmers participating in the Program were to be either slaughtered or exported. (About 96% of the animals were sold for slaughter.) 6. According to USDA data, there was a 4.4% decline in 1987 in dairy cow numbers in the United States, but milk production fell by only 0.6Z as milk yields increased by 4X. Production of SMP fell by 20X--equal to 118,500 tons. Stocks of SMP held by the CCC fell by 187,000 tons. Depending on what happened to non-CCC stocks in 1987, domestic consumption and exports of ShP have increased by at Least 68,000 tons (see the figures below on milk production and SNP production, consumption, and stock changes in the United States). 7. With cheese production continuing to increase over the 1984-87 period by an average of 4.4X p.a. and with milk production stabilized in 1986 and - 225 - CES IN US SHP PROWMON, coXSutIOU AIM STOCKS Milk SMP SHP Stocks Other Apparent Production Production Held by CCC SIP Stocks SMP Consumption …('000)-…-------…- ( - - - - 1985 +5.68 +104.0 -97.5 -3 +204.5 1986 +0.16 -39.8 -194.2 +47 +107.4 1987 -0.64 -118.5 -186.8 NA (+68.3) NA - Not available. Source: USDA. 1987, butter and SMP production have been declining and stocks have been falling--without an unusual increase in consumption and exports. Now that the Dairy Herd Termination Program is over, productivity increases will ensure that total milk production begins to increase again and so probably will butter and SMP production and SNP stocks. 8. In the EEC the milk quota reductions agreed by the EC Councii of Ministers in December 1986 (for the fourth year of the program) substantially reduced EEC milk production in 1987. The EEC milk quota for 1987-88 was cut by approximately 6%. The whole quota package also involved a buyout of dairy cows for slaughter, as well as a super levy of up to 100% of the target price for milk in excess of each country's quota. Most countries had difficulty in meeting the quota, but the scheme was generally successful in reducing production. The second stage of the quota scheme for 1988-89 involves a smaller reduction in quotas of 2.5%. 9. In New Zealand, traditionally the third largest SNP stockholder, SNP stocks fell by two-thirds in 1987. This decline was mainly due to the impact of drought on milk production. However, the reforms of the New Zealand economy--including the removal of most assistance to the agricultural sector and the resulting higher interest rates and higher inflation--have had a generally depressing effect on agricultural production. Therefore, part of the reduction in New Zealand's milk production will be permanent. 10. For the short term, the prices of SNIP and WHP should remain near their present historically high levels. Given the policy-induced pressure on pr3duction of milk in the EEC, the United States, and New Zealand, world production will move back above 1986 levels only slowly. The shift away from butter production towards cheese production and low-fat fluid milk consumption will continue and this will restrain growth in production of SMP. 11. Over the long term, the main factors which will influence production and consumption of milk products and therefore the prices of SHP and WHIP are - 226 - the following: (i) technological change; (ii) production and prices of substitutes; (iii) dietary concerns in the industrial countries; (iv) dairy feed costs; (v) consumption in the developing countries; (vi) production and consumption developments in the CPEs, especially the USSR; and (vii) dairy policies, particularly in the EEC and the United States. The impact of these factors is discussed below. 12e Technological change. I1ilk yield growth rates in the EEC and the United States have been very strcng, in large part, it is argued, because of the high support prices which have encouraged the adoption of yield-improving technology and the more intensive use of feedstuffs. Therefore, future dairy policies in the EEC and the Ulnited States will be very important in determining future yield growth. Eowever, their impact may be overshadowed by the impact of the Bovine Somatotrophin hormone. The use of this hormone is said to increase milk production by up to 30% under co mercia1 conditions, without additional feed inputs. Use of this hormone could become widespread in che dairy industries of the industrial countries and cause a period of rapid growth in yields. 13. Substitutes. The main competition for milk products comes from the vegetable oils. The prices of these in real terms have been falling substantially in the period since i950. It is likely that this downtrend will continue (see Section on Vegetable Fats and Oils). 14. Dietary concerns. Concern over the consumption of animal fats in the industriaL countries has depressed butter consumption and mcre recently has increased the preference for low-fat liquid milk over high-fat liquid milk. Low-fat cheeses, yogurts, and other products are also fashionable. This decline in demand fcr dairy fat will obviously keep pressure on prices of fat products. One of its side effects, however, may be to reduce SMP production, i.e., because of the lower butter production. This would tend to cause SMP prices to increase. 15. Feed costs. Prices of feedstuffs have been at low levels in recent years in countries where prices are not controlled. Our forecasts are for grains prices to continue to increase in the near term but to decline in real terms over the long term. The EEC is a special case because of its controls over grains and other feed prices. If the Common Agricultural Policy pricing regime is maintained, as we presume, and controls over nontraditional imported feedstuffs are tightened, as seems likely, feed costs could increase somewhat in the EEC. 16. Consumption in the developing co.litries. About 90% of WMP and SMP imports are taken by the developing countries. The OPEC countries have been the fastest-growing markets for these products in recent years. The sharp fall In petroleum prices since 1986 has no doubt reduced the rate of growth of milk product imports into the OPEC countries. The fast-growing manufacturing exporters of East Asia have been the other main growth area for powered milk imports. Growth in the higher-income developing countries offers th3 best hope for increases in aemand for SMP and WMP. 17. Prospects in the CPEs. The main purchaser of powdered milk in the CPEs has been the USSR. It should remain a largely opportunistic buyer, with - 227 - growth not expected to be rapid. The USSR has followed a policy of highly subsidized consumer prices for dairy products--well below costs of production. There is at the same time an emphasis on maintaining self-sufficiency. How well this goal can be met will deperd upon improvements in the efficiency of producing feedstuffs or the willingness to continue importing grains and other feedstuffs. 18. Dairy policies. Now that the stocks of dairy products held publicly in the EEC and che United States have been substantially reduced and prices have risen, political concerr. and action over the costs of the intervention leading to the recent high stock levels will most likely quickly subside. 1/ In that case, it is likely that the recent efforts to cut back production in these countries will be relaxed and stock levels will build up again. This has been the case in the past. An additional concern is the proposal for an EEC consuxmption tax on oils and fats which has been repeatedly advanced by the European Comrnission. One of the effects of implementing such a tar would be to reduce domestic consamption and increase stocks and exports of butter. International prices of butter and vegetable oil would be reduced. There is also pressure in the EEC to exclude the imports of butter from New Zealand to the United Kingdom--the result of a long-standing agreement. If this pressure suCceeds it will have a similar impact on internationaL prices of fats and oils - Price Forecasts 19. The price run-up in international prices for SMP and WMP is expected to be short-lived. Over the longer run, the increases in milk yields (because of lower feed costs and technological changes) and the relaxation of production controls in the EEC and the United Stases (while maintaining the high price-support programs) will mean a buildup of stocks again and a decline in prices. Offsetting pressures could come from higher incomes in the developing coutitries (includirg the oil-exporting countries if, as expected, crude oil prices move up again in the 1990s). Also, the continuing decline expected in butter prices could lead to slower growth in SMP production and hence upward price pressure. As shown in the table below, powdered milk prices are forecast to decline fairly sharply after 1988. Powdered milk production should respond quickly to the present high price levels. As well, the annual use of SMP for animal feed in the EEC is as large as world trade in SMP, and at the Dresent high prices for SMP there can be some Aiversion to the world market. It is expected that by around 1992 stocks of powdered milk will again have built up to the point where action to reduce them will be taken, and so there will be another cycle of prices in the 1990s. i/ Stocks of butter in the EEC are still relatively high (over 350,000 tons in August 1988)--equivalent to world exports for about six months. By comparison, they were equivalent to more than two years of world exports in 1986. - 228 - nxct FORECkT FM sw AND WP -------------------(US$ /Ton, f.o.b.)---------------------- SMP WMP Current Constant 1985 $ Current Constant 1985 $ 1987 835 642 1,048 806 1988 1,600 1,137 1,500 1,066 1989 ,400 936 1,200 803 1990 900 593 950 626 1991 725 472 850 553 1992 710 451 830 528 1995 1,250 691 1,500 829 2000 1,000 441 1,170 516 FURTILI17RI Summary 1. The international export prices of fertilizers fell to record-low levels in 1986 because of extremely low farm prices, the debt problems of US farmers and fertilizer-importing developing countries, and excessive production capacity and stocks. Fertilizer prices started to recover in 1987 mainlv due to strong demand from the major importing countries. Over the short term, fertilizer orices are expected to continue to rise, helped by sustained demand increases as a result of smaller acreage-reduction programs in the United States and the recent drought in North America. Over the long term, nitrogenous fertilizer prices in real terms are expected to stage a strong recovery towards the early 1990s but decline again toward the year 2000. Prices of phosphates and potash in real terms are expected to steadily increase through most of 1990s. 2. World fertilizer consumption is projected to grow at 2.9% p.a. between 1986/87 and 2000/2001. Consumption in developing countries is expected to grow the fastest, at 4% p.a.. followed by industrial countries (2.3Z p.a.) and CPEs (1.9% p.a.). The source of the expected growth in fertilizer consumption in industrial countries will be mainly crop area expansion, whereas in the developing countries and CPEs, demand growth will come in the form of increased fertiLizer applicatior. per unit of crop area. 3. Over the last decade there has been a strong movement towards nitrogenous fertilizer production in countries with plentiful and inexpensive natural gas supplies--mainly in the Near East and the USSR. This trend is expected to continue but at a slower rate becauie the natural gas price differentials between these countries and industritl countries have narrowed to such an extent as to restore the cost competitiveness of some industrial country producers. World production of nitrogenous fertilizers is projected to grow at 3% p.a. between 1986/87 and 2000/2001. The largest increase in nitrogenous fertilizer production is expected in developing countries--the expansion in the Far East and Latin America will be mainly for domestic needs, whereas production expansion in the Near East should be mainly for export. Phosphate fertilizer production is expected to increase substantially in the developing countries because the maior raw material-abundant countries such as Morocco, Tunisia, Jordan, and Cbina are expanding their production. The United States will retain its position as the world's leading producer and exporter of phosphate fertilizers through the year 2000, but its relative importance will decline significantly. World production of potash fertilizer is expected to grow more slowly in response to the anticipated slov growth in demand. The USSR and Canada are expected to continue to dominate world potash fertilizer production. 4. World exports of fertilizers are projected to grow at 3.2% p.a. in the projection period as compared to 5.1% p.a. in the period 1970-86. The CPEs and industrial countries are expected to remsin net exporters, and the developing countries should remain net importers and account for most of the increase in world imports. - 230 - Demand Outlook 5. World consumption of fertilizers recovered in 1986/87, increasing by 3.4% compared to a decrease by 1.3% in 1985/86. However, industrial countries showed declines in both 1985/86 and 1986/87, by 5.2% and 1%, respectively; these declines mainly resulted from government policies on price supports and production controls such as the 1985 Farm Bill in the United States and introduction of the quota system in the EEC. Fertilizer consumption in the developing countries increased in 1986/87 by 7.7%, more than compensating for the decline of 3.1% in the previouts season. The decrease in fertilizer consumption in 1985/86 in the developing countries can be largely attributed to the reduced consumption in China as a result of adverse weather, crop switching, and supply constraints. Only the CPEs showed steady growth, by 6.8% in 1985/86 and 2.7% in 1986/87. 6. The projections of fertilizer demand are based on our integrated grains/fertilizer model. In the model, fertilizer demand is determined by the area harvested for grains, fertilizer prices, and grain prices. Farmers are assumed to respond to these factors with some lags. The price elasticities of fertilizer demand incorporated in the model are generally much lower than those fournd in other econometric studies of fertilizer demand (Table l). The differences, however, are mainly due to the different fertilizer prices used. The previous studies have used prices paid by farmers while our model uses international export prices. The relationships between the two orices are rather weak because of domestic interventions. TABLE 1: DEKAND PRICE ElASTICITIES OF THE INTEGRATED GRAINS/FERTILIZER MODEL -------------------------------------------------------__--------------------_ ----Nitrogen---- --Phosphates-- ---Potash--- ST a/ LT b/ ST LT ST LT Argentina 0.10 0.50 0.02 0.05 0.19 0.32 Australia 0.01 0.22 0.32 2.23 0.02 0.96 Brazil 0.04 0.08 0.04 0.06 0.03 0.04 Canada 0.01 0.36 0.03 0.80 0.01 0.04 China 0.08 0.52 0.07 0.14 0.07 0.43 India 0.02 0.27 0.03 0.21 0.12 0.41 USSR - - 0.01 0.01 0.11 0.19 United States 0.05 0.26 0.01 0.10 0.04 0.34 EEC 0.01 0.14 0.07 0.57 0.12 0.34 Wgrld 0.03 0.23 0.01 0.19 0.03 0.27 - Not available. a/ Short term. b/ Long term Source: World Bank. - 231 - 7. The provisions incorporated in the 1985 US Farm Security Act have been and will continue to be en important factor in determining fertilizer consumption. They were designed to pursue lower acreage and production of grains, cotton, and soybeans and to reduce world traded prices. For that reason the Farm Bill has had a negative impact on fertilizer demand. Simulation with our grains/fertilizer model indicates that the combined effect of lower US loan rates and acreage reductions was a 20% decline in world grain prices and a 1.9% reduction in world fertilizer consumption in 1986/87. The model also estimates that the effect of the acreage-reduction program alone was a 9.7% reduction in US Lertilizer consumption, while it has had a sma'l positive impact on the rest of the world's fe-rtilizer consumption. 8. The United States has reduced the rice set-aside acreage from 35% to 25% this year in response to the current high rice prices and it has already announced a lower wheat set aside acreage for 1989, down from 27.5% to 10%. However, the drought in the United States led to sharp increases in prices and wtill lead to calls for a simaller set-aside acreage in all crops. (See the section on grains for full details.) Therefore, the negative effect of the US Farm BilL on fertilizer demand over the short term should be lessened. 9. Fertilizer application per hectare of crop area 1/ in industrial countries has remained around 250 kg over the past 16 years. The model projects a slight increase in 1995 and returning to 250 kg by 2C00 because a substantial expansion 'n crop area is expected by that time. However, fertilizer applications in the developing countries and CPEs have been increasing substantially, and the trend is expected to continue. The forecasts of fertilizer application per hectare by region are as follows. -----------------------------------------------------------------__----------_ Region 1970 1980 1986 1990 1995 2000 ----------(kg/ha)--------------------- Industrial 229 253 241 252 266 250 Developing 32 85 120 138 162 187 Centrally Planned 118 198 276 306 338 370 10. The main source of the expected growth in fertilizer consumption in industrial countries is crop area expansion, while it is mainly the growth in fertilizer application per unit of crop area in the developing countries and CPEs. This is because there is land available for expansion in industrial countries while the possibilities for expansion in the developing countries and CPEs are limited. The projected average annual growth rates for V1 Crop area includes area under grains and soybeans. - 232 - fertilizer consumption, crop area, and fertilizer application per unit of crop area for the period 1986-2000 by economic region are as follows: Industrial Developing Centrally Planned …-----------(2 p.a.)------------------- Fertilizer Consumption 2.3 4.0 1.9 Crop Area 2.0 0.8 -0.2 Fertilizer/hectare 0.3 3.2 2.1 1U. World consumption of nitrogenous fertilizer is projected to reach 112 million tons in 2000/2001 from 72 million tons in 1986/87. This increase represents an average annual growth rate of 3.2% p.a. compared to 7.4% p.a. in the period 1961-86. Consumption in the developing countries is expected to grow fastest and to account for the largest portion of the increase. The share of developing countries in world nitrogenous fertilizer consumption is expected to increase from 48% in 1986/87 to 55% in 2000/2001. The consumption share of the industrial countries is expected to decrease from 30% to 26% over this period while the share of the CPEs is expected to decrease from 22% to 19% during the same period. 12. World consumption of phosphate fertilizers is projected to increase from 34 million tons in 1986/87 to 51 million tons in 2000/2001. This represents an average annual growth rate of 2.8% compared to 4.5% p.a. in 1961-86. The fastest growth is expected in the developing countries, and their share in world consumption of phosphate fertilizers is expected to increase from 37% in 1986/87 to 44% in 2000/2001. During the same period the industrial Countries' share is expected to decrease from 30% to 28% . 13. World consumption of potash fertilizers is projected to increase from 26 million tons in 1986/87 to 37 million tons in 2000/2001, representing an average annual growth rate of 2.5% compared to 4.5% in 1961-86. The industrial countries are expected to account for the largest portion of the increase whereas the developing countries are expected to show the strongest growth. Therefore, the consumption share of industrial countries is expected to increase from 41% in 1986/87 to 42% in 2000/2001 while the share of the developing countries is expected to increase from 22% to 24%. Supply Outlook 14. Two sources of information have been used in deriving the supply projections. One is the information on capacity expansion projects under construction or firmly committed, compiled by the PA/WUIDOiWorld Bank Working - 233 - Group on Fertilizers. The other is the grains/lertilizer model. The former has detailed information by country up to 1992/93, while the latter generates aggregate projections by economic region up to year 2000. Table 2 suimmarizes the fertilizer capacity projections done by the FAO/UNIDO/World Bank Working Group on Fertilizers. For convenience, nitrogen capacity is measured in terms of ammonia and phosphate capacity in terms of phosphoric acid. 15. In the grains/fertilizer model, it is assumed that short-term supplv responds to prices under a given level of capacity. For the long term (long enough to bring investment projects on-stream), s;tpplies respond to prices through changes in productlon capacity. Table 3 summaries the short- and long-term supply elasticities implied by the grains/fertilizer model. 16. For the last decade there has been a strong movement towards nitrogen fertilizer production in countries where natural gas is very cheap, mainly in the Near East and the USSR. This trend is expected to continue but at a slover rate because the natural gas price differential between these countries and industrial countries should be narrowing under the expected situation of low energy prices. Under the relatively low oil prices projected, production of nitrogenous fertilizer in the United States and several Western Europe countries with domestic supplies of natural gas should be expected to rise in the long run. As shown in Table 4, by 1995 the industrial countries could become highl.y cost competitive in ammonia/urea produccion vis-a-vis the oil- exporting developing countries. 17. The largest increase in nitrogenous fertilizer production is expected in Asia, particularly in China, India, and Indonesia. There will be major investment programs in these countries t^ produce urea to meet their domestic needs. The Near East will continue to expand nitrogen capacity mainly for export markets. Latin America is expected to grow fastest in nitrogenous fertilizer production, again to meet domestic needs. The major producers in this region are Mexico, Brazil, Trinidad, and Venezuela. 18. World production of nitrogenous fertilizer is projected to increase from 76 million tons in 1986/87 tu 115 million tons in 200012001, representing an average annual growth rate of 3%. As a result of faster growth in the developing countries, the production share of the developing countries is expected to increase from 41% in 1986/87 to 48% in 2000/2001. The production share of the industrial countries is expected to decrease from 30% to 26% and for the CPEs from 29% to 26Z. 19. Pbosphate fertilizer production is expected to increase substantially in the developing countries because the major raw material-abundant countries are expanding production. Morocco will increase its output of phosphoric acid from the large phosphate complex at Jorf L.asfar and plans to build two more plants in the 1990s. Tunisia has a long-term plan to build a large new mine at Sra Quertane which could come on-stream in the mid-1990s. Jordan has begun the Shidiya Phosphate Mine project, financed by the World Bank, which will bring the Shidiya deposit into production at z level of 1.5 million tons a year. The pro,ect is expected to be completed in 1994. The Chinese government desires to correct the imbalance between its nitrogen and phosphate application and plans to increase phosphate production to meet its domestic needs. China has begun a phosphate development project, financed by the World TrALE 2t WORLD FERTILIZER CAPACITY 1986/87-1992/93 -----…-Ammonis ('000 Tons W)------- Phosphoric Acid ('000 Tons P205) -----Potash ('000 Tons X20)- DC LDC CPEa World DC LDCs CPES World DC LDC. CPEu World 1986/87 31,710 45,324 34,712 111,746 16,r75 11,312 7,570 35,657 19,767 2,030 14,630 36,427 1987/88 31,418 48,317 34,952 114,687 16,040 12,120 7,670 35,830 19,797 2,130 16,130 33,057 1988/89 31,493 50,248 35,348 117,089 16,040 12,378 7,883 36,301 19,347 2,320 16,130 37,797 1989/90 31,493 50,570 36,148 118,211 15,970 12,451 8,118 36,539 19,342 2,440 16,130 37,912 1990/91 31,493 52,601 36,91P 121,012 15,970 12,597 8,253 36,820 19,362 2,440 16,130 37,932 1991/92 31,247 54,098 37,373 122,718 15,970 12,623 8,253 36,846 19,002 2,440 16,130 37,572 1992/93 31,674 55,523 37,773 124,970 15,970 12,892 8,253 37,115 19,002 2,440 16,130 37,572 t Notess DC ' Industrial countries. LDC - Developing countries. CPEs a Centrally planned economies Source: PAO/UNIDOIWorld Bank Working Group on Pertilizers. - 235 - TA 3: SUPPLY PRICK ELASTICITIES OF THE RA NSIFERTiILIZER NIOI Region ---Nitrogen--- Phosphates --Potash-- ST a LT b/ ST LT ST LT North America 0.36 0.21 0.12 2.00 - - Western Europe 0.36 0.20 0.20 0.14 - - Centrally Planned 0.08 1.46 0.02 0.02 - - Developing Countries 0.01 1.94 0.01 0.17 - - World 0.16 1.17 0.08 0.43 0.04 0.32 - Not available. af Short term. b/ Long term. Source: World Bank, International Economics Department. TABLE 4: FIJEL COST ASSUMPTION AND TOTAL COSTS OP PRODUCTION OF AMONIA AND UBREA IN 1995 Natural Gas Ammonia Urea ($/MBTU) -------($/Ton)- -------------(in 1985 $)…-------…----- Industrial Countries 2.0 160.4 162.9 Developing Countries: A 1.2 167.0 175.0 B 0.6 188.1 196.4 Notes: Assumes 15-year average life and 10% return on capital. Crude oil price was assumed at $13.1ibbl (in 1985 $). A - With moderate infrastructure and sizable domestic and international markets for its natural gas, e.g., Mexico. B - With minimal infrastructure and limited outlets for its natural gas, e.g., Saudi Arabia. - 236 - Bank, which will produce 2.5 million tons of phosphate rock a year when completed in 1993. Recently, Brazil has approved a $1.2 billion fertilizer investment program which will lead to a substantial increase in phosphate production. 20. The United States will retain its position as the world's leading producee. and exporter of phosphate fertilizers through 2000, but its relative position will decline significantly due to the keen competition from major developing country producers. 21. World product%n of phosphate fertilizers is projected to increase from 37 million tons in 1986/87 to 54 million tons in 2000/2001. This represents an annual growth rate of 2.7% p.a., compared to 4.6% p.a. in the period 1961-86. The developing countries' share is expected to increase from 30% in 1986 to 38% by 2000. The industrial countries' share is expected to decrease from 40% to 36X, while the CPEs' share is expected to fall from 30% to 26%. 22. World production of potash fertilizer is expected to grow at only 2.1% p.a. between 1986/87 and 2000/2001 compared to a growth rate of 4.5% p.a. in the period 1961-86, in response to the anticipated slower growth in demand. The USSR and Canada are expected to continue to dominate world potash fertilizer production. The Saskatchewan provincial government passed legislation known as the Potash Resources Act in September 1987. The Act enables the governmenL to control the production of potash in the province, which presently comprises about 11 million tons or 30% of world capacity. This Act will play an important role in determining the availability and price of notash. 23. The main row material in phosphate fertilizer production is phosphate rock. World production of phosphate rock is determined by the level of world phosphate fertilizer production. In the absence of an explicit economic model for the world phosphate rock market, individual country supplies have been projected on the basis of available information on capacity expansion plans, costs, and resource bases. A key question in anticipating phosphate rock supplies is the pricing and production policies of the main producers (Morocco, the United States, Jordan, and Togo) in an oligopolistic market envirorment. Because of the existence of this market structure, the phosphate rock industry has been able to maintain a measure of stability in rock prices at levels relatively high compared with those of finished phosphate products. There are two reasons for this success. Unlike many other oligopolies that have engaged in price wars in the face of stagnant or shrinking world demand, the phosphate rock industry has been fortunate to enjoy a steadily expanding market for its product. Secondly, there has not yet been a serious challenge to the dominant position of the United States and Morocco. Jordan's recent expansion of production and exports was accommodated by an almost equal sharing of the burden by the United States and Morocco without causing serious strains between them. The phosphate rock projections here reflect the view that this pattern will continue in the future. - 237 - Trade Outlook 24. The supply-demand projection for nitrogenous fertilizers indicates that the industrial countries will have the potential to meet their own needs. However, they will continue to take full advantage of imports of cheap materials when available. The developing countries, particularly those in Asia and Africa, will continue to be major importers of nitrogenous fertilizers, and the CPEs will continue to be the major exporters. Nitrogenous fertilizer consumption is expected to grow faster than production in China; therefore, China will continue to be the largest importer of nitrogenous fertilizers. While the USSR and countries of Eastern Europe will continue to dominate the export markets, the Near East will also continue to be a major exporting region. 25. The United States is expected to remain the main importing and exporting country for nitrogen materials due to the fact that it imports large quantities of ammonia--most of which are processed and exported as DAP. Many of the major exporters of nitrogenous fertilizers among the industrial countries are being displaced by exporting countries with cheap gas. For example, Japan held about 19% of the world exports of nitrogenous fertilizer in 1970 and dominated the Far East markets. its export share was reduced to 1% in 1986 and is expected to fall to 0.5% by 2000 due to the fact that with expensive feedstocks such as naphtha and LPG it can no longer compete. Latin America is expected to be the fastest growing region in exports of nitrogenous fertilizer. This is because the gas-rich countries such as Trinidad, Venezuela, and Mexicc are expanding their production for export to the growing markets in North and South America. 26. World imports of phosphate rock as a proportion of world consumption declined fron 48% in 1970 to 31Z in 1986, while for phosphate fertilizers the proportion increased from 13% to 22% during the same period. This change reflects the change in world production and trade towards greater domestic processing of raw materials oia the part of the deve:oping country producers. Pricing of phosphate rock at relatively high levels compared with phosphate fertilizer products stimulated this change by creating import demand for finished products. Another reason for more domestic processing of phosphate rock is to get moze value-added and to save transportation costs. This trend towards domestic processing is expected to continue but at a slower rate than in the last 16 years. 27. Developing countries and CPEs should continue to be the major importers ot phosphate fertilizers, while industrial countries (mainly the United States) will continue to be the leading exporters. However, the relative position of the United States will be reduced somewhat as a result of competition from developing country prod-ucers such as Morocco, Tunisia, and Jordan. The largest increase in import demAnd is expected to be in Asia, particularly in India and China. 28. Exports of potash fertilizers are concentrated in a few countries-- Canada. the USSR, the German Democratic Republic, the Federal Republic of Germany, Israel, France, and Jordan. This pattern is expected to continue. With the development of large potash resources in Canada since the early 1960s there has been a rapid increase in exports from Cauada. The Canadian share in - 238 - world exports reached 39% in 1986, and Canada is likely to -ncrease its dominance--its share is forecast to increase to 44% by 2000. Although most growth in potash imports will take place in developing Asia and Latin America, the United States will remair. the largest importer. Price Outlook 29. Fertilizer prices started to recover in 1987 from the record-low levels of 1986, and the recovery continued into 1988. Urea prices increased by 29% in the first quarter of 1988 from last quarter of 1986. During the same period prices of TSP increased by 39%, DAP by 48%, and potassium chloride by 32%. These increases were mainly due to strong demand from the major importirg countries such as China and the Philippines for urea, China, Iran, Pakistan, Brazil, and the USSR for phosphate products, and China, India, and Indonesia for potash. 30. Not all fertilizer prices have behaved in the same way, however. Phosphate rock prices fell to US$ 31/L-n in 1987 from US$34/tan the year before--mainly reflecting weak demand i.k the major markets of Europe and Japan. Pho phate rock prices eventually turned upwards, increasing to US$36/ton in 1988 as a follow-through from the sustained price increases for TSP and DAP. 31. Over the short term, fertilizer prices are expected to continue to rise as a result of expected strong demard (see Table A17). Two factors should contribute to the increase in demand. First, the cropland planted in 1988 in the United States is expected to increase because of smaller acreage- reduction programs following the lower 1987 harvest. Second, higher grain prices resulting from the recent drought in the United States in turn will stimulate fertilizer application rates and increased plantings by non-US producers. 32. Canada dominates the world potash markets. Therefore, the supply situation in Canada will remain an important influence on world potash prices. In particular, the Saskatchewan Potash Act was passed in September 1987, giving the Canadian provincial government the power ;o control potash production. The measure is intended to reduce the province's production and drive up the world prices. 33. Long-term fertilizer prices have been projected on the basis of a long-term supply/demand equilibrium assumption in the grains/fertilizer model. The price projections take into account, among other things, the industry's investment and production behavior in response to fertilizer prices, the crop price and production projection given elsewhere in this report, and the expected movements in exchange rates and interest rates. All prices have been initially projected in nominal terms. 34. The projected real prices for phosphate and potash should continue to increase up to 2000 because of expected higher crop prices and strong demand. The projected real prices for nitroger show cyclical behavior largely due to the industry's investment behavior. Prices are projected to recover strongly toward the early 1990s and to decline toward the late 1990s. - 239 - 35. The grains/fertilizer model does not include phosphate rock. The price of pbosphate rock is projected on the basis of the demand for phosphate roek implied by the projected production of phosphate fertilizers, known capacity espansion projects, and the market and cost structure. Over the short term, phosphate rock prices should rise as demand for phosphate fertilizers increases. Over the long run, however, phosphate rock prices should move approximately in line with prices for phosphate fertilizers. TABLE Ali VoSPHATE ROCK - PRODUCTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COUNTRIES/ 1987 - ECOUomIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------------------- ('00 TONS)--- ---------------------- ------(X PER ANNUM)- INDUSTRIAL 35,124 52,534 39,636 41,700 42,300 42,800 44,200 47,500 51,000 3.4 1.6 1.6 MORTH AKERICA 35,110 52,326 38,884 40,900 41,500 42.000 42,600 45,700 49.000 3.3 1.5 1.4 U6ITED STATES 35,11n 52,326 38,884 40,900 41,503 42,000 42,600 45,700 *1,000 3.3 1.5 1.4 NWN-MARKET 17,663 25,023 33,200 33,600 34,500 35,000 35,500 38,600 41,800 6.2 3.5 1.7 USSR 17,665 25,023 33,200 33,600 34,500 35,000 35,500 38,600 41,800 6.2 3.5 1.7 DEVELOPING 27,500 57,737 69,113 70,800 73,400 76,100 78,500 94,500 114,700 6.3 6.0 3.8 ASIA 3,438 15,891 20,970 21,800 22,600 23,300 24,600 30,300 36,800 12.2 13.4 4.1 CHINA 1,767 9,502 9,500 10,000 10,500 11,000 12,000 16,000 20,500 14.6 13.3 5.7 JORD" 851 3,771 6,249 6,400 6,500 6,600 6,700 7,400 8,200 11.1 16.5 1.9 AFRICA 19,560 33,308 36,835 37,800 39,30u 41,100 42,200 51,800 65,000 4.6 3.3 4.3 NDROCCO 11,35P 19,565 21,178 22,000 22,700 23,900 24,700 32,200 42,100 4.4 3.3 5.1 TUNISIA 2,929 4,406 5,951 6,100 6,400 6,500 6,600 7,100 7,700 3.5 3.9 1.8 TOGO 1,566 2,698 2,314 2,400 2,600 2,700 2,800 3,600 4,400 8.5 2.3 4.8 OCEANIA 2,984 3,299 2,319 2,200 2,100 2,000 1,900 1,400 900 0.3 -1.0 -6.6 WORLD 80,286 135,294 141,949 146,100 150,200 153,900 158,200 180,600 207,500 5.1 3.9 2.7 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)t END-POINT FOR PROJECTED PERIODS (1987-2000). Lt ESTYKATg. SOURCESS IFA, ANNUAL PHOSPhAIS ROCK STATISTICS (ACTUAL); iMORW IAiK, iNTERNATIONAL ECOOWIICS DEPARTMENT (PROJFCTED). TADLI A2M PGOFSATE ROCX - COQ0UMSPION BY MKAI COUKTRKtS AND kOOWmrC. RCZOIS ACTUAL P OJECTZD GUOVTh RATZS Al COOmTRIISi 19S7 - EOULts 1969-71 1979-81 1986 1987/B 198b 1989 1990 1995 2000 1961-S6 1970-S6 2000 t- ('000 TO) -- - ---------(*-I-- --- I------ (I PER AYM)U-- INWBSTRIAL 50,145 69,363 52,4A4 33,700 54,800 56,100 57,800 62,200 68,000 2.5 0.9 1.6 NMETI AMZRICA 26,585 43,017 32,691 33,500 34,300 33,200 34,000 40,700 45,900 3.4 2.2 2.5 UKItLD STATES 24,37S 39,519 30,430 30,500 31,200 32,000 32,bO0 37,100 k2,000 3.4 2.4 2.3 UC-1O 15,605 18,120 13,811 14,100 14,300 14,500 14,500 14,700 14,800 1.9 -0.7 0.3 FRANCI 3,681 5,010 3,335 3,100 3,000 3,000 3,000 3,200 3,200 3.0 01t 0.2 noU-MUAAKZ 18,220 30,099 39,196 39,900 40,500 41,200 42,000 45,700 49,800 7.0 4.3 1.7 USSR 11,874 20,453 30,006 30,600 31,200 31,800 32,500 35,900 39,600 7.7 5.3 2.0 A8TXRN EUROPE 6,346 9,645 9,190 9,300 9,300 9,400 9,5u0 9,800 10,200 5.5 2.0 0.6 DBYvzLP2Po 12,467 35,620 49,049 52,500 54,900 .6,600 58,400 72,700 $9,700 9.9 9.3 4.2 ASIA 5,664 16,963 21,608 22,500 23,200 24,000 24,900 30,700 36,500 10.3 10.0 s.8 C8IKA 3,004 10,250 10,166 10,400 10,700 12,000 11,500 15,500 19,600 10.6 9.0 5.0 AIRICA 2,886 10,185 16,397 19,000 20,600 21,200 22,500 29,900 41,500 10.2 12.3 6.2 6$OmUTR XUROPF 2,030 3,a23 4,144 4,300 4,400 4,500 4,600 5,200 6,000 6.7 5.0 2.3 *WRL4D 80,832 135,281 140,689 146,100 130,200 153,900 158,200 180,600 207,500 5,0 3.S 2.7 Al LEAST SQUARZS TREND FOR RISTORICAL PERICOS (1961-S6)1 END-POINT FOR PROJECTED PERIODS (1987-2000). 51 ESSTMATE. SURC3St IFA, ANNUAL PHO3PHATZ 2KM STATISTICS (ACTUAL); WORLD LiK, INTIRWATIONAL ECOIOHICS DEPARTMENT (PROJECTED). TABLE A3 POSPHAT ROCK - OROSS EXPORTS BY MAXN CWUMThIES AND ECONOIIC REOXOKS ACTUAL PROJECTED GROITS RATES Al CoubmuZsIl 1967- ECONOKIEs 1969-71 1979-81 1986 1987/1 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------------------------- ('000 TONS) ---------------- --*-------------- --- ------ (t PER ANNU1) ------- ZNDUSTRIAL 10,827 13,255 9,199 9,240 10,000 1O,2QU 10,100 9,000 8,200 3.3 -0.6 -0.9 IORTH AMERICA 10,827 13,185 9,007 9,041 9,800 10,000 9,900 8,800 8,000 3.2 -0.7 -0.9 UNITED STATES 10,827 13,185 9,007 9,041 9,800 0o,oo0 9,900 8,800 3,000 3.2 -0.7 -0.9 Om-MARKET 3,789 4,569 3,243 3,200 3,260 3,260 3,260 3,100 3.000 1.5 -3.0 -0.5 USSR 5,789 4,569 3,243 3,200 3,260 3,260 3,260 3,100 3,000 1.5 -3.0 -0,5 DZVILOPINC 21,503 32,548 31,823 32,430 32,720 33,490 34,510 39,560 44,000 3.5 1.8 2.4 ASIA 950 4,292 6,501 6,930 6,940 7,060 7,370 a,250 8,680 11.1 12.3 1.9 JORDAN 746 3,285 5,199 5,543 5,550 5,650 ,s900 6,600 7,100 11.2 14.4 1.9 AIGA 16,730 23,195 20,458 20,890 21,190 21,890 22,660 27,040 31,000 2.8 0.3 3.1 1kOCcO 11,155 16,700 13,696 13,450 13,830 14,430 15,160 18,980 22,000 2.9 0.7 3.9 TUNISIA 2,125 1,337 1,193 1.250 1,250 1,250 1,200 1,200 1,200 -2.7 -5.3 -0.3 0o;0 1,581 2,701 2.266 2,510 2,380 2,400 2,450 2,700 3,800 9.2 2.2 2.8 SUEGAL 1,103 1,378 1,353 1,480 1, 55 1,600 1,600 1,600 1,600 3.8 -0.8 0.6 OCLANIA 2,984 3,251 2,374 2,100 2,000 1,900 1,800 1,300 800 0.3 -1.1 -7.1 nORLD 38,119 50,372 44,265 44,870 45,980 46,950 47,870 51,660 55,200 3.2 0.6 1.6 A/ LEAST SIIARES TiRWD FOR HISTORICAL PC.rODS (1961-86)a EM0D-FINT FOR PROJECTED PERIODS (1987-2000). 111 TSTIMAT5. SOURCSSt IhA, ANNUAL PLOSPJATI ROCK STATISTICS (ACTUAL)i UORLD LK, INIERNATIOIAL ICOttHICS DEPARTMHNT (PROJECTED). TABLE A4: PBOSPBAIE ROCK - GROSQS IMPORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWITH RATES A/ COtmTRIES1 1907 - ECON0iolES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------- ---------------- ('000 TONS) -------------------------------------- ----- PER AN )- INDUSTRIAL 25,849 30,085 22,007 23,140 23,410 23,880 23,940 24,700 25,300 1.5 -0.6 0.7 NOkTH A:XERICA 2,302 3,876 2,814 3,500 3,600 3,800 3,900 4,400 4,900 3.7 0.6 2.6 CANADA 2,207 3,498 2,241 3,000 3,100 3,200 3,200 3,600 3,9C0 3,9 0.3 2.0 CEC-l0 15,605 1,120 13,311 14,100 14,300 14,500 14,700 14,800 0 1.9 -0,7 0.4 YRANCE 3,681 5,010 3,335 3,100 3,000 3,000 3,000 3,200 3,200 3.0 0.1 0.2 GERMANY, FED. REP. 2,865 2,364 1,362 1,400 1,450 1,450 1,450 1,450 1,450 -0.7 -4.0 0.3 JAPAN 3,007 2,571 1,967 2,070 2,000 2,000 1,950 1,900 1,800 -0.1 -2.7 -1.1 MMW-HARKET 6,346 9,645 9,239 9,390 9,400 9,600 10,000 10,600 11,700 5.3 2.0 1,7 EASTERN EUROPE 6,346 9,645 9,390 9,300 9,300 9,400 9,500 9,800 10,200 5.5 2.0 0.7 DEVELOPING 6,470 10,630 11,759 12,340 13,170 13,480 13,930 16,160 18,500 6.0 2.5 3.2 ASIA 3,177 5,364 7,220 7,420 7,660 7,920 8,220 10,130 12,000 7.0 4.5 3.6 INDIA 765 1,388 1,868 1,990 2,080 2,100 2,200 2,900 3,400 6.4 6.6 4.2 AMERICA 1,584 2,011 1,563 1,830 2,350 2,340 2,410 2,310 2,200 6.4 -3.5 1.4 SOUTHERN EuROPs 1,653 3,183 2,956 3,070 3,140 3,200 3,280 3,700 4,280 5.7 3.3 2.6 WOWLD 38,665 50,360 43,005 44,870 45,900 46,960 47,870 51,660 55,200 3.0 0.4 1.6 A/ LEAST SQUARES TRWUD FOR HISTORICAL PERIODS (196l-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIKATE. SOURCES3 IA, AIYAL PHOSPHATE ROCK STATISTICS (ACTUAL)i WORLD SAl, INTERNATIONAr ECONOMICS DEPARTMENT (PROJECTED). TABLE A5i NITROGENOUS FERTILIZERS - PRODUCTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES A/ COtmmRIES/ 1987 - EC0RCtIES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------('000 TONS)------------------------------------- ------(I PER AKNU)------- INDUSTRIAL 18,705 24,744 23,216 24,450 24,940 25,370 25,590 27,960 30,110 3.7 1.5 1.6 ORTH AMERICA 8,672 12,939 12,016 12,473 12,765 J3,027 13,087 14,600 15,970 5.0 2.4 1.9 UNITED STATES 7,938 11,176 9,549 9,644 9,741 9,838 9,883 10,390 10,920 4.3 1.3 1.0 KEC-l0 6,837 9,114 8,853 9,500 9,650 9,800 9,940 10,660 11,320 3.2 1.7 1.4 FRANCE 1,360 1,638 1,530 1,560 1,575 1,590 1,600 1,625 1,650 2.6 0.8 0.4 GERKANY, FED. REP. 1,466 1,340 1,019 1,030 1,050 1,070 1,090, 1,120 1,150 -0.6 -2.1 0.8 JAPAN 2,050 1,304 990 1,010 1,025 1,025 1,025 1,020 1,010 -1.4 -5.0 0.0 WoN-MARKET 8,687 16,063 21,858 22,300 22,520 22,830 23,860 26,860 30,250 9.3 5.5 2.4 USSR 5,329 9,937 14,996 15,340 15,460 15,670 16,580 18,980 21,690 9.7 6.0 2.7 EASTEURN EROPE 3,358 6,127 6,862 6,960 7,060 7,160 7,280 7,880 8,560 8.7 4.7 1.6 DEVELOPING 5,539 20,765 31,163 33,060 34,910 36,760 38,230 45,850 55,050 13.9 11.6 4.0 ASIA 3,646 16,495 24,643 25,850 27,010 28,170 29,300 35,360 42,670 15.8 12.9 4.0 CHINA 1,660 9,846 12,383 12,630 13,040 13,200 13,400 16,150 19,500 16.3 14.1 3.4 INDIA 837 2,511 5,412 5,9"0 6,390 6,750 7,040 8,570 10,450 15.0 12.0 4.5 AMERICA 829 1,694 2,991 3,200 3,650 4,100 4,295 5,430 6,830 8.7 8.2 6.0 H2XICO 408 753 1,250 1,450 1,625 1,800 1,890 2,380 3,000 11.5 7.5 5.8 SOUTHERN EUROPE 646 1,552 1,858 1,960 2,030 2,100 2,160 2,500 2,900 11.1 6.7 3.1 WoLD 32,931 61,572 76,237 79,810 82,370 84,960 87,680 100,670 115,410 7.4 3.4 2.9 …__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _,_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _,,_ _ _,_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86), END-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMATE. NOT8: SPLIT YEARS ENDING IN JUNE OF THE YEARS SHOWN, * YEAR 64-66 DATA FOR CHINA ARE ESTIMATES. SOURCES: FAO, FERTILIZER YEARBOOK TAPES (ACTUAL)l WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTFD). TABLE A6s NITROaENolUS FERTILIZERS - CONSUTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COUNTRIES/ 1987 - ECONCEIES 1969-71 1979-81 1986 19871B 198& 1989 199Q :1995 200" 1961-86 1970-86 2000 ------------- ~------------------(- 000 TONS)O----N------------------------------ --- (% PER ANlJM) --- INDUSTRIAL 14,524 21,1.90 Z1,528 22,627 24,072 24,953 25,824 27,148 29,017 4.3 2.6 1.9 NORTH AMERICA 7,435 11,289 10,540 10,354 11,713 12,327 12,948 13,690 14,783 4.7 2.4 2.7 UNXTED STATES 7,131 10,376 9,389 8,931 10,020 10,535 11,054 11,850 12,650 4.4 1.8 2.7 EEC-10 5,493 8,169 9,148 9,125 9,318 9,528 9,733 10,020 10,610 4.5 3.2 1.2 FRANCE 1,407 2,158 2,578 2,630 2,682 2,736 2,791 3,081 3,402 5.4 3.5 2.0 fON-MARXET 7,456 12,578 16,018 16,390 16,913 17,438 17,965 19,769 21,630 8.4 4.4 2.2 USSR 4,528 8,037 11,475 11,756 12,186 12,617 13,048 14,340 15,636 9.6 5.2 2.2 EASTERN EUROPE 2,927 4,541 4,543 4,634 4,727 4,821 4,917 5,429 5,994 6.6 2.0 2.0 DEVELOPING 9,183 25,636 34,910 36,776 37,901 39,558 41,367 50,698 61,298 11.0 9.3 4.0 ASIA 6,160 19,353 27,024 28,076 28,970 30,333 31,817 39,631 48,676 12.3 10.6 4.3 CHINA 3,125 11,427 14,082 15,008 15,249 15,912 16,C33 22,434 27,749 13.2 11.5 4.8 INDIA 1,334 3,616 6,529 6,938 7,376 7,845 8,364 9,194 11,848 12.4 10.2 4.2 AMERICA 1,284 2,790 3,774 3,738 3,762 3,845 3,952 4,362 4,822 8.5 6.3 2.0 SOUTHERN EUROPE 895 1,755 2,083 2,145 2,212 2,280 2,351 2,740 3,206 7.9 5.7 3.1 Ls WORLD 31,162 59,404 72,455 75,793 78,886 81,949 85,156 97,615 111,945 7.4 5.6 3.0 1 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)t END-POINT FOR PROJECTED PERIODS (1987-2000). Ll ESTIMATE. NOTEi SPLIT YEARS ENDING IN JUNE OF TaE YEARS SHOwN, * YEAR 64-66 DATA FOR CBINA ARE ESTIKATES. SOURCES: FAO, FERTILIZER YEARBOOK TAPES (ACTUAL); WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A7 NITRGENOUS FERTILIZERS - GROSS EXPORTS BY MAIN COUNIES AND ECONOIC REGIONS ACTUAL PROJECTED GROWTH RATES Al COOE_ S_ 1987 - EODNOMIrS 1969-71 1979-81 1986 1987/B 1986 1989 1990 1995 2000 1962-86 1970-S8 2000 ______________________._ ---------------------------------------------------------------------------------------------------------- ---------------------------------('000 TONS) ------------------------------------- ------(X PIR ANUh)------- INDUSTRIAL 5,411 7,810 8,624 8,784 8,791 8,934 8,925 10,400 11,390 4.6 5 3 2.0 NORTS AMMUCA 1,460 3,449 4.005 4,140 4,120 4,235 4,200 5,540 6,380 9.7 8.2 ',.4 UNITED STATES 1,039 2,488 2,460 2,500 2,550 2,595 2,640 2,890 3,100 9.7 6.8 1.8 CANADA 421 961 1,545 1,640 1,370 1,640 1,560 2,650 3,280 10.1 11.3 5.5 BEC-10 2,174 3,231 3,832 3,850 3,870 3,890 3,910 *,010 4,110 4.0 3.8 0.5 N 'TUERLA1S 587 1,180 1,320 1,400 1,450 1,500 1,520 1,640 1,720 8.3 4.8 1.6 JAPAN 1,305 584 187 184 181 179 176 163 150 -4.1 -13.0 -1.6 NOR-KARRET 871 2,765 4,788 4,790 4,850 4,780 5,160 6,130 7,340 15.2 10.8 3.3 USSR 198 1,050 2,378 2,300 2,290 2,140 2,470 3,250 4,240 16.0 11,7 4.8 EASTERN EUROPE 673 1,715 2,409 2,490 2,560 2,640 2,690 2,880 3,100 14.7 7.6 1.7 DEVEOPING 541 1,629 3,573 3,628 3,664 4,397 4,715 6,730 9,740 12.6 11.5 7.8 ASIA 229 1,208 2,487 2,445 2,510 2,987 3,173 4,310 5,850 26.7 14.5 6.9 KUWAIT 113 231 329 350 370 390 415 555 740 8.9 C/ 2.0 5.5 AMERICA 231 218 465 525 590 670 760 1,380 2,500 2.2 3.4 12.8 0 WORLD 6,823 12,204 1G,985 17,202 17,305 18,111 18,800 23,260 28,470 7.0 5.9 3.9 __________,__________,_______,,,_,,_______u___.... .. .. . .. .. . .. .. . ____.------ - -- - - -- - - -- - - -- - ---- -- - - -- - --- --_--_--_--_----________ Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). L/ ESTIMATE. C/ GROUTR RATE FOR 1966-86 PERIOD. NOTE, SPLIT YEARS ENDING IN JUNE OF THE YEARS SHOWN, * YE 64-66 DATA FOR CHINA ARE ESTIMATES. SOURCES, FAO, FEP.TILIZER YEARBOOK TAPES (ACTUAL); WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). T*AUB A8, 3I1WOS vMtILU8 - MM'8 tIOI UT MM COoScIU AND COSOSC tWIOUS I ACTUAL CD URm A 1~~~~~~~~~~- - - -- - - - - - - - - - - - - - -- -- - .. .. .... .. ....... "_.. . .. _.. _...... .. . . . . . . . . . . . . CouutfI 1"7 - uooltAIUs 1969-71 1979-81 1988 1987/1 1988 1S99 1990 1995 2000 19f1-84 1970-88 2000 -----------------------------------('000 TOS))------------------------------------ (2 PER AWU) ------- IUDUSTRI4L 1,942 5,125 8,669 8,169 8,437 8,680 6,940 9,536 10,390 9.5 10.2 1.9 NOTH AKZRCA 806 2,419 3,774 3,936 4,102 4,268 4,450 4, 536 5,150 10.9 11.6 2.1 UNXTED STATES 795 2,298 3,543 3,700 3,d60 4,020 4.196 4,350 4,830 10.7 11.3 2.1 ZEC-10 981 2,413 4,262 3,575 3,650 3,700 3,750 4,000 4,470 9.0 9.2 1.7 VRAECE 183 760 1,244 1,270 1,310 1,350 1,400 1,660 1,960 19.1 11.5 3.4 MMN-MAKET 352 346 535 546 557 568 580 640 710 3.8 2.6 2.0 EASTERN EUROPE 349 316 490 500 510 520 330 590 650 3.4 2.0 2.0 DEVELOPINO 4,291 7,178 7,887 8,487 8,311 8,500 9,280 13,084 17,370 6.2 4.4 5.7 ASIA 2,849 4,526 5,192 5,670 6,036 5,813 6,090 9,084 12,360 6.7 5.4 6.2 CHINA 1,491 1,615 1,757 2,840 2,870 2,933 3,290 6,300 8,310 6.2 4.2 8.6 INDIA 542 1,287 1,106 1,040 1,233 1,300 1,330 1,344 1,400 6.3 5.3 2.3 AFRICA 450 823 750 780 8t0 840 870 1,050 1,280 5.4 2.5 3.9 AMERICA 698 1,329 1,343 1,415 1,490 1,570 1,660 2,160 2,810 5.6 2.5 5.4 BRAZIL 208 446 286 310 355 400 415 500 600 7.7 -2.1 5.2 SOUTHERN EUROPE 288 484 583 602 621 640 660 770 900 3.8 2.8 3.1 WORLD 6,586 12,649 17,091 17,202 17,305 18,111 18,800 23,260 28,470 7.3 6.6 3.9 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961'86)z END-POINT FOR PROJECTED PERIODS (1987^2000). El ESTIMATE. NOTE: SPLIT YEARS ENDING IN JUNE OF THE YEARS SHOWN, * YEAR 64-66 DATA FOR CHINA ARE ESTIMATES. SOURCZS: FAO, FERTILIZER YEARBOOK TAPES (ACTUAL)$ WORLD BANK, INTERNATIONAL ECONOMICS DEPARTME r' (PROJECTED). TABLI A9s PSOSPUATh PlRS'tL21R8 - PRODUCTION BY MAIN COUNTRIES AND ECO?NOIC REGIONS ACTUAL PROJECTED OROWTH RATES Al COAIN8SI 1967 - ieOiiB 1969-71 1979-81 1986 196715 I9Se 1999 199Q 199 2000 1961-06 1970-66 2000 --------T------------------------ ON-)-(1 PE1-------------------------------------- ------(X PER A )------- INDUSTRIAL 13,376 16,036 14,902 15,264 13,560 15,935 16,413 17,668 19,310 2.2 0.4 1i's NORTH AM4RICA 5,901 9,253 8,613 8,824 9,040 9,265 9,493 10,718 12,100 4.3 2.6 2.5 UNIITED STATES 5,324 8,558 8,133 8,336 8,544 8,760 8,980 10,160 11,500 4.4 2.9 2.5 ZEC-10 5,136 4,362 3,324 3,400 3,440 3,480 3,490 3,525 3,560 -0.4 -2.8 0.3 FRANCE 1,451 1,338 1,00C 925 900 900 900 950 930 0.S -2.7 0.2 JAPAN 693 657 588 540 510 510 510 500 500 0.4 -1.0 0.6 N0N-KUMANT S,332 8,908 11,145 11,336 11,529 11,729 11,930 12,995 14,160 6,6 4.0 1.7 USSR 3,424 6,009 8,477 8,647 8,819 8,996 9,176 10,130 11,180 7.2 4.9 2.0 EASTERJ EUROPE 1,908 2,809 2,668 2,689 2,710 2,733 2,754 2,865 2,930 5.3 1.8 0.6 DIVELOPINO 3,312 8,233 10,972 11,744 12,270 1 ,(57 13,067 16,270 20,070 9.8 7.6 *.2 ASIA 1,577 4,203 5,911 6,120 6,330 6,550 6,780 8,360 9,940 11.5 8.4 3.8 CHINA 947 2,277 2,136 2,182 2,243 2,304 2,410 3,250 4,110 10.4 5.3 5.0 1 "' DIA 247 869 1,692 1,780 1,810 1,645 1,940 2,420 2,900 13.0 13.3 3.6 AFRICA 783 1,275 1,816 2,107 2,283 2,347 2,490 3,310 4,boo 7.3 5.6 6.4 HOROCCO 124 178 467 575 630 800 870 1,180 1,500 12.2 9.1 7.7 TUNISIA 190 393 702 760 820 840 a53 1,070 1,300 8.3 9.5 4.2 1 ANRICA 478 1,677 1,921 21,237 2,257 2,340 2,362 2,930 3,630 11.1 7.9 4.2 3PAZIL 209 1,342 1,526 1,630 1,690 1,7S0 1,820 2,210 2,700 14.5 12.2 4.0 SOUTHERN gUROPB 474 1,044 1,306 1,360 1,380 1,400 1,435 1,650 1,880 7.4 6.9 2.5 WORLD 22,020 33,177 37,018 38,34* 39,379 40,321 41,410 46,933 53,540 4.6 3.o 2.6 …--------_-_-------------..-------.--..--.-..-----_---------------.------------------______--___---_--,___-______-________________.__ A/ LEAST SQUARES TRIED POM HISTORICAL PERIODS (1961-86)i ENC POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. NOTE: SPLIT YEARS ENDING IN JUNE OF THE YLARS SHWN, * YEM 64-66 DATA FOR CHINA ARE ESTIMATES. SOURCESi FAO, FERTILIZER YEAROOR TAPES (ACTUAL)i WORLD An, INTERNATIONAL ECONoeICs DEPARTHENT (PROJECTED). TABLX A10 PROOPHATS FERTILIZERS - CONSUMPTION BY MAIN COUNTRIES AND EonomHiC MEIONS ACTUAL PROJECTED CROV RATES A.] woumxlss/ 1987 - ECONOMIES 1969-71 l979-8l 1986 1987/B 1988 1989 1990 1995 2000 l961-86 1970-86 2000 -----------------------------------('000 TONS)------------------------------------- ------(1 PER AM)------- INDUSTRIAL 11,776 12,497 10,418 11,094 11,802 12,328 12,735 13,384 14,090 1.2 -0.7 1.9 NORTH AMYRICA 4,616 5,375 4,283 4,383 4,766 5,017 5,259 5,614 6,020 1.7 -0.3 2.5 UNITRD STATES 4,299 4,761 3,641 3,711 4,062 4,279 4,491 *,770 5,100 1.4 -0.9 2.5 EEC-10 4,759 4,732 4,051 4,270 4,482 4,660 4,805 4,98o 5,160 0.9 -1.0 1.5 FRANCE 1,808 1,811 1,372 1,199 1,427 1,456 1,485 1,540 1,600 1.4 -1.7 1.0 WM-MARKET 5,160 8,710 11,203 11,552 11,743 11,936 12,133 13,149 14,203 6.6 4.3 1.6 USSR 3,092 5,650 8,354 8,318 8,6'14 8,854 9,030 9,950 10,960 7.5 5.7 2.0 ASTEzRN EUROPE 2,068 3,061 2,849 3,034 3,059 3,082 3,105 3,197 3,248 5.1 1.6 0.5 DEVELOPING 4,042 9,931. 12,793 13,746 14,285 14,847 15,383 18,941 22,575 9.2 7.3 3.4 ASIA 1,966 5,287 7,817 8,462 8,822 9,182 9,509 12,127 14,630 10.9 9.2 4.3 CHINA 947 2,575 2,770 4,204 4,410 4,593 4,739 6,386 7,930 11.9 8.0 3.0 AFRICA 555 1,096 1,101 1,425 1,481 1,540 1,603 1,956 2,349 6.6 4.9 3.9 AHERICA 956 2,470 2,778 2,728 2,811 2,912 3,012 3,337 3,733 6.8 5.3 2.4 JRAZIL 392 1,664 1,682 1,810 1,871 1,940 2,013 2,240 2,544 13.1 6.6 2.7 SOUTHERN EUROPR 363 1,072 1,094 1,131 1,171 1,213 1,259 1,521 1,863 6.1 4.5 3.9 WORLD 20,977 31,138 34,414 36,392 37,830 19,111 40,253 45,472 50,873 4.5 3.0 2.4 A/ LEAST SQUARES TRSND FOR 8ISTORICAL PERIODS (1961-86)$ END-POINT FOR PROJECTED PERIODS (1987-2000). '/ ESTIMTE. MOTh: SPLIT YAR.S ENDING IN JUoN THE YEARS SWN, * YEAR 64-66 DATA FOR CHINA ARE ESTIKATES. SOURCEs: lAO, ?EtTILIZER YEARBOOK TAPES (ACTUAL)l WORLD BANK, INTeMATIONtAL ECOOCHICS DEPARTMENT (PROJECTED). TABUL All t PSUATS MTrLIuEaS - OIS WXPTS BY MAIN OUNTRIS AID Z8COMC RbGIOPS ACTUAL PROJECTED GIUOMT RATES Al COUwTRIES/ 1987 - sCOWOFlSs 1969-71 1979-81 1986 198713 1988 1989 1990 1995 2000 1961-86 1970-86 00 ----------------------------------('000 TONS)----------------------------------- . ......( Pn AmW) ------- INDUSTRIAL 2,429 3,314 5,682 5,798 5.910 6,025 6,141 7,190 8,275 7.2 5.7 2.8 NORTH AMERICA 1,126 3,857 3,959 4,056 4,157 4,259 4,363 5,348 6,353 11.5 6.6 3.5 UWIRD STATES 860 3,646 3,8S4 3,981 4,081 4,183 4,267 5,270 6,273 12.7 10.4 3,6 CANADA 266 211 75 75 76 76 76 78 SO 0.4 -8.2 0.4 EEC-1 1,176 1,255 1,388 1,394 1,399 1,405 1,410 1,440 1,470 1.8 0.4 0.4 1R.AMZ 97 173 112 114 116 118 120 135 150 2.4 0.2 2.1 Nm-MARKET 139 484 .8o 601 614 629 639 710 800 1lt0 11.5 2.2 USSR 115 243 191 200 209 220 226 280 340 7.5 7.5 4.2 DEVELOPING 453 1,121 2,369 2,591 2,839 3,236 3,519 4,610 5,710 12.7 11.4 6.3 ASIA 21 341 862 1,010 1,180 1,494 1,693 1,870 2,100 32.5 24.1 5.8 AFRICA 307 512 985 1,046 1,111 1,180 1,250 2,090 2,.80 10.0 8.9 8.1 TUJNISIA 183 355 575 610 640 670 700 700 1,170 S.4 8.9 5.1 MOROCCO 88 98 336 360 560 620 690 960 1,490 12.4 Cl 10.4 11,6 NORLO 3,021 6,919 8,639 8,990 9,363 9,890 10,299 12,510 14,785 8.3 7.1 3.9 Al LEAST SQUARES TREND FOR HISTORICAL PERIOD)S (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMATE. Cl GROWTHf RATE FOR 1963-86 PERIOD. NOTE, SPLIT YEARS ENDING IN JUNE O THE YEARS SHOWN, * YEAR 64-66 DATA FOR CHINA ARE ESTIMATES. SOu1RCEs FAO, FERTILIZER YEARBOOK TAPES (ACTUAL)l WORLD BANK, INTERNATIONAL ECONO*ICS DEPARTMENT (PROJECTED). TANLI A12, PUOSPEATE VTILIZERS - C2OSS IMPORTS BY MAIN COUNTRIES AND EOONCMIC REGIONS ACTUAL PROJECTED GROWTH RATES Al OOUVNRlISI 1987 - EooUWsS 1969-71 1979-81 1986 1987/3 1988 1989 1990 1995 2000 196l-86 1970-86 2000 ----------------------------------('000 TONS) ------------------------------------- ------ (X PER AN") ------- INDUSTRIAL 1,363 2,282 2,923 3,177 3,424 3,624 3,820 4,070 *,330 3.7 5.0 2.4 NOUIH AMICA 286 355 317 367 392 415 441 477 516 3.2 -0.3 2.7 UNITD STATES 267 207 107 108 108 109 110 113 116 0.6 -6.5 0.6 DEC-10 911 1,663 2,123 1,270 2,430 2,590 2,730 2,900 3,080 6.3 5.4 2.4 FRANCE 348 649 580 588 643 674 705 725 800 4.5 2.5 2.4 NoW-MARRET 230 525 907 1,059 1,116 1,170 1,187 1,210 1,240 9.2 8.3 1.2 EASTERN EUROPE 227 446 497 646 700 750 765 770 780 7.6 5.8 1.5 DEVELOPING 1,232 3,176 3,722 4,754 4,823 5,096 5,292 7,230 9,215 087 7,9 5.2 ASIA 450 1,650 2,380 3,372 3,399 3,632 3,784 5,480 7,180 10.6 12.7 6.0 ARICA 135 337 351 365 380 394 410 500 610 8.9 8.8 4.0 AMZICA 535 874 816 836 856 876 897 1,010 1,140 5.9 0.7 2.4 BRAZIL 183 326 160 180 185 190 200 60 50 -10,8 -35.7 -9.4 SOUTEN EUROPE 112 310 171 177 184 190 197 235 280 3.6 2.0 3.6 WORLD 2,625 5,982 7,552 8,990 9,363 9,890 10,299 12,510 14,785 7.4 6.7 3.9 At LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PROJECTED PERIODS (1.987-2000). Bl ESTIMATE. OSZ SPLIT YEARS ENDING IN JUNE OF THE YEARS SHO4N, * YEAR 64-66 DATA FOR CHINA ARE ESTIKATES. SOURCES, FAO, FERTILIZER YEARBOOK TAPES (ACTUAL), WIL)D BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A13 POTASH rRTILIZMSR - PRODUCTION BY MAIN COUNTRIES All") .CONOMIC REGIONS ACTUA__ PROJECTEI CROWTH RATES Al COUNTRIES/ 1987 - BCOFKtIES 1969-71 1979-81 1966 196713 1988 1989 1990 1995 2000 1961-86 1970-86 2000 -------------------- -------------('000 TONSN------------------------------------- (Z PER ANUM)------- INDUSTRIAL 10,672 14,307 13,123 14,283 1V 703 15,038 15,302 16,360 17,540 2.8 1.3 1.6 NORT AKnERCA 5,779 8,792 8,255 9,043 9,443 9,748 9,982 10,960 12,090 4.6 1.9 2.3 IUNITZD STATES 2,224 1,977 1,212 1,193 1,268 1,248 1,227 1,150 1,100 -2.7 -4,5 -U.6 CANADA 3,553 6,814 7,041 7,850 8,17S 8,300 8,755 9,810 10,990 9.7 el 4.2 2.6 EZC-10 4,892 5,515 4,868 5,240 5,260 5,290 3,320 5,400 5,450 0.9 0.5 0,3 EOE4UNY, FED. REP. 2,395 2,564 2,061 2,500 2,500 2,500 2,300 2,500 2,500 0.6 -0.2 0.0 PRANCE 1,815 1,858 1,558 1,600 1,600 1,600 1,600 1,600 1,600 -0.2 -0.8 0.0 NOO-MUARKET 6,443 11,142 13,685 13,990 14,190 14,390 14,660 16,140 17,800 6.7 4.1 1.9 USSR 4,046 7,716 10,200 10,500 10,700 10,900 11,170 12,640 14,300 8.9 4.8 2.4 EASTERN EUROPE 2,397 3,426 3,485 3,490 3,490 3,490 3,490 3,50n 3,500 3.3 2.6 0.0 DEVYLOPING 694 859 1,952 2,100 2,200 2,230 2,260 2,750 3,350 8.9 4.2 3.7 SOUTHERN EUROPE 521 830 1,264 1,300 1,320 1,350 1,400 1,510 1.600 9.2 5.1 1.6 WORLD 17,809 26,307 28.760 30,373 31,093 31,658 32,222 35,250 38,690 4.3 2.7 1.9 t., Al LEAST TWARBS TREND V( HISTORICAL CPkIODS (1961-S6), END-POINT FOR PROJECTEr PERIODS (1987-2000). Di ESTIMATZ. Cl GROWTH RATE FOR 1962-86 PlRIOD. MMT: SPLIT YEARS KNDING IN JUNE OF THE Y(ARS SHOWN, * YEAR 64-66 DATA FOR CHINA ARM STIMAEs. SOURCESi FAO, FERTILIZER YEARBOMo TAPES (ACTUAL) i WORLD LANK, ITU.ATXONAL ECOICS DEPARTMT (P0CJ-CTED) TABUL A14t POTASE FERTILIZERS - CO*SUMPTI"1W BY MAIN COUNTRIES AND ECOIOWCIC RE IONS ACTUAL PROJCiTED aROIWT RATES Al 1987 - Euc4Tto 0969-71 t197-21 1986 s 1.711 19R8 1989 1990 1993 2000 1961-86 1910-86 2000 - ( 000 TON-S)- ( PER AUH>--- INDUSTRIAL 9,506 11,801 10,746 11,699 12,353 13,039 13,447 14,525 15,53U 2.3 0.8 2.2 JMTH MCA 3,984 5,855 4,792 4,978 5,400 5,676 5,962 6,834 7,709 Z .5 1.4 3.4 UNINTD STATES 3,801 5,502 4,402 4.583 4,996 5,264 5,549 6,370 7,198 3.4 1.2 3.5 AXC-lo 4,145 4,551 4,672 4,-85 4,971 5,363 5,487 5,680 5,765 1.6 0.5 1.4 GERMANY, FED. REP. 1,179 1,135 932 941 951 960 970 1,019 1,071 -0.4 -1.5 1.0 FRANCE 1,390 1,725 1,878 1,695 1,912 1,929 1, 47 2,036 2,129 3.2 1.6 0.9 JAPAN 619 594 599 634 671 679 673 652 627 0.2 -0.1 -0.1 N -lARLU 5,136 7,929 9,759 9,837 10,013 10,217 10,432 11,525 12,583 6.5 3.3 1.9 USSR 2,560 4,740 6,677 6,850 7,029 7,211 7,399 8,412 9,388 8.6 5.2 2.5 ASTERN EROPN 2,573 3,189 3,082 2,987 2,984 3,006 3,033 3,113 3,195 4.1 0.4 0.5 DI EVO?ING 1,634 4,269 5,608 5,837 6,057 6,278 6,503 7,569 8,827 9.7 7.4 3.2 ASIA 594 1,937 2,739 2,811 2,912 3,036 3,163 3,839 4.575 12.4 9.8 3.8 ANICA 608 1,581 2,006 2,060 2,149 2,244 2,301 2,533 2,874 9.9 6.6 2.6 kn bRAZIL 286 1,059 1,282 1,327 1,397 1,450 1,506 1,682 1,930 13.7 7.7 2.9 WORLD 16,276 23,999 26,113 27,373 28,423 29,534 30,382 33,619 36,940 4.5 2.7 2.3 Al LEAST SQUARES TR6N FOR HISTORICAL PERIODS (1961-86)s END-POINT FOR PROJECTLD PERIODS (1987-2000). a/ ESTUIATE. NlOTE SPLIT YEARS ENDING IN JUNE OF THE YEARS SHQN, * YEAR 64-66 DATA FOR CHINA ARE ESTIMATES. SOURCES: FAO, ERTILIZER YEARBOOK TAPES (ACTUAL): ILD BANK, INTERNATIONAL ECOCICS DEPARTM (PROJECTED). TABU Al5i POTASE IUTILIZES - 00SS MaOT B DY MAIN COUVTRIES DAN ECOiEIC RZIONS ACTUAL PROJECTED OP.l4E7 RATES Al COUNMRES/ 1987- £scoWmiS 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-8C 2000 ----------------------------------('000 TONS) ------------------------------------ ------(1 PER ANUN) ------- IWDUSTRIAL 6,146 9,574 9,902 10,267 10,786 11,096 11,342 12,360 13,520 5.4 2.6 2.1 *ORTV AKRICA 3,944 6,958 7,354 7,701 8,202 8,494 8,722 9,650 10,710 9.0 3.2 2.6 CALADA 3,352 6,190 6,810 7,171 7,685 7,990 8,230 9,220 10,330 14.9 4.0 2.8 UNITED STATES 592 767 544 530 517 504 4§2 430 3eo 0.7 -2.5 -2.5 liC-lo 2,202 2,616 2,548 2,536 2,584 2,602 2,620 2,710 2,810 1.5 1.5 0.7 CGEMANY, FED. REP. 1,151 1,43- 1,381 1,395 1,410 1,420 1,440 1,510 1,590 2.2 1.8 1.0 FRANCE 762 60.1 600 580 560 540 520 490 410 -1.3 -2.3 -1.6 NO6-NARUST 2,924 5,306 5,752 5,864 5,881 5,896 5,963 6,360 6,930 6,8 3.9 1.3 USSR 1,206 2,!,79 2,938 3,044 3,061 3,076 3,145 3,530 4,100 10.9 4.4 2.3 STRTN EUROPE 1,717 2.,B07 2,814 2,620 2,820 2,820 2,820 2,830 2,830 4.5 3.5 0.0 DKVIm.OPINr 523 798 1,779 1,911 2,002 2,029 2,057 2,500 3,050 10.2 7.8 3.7 SOUTHNI EUROPE 511 781 1:106 1,138 1,155 1,181 1,225 1,320 1,400 9.5 5.7 1.6 ISRAEL 511 781 1, .16 1,138 1,155 1,181 1,2'.5 1,320 1,400 9,5 5.7 1.6 kumlLD 9,593 15,758 i'.433 18,042 18,669 19,021 19,364 21,220 23,500 6.1 3.4 4.11 Al LEAST SQUARES TREND FMR HISTORICAL PERIODS (1961-86) i END-POINT FOR PROJECTED PERIODS (1987-2000). DI ESTIMATE. NiOTE SPLIT YEARS ENDING IN JUNE OF THE YEAaS SUMiR, * YEAR 64 66 DATA FOR CHINA ARE ESTIMATES. SOURCBS: PAO, FERTILIZER YEARBF TAPES (ACTUAL); WORLD DAK, INTEREATIOMAL ECOKOMICS DEPARTMENT (PROJECTED). TABLE A16t POTASS FERTILIZERS - 5ROSS W (IPORTS BY MAIN COUNTRIES AND ECONO1IC RE(,IONS ----------_--_-----------------_------------_---------------------__---------__------------------_--_--.---_--_-__.-_----__--_--_.- ACTUAL PROJECTED GROWJTH RATES Al COUNTRIESI 1987 - ECCNCIHES 1969-71 1979-81 1986 1987/3 2988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------------------------------------------------------------__-----------__-----------------------..----------------_---_----- ----------------------------------('000 TONS) ------------------------------------- ------ (% PER ANNUM)------- INDUSTRIAL 5,831 8,627 8,595 9,191 9,501 9,712 9,907 10,630 11,570 5.1 2.6 1.8 NORTH AKERICA 2,530 4,764 3,966 4,436 4,739 4,846 4,934 5,170 5,590 9.0 3.2 1.8 UNITED STATES 2,493 4,743 3,950 4,420 4,723 4,830 4,910 5,160 5,580 9.7 3.3 1.8 gEC-10 1,866 2,274 3,089 3,151 3,214 3,278 3,344 3,690 4,070 3.8 3.2 2.0 UNITED KINGDOH( 508 365 345 355 365 375 385 397 410 -1.1 -2.4 1.1 JAPAN 600 609 624 625 626 628 629 635 640 0.2 -0.5 0.2 NOW-JARKET 1,920 2,662 2,836 2,850 2,747 2,767 2,790 2,860 2,940 6.3 1.5 0.2 KASTDI EUMOPE 1,920 2,662 2,805 2,819 2,716 2,736 2,760 2,830 2,910 6,2 1.5 0.2 DEVELOPING 1,651 4,446 5,772 6,101 6,421 6,542 6,667 7,730 8,990 9.9 7.6 3.0 ASIA 550 2,005 2,744 2,848 2,957 3,069 3,185 3,840 4,620 12.2 10.3 3.8 AXEZICA 021 1,029 2,075 2,1ZQ 2,209 2,304 2,361 2,590 2,930 10.4 0.7 2.5 hUA!IL 286 1,059 1,277 1,327 1,397 1,450 1,506 1,682 1,930 13.7 7,7 2,9 WORLD 9,402 15,735 17,204 18,042 18,669 19,021 19,364 21,220 23,500 6.3 3.6 2.1 ..__________________________________________________________________________________________._________---------------------------- Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)1 END-POINT FOR PROJECTED PERIODS (2987-2000). B/ ESTIMATE. NOTE: SPLIT YEARS ENDING IN JUNE OF THE YEARS SHOIN, * YEAR 64-66 DATA FOR CHINA ARE ESTIHATES. SOURCESi FAO, FERTILIZER YEARBOOK TAPES (ACTUAL)i IARW BANK, INTER)IAT1OMAL ECONOMICS DEPARTMENT (PROJECTED). TABU A17 P7 lI2llE3I - N{IIqs, 190-87 (JCtALW) AND 19%-2000 (160J1f2) - (/In) ~ - (S/Ibn) ~ (3/lbk8)~ VW3J -- -- p .ck 6/-- b/ - c/ --P d/ - */5 O=ent 3 1985 0onwtan S Qjrr.st 1985 &cntant 5 awre. $ l19 Cortmt S Garrnt f lM5 Cutent $ O t 3 195 o t 4 tV f/ US G /M f/ LS 7t MNf/ E( ' 3 v Ffl us cw Li U5 o 1960 13.0 43.5 47.0 28.5 95.3 103.0 1961 13.0 42.8 46.5 30.0 96.7 107.4 19I2 11,5 37*1 40.3 30.0 96.8 105.1 1963 11.5 37.8 39.7 72,3 237.8 249.7 30.0 98,7 101.6 1964 12.5 40.2 42.5 90.5 291.0 307.4 32.5 10.5 110.4 1965 14.0 44.7 46.4 95.8 36. 1 317.2 29.5 94.2 97.7 1966 13.0 40.1 41.6 89.3 275.6 2B3.8 27.5 84.9 tt.0 1967 12.0 36.7 37.3 79.3 242.5 246.6 41.0 143.7 146.3 68.5 209.5 213,2 25.5 76,0 79.4 -:fO it.5 35.4 34.1 65.5 201.5 194.2 36.0 J16.9 112.7 65.0 201.5 194.2 24.0 73.a 71,2 1969 11.3 33.0 31.8 56.0 163.7 157.5 39.0 114.0 109.7 i5.0 1096 103.Z ZZ.0 64,3 61;9 1970 11,0 3D,3 29,3 483 133.1 128.6 42.5 117,1 113.1 54.0 148.8 143.7 31.5 8.8 3. 1971 11.3 29.5 28.5 46.0 120.1 116.0 43.3 113.1 109.2 61.S 161.4 155.8 32S 84.9 81.9 1972 11.5 27.6 27.7 5 142.2 142.7 67.5 161.9 162.4 91.0 216.2 219.0 33.5 0. 3 50.6 1973 13.8 28.5 31.2 94.8 195.9 214,0 99,5 20546 224,7 118.8 245.5 26.2 42.3 67.8 .0 1974 54.5 92.5 113.0 315.8 53t.2 654.6 3 03.6 515.5 629.4 332.6 564.7 6119.5 60.5 102.7 125.4 1975 67.0 102.3 126.4 198.0 302,3 173.4 p02.5 309.2 381.9 243.0 371.0 458.3 81.3 124.1 153.) 1976 36.0 54.2 63.9 112.0 168.7 199.7 90.9 236.9 162.2 120.0 1890.7 212.8 55.0 82.8 97.6 1077 30.5 41.8 50.7 127.4 174.5 211.8 97.9 134.1 162.8 133.0 182.2 221.1 5L.0 69.9 PA4.8 1 1978 29.0 34.6 44.9 144.8 172.6 224.3 98.0 116.8 151.8 139.8 166.6 216.5 56.4 67.2 8.4 1979 33.Q 34.7 47.0 172.9 181.8 246.2 142.2 149.5 202.5 193.3 203.3 273.2 76.7 91.7 109.2 1980 i4.7 44.8 60.9 222.1 213.0 289. 180.3 172.9 235.1 222.2 213.0 2i9.8 115.7 110.9 150.9 1981 49.5 47.2 58.9 216.0 206.1 257.1 161.3 153.9 192.0 195., 186.1 232.1 112.4 107.3 133.t 1982 42.4 41.0 47.4 158.8 153.7 177.6 138.4 134.0 154.8 182.8 177.0 20.5 81.6 79.0 91.3 1983 36.9 36.6 39.7 135.4 134.5 145.8 131.7 133.8 145,1 183.5 182.2 197.6 75.3 74.8 81.1 1984 38.3 38.7 39.7 171.3 173.0 177.6 L31.3 132.6 136.1 189.1 191.0 19E.1 83.7 e4.5 36.8 1965 33.9 33.9 33.9 136.3 136.3 136., 121.4 121.4 121.4 169.0 169.0 169.0 84.0 84i0 84.0 1986 34.0 28.9 33.5 107.0 90.4 104.9 121.2 102.5 118.4 154.2 130.4 151.2 68.8 W.2 67.5 1987 33.0 28.5 35.2 116.6 89.7 111.1 138.0 106.2 131,5 173.7 133.7 165.5 69.0 53.1 65.7 Ptojwc < 19H18 36.0 25.6 33.0 148.0 105.2 135.6 157.0 111.6 143.8 196.0 139.3 179.6 87.0 61.8 79.7 1989 39.0 26.1 34.2 180.0 120.4 157,7 163.0 109.0 242.8 228.0 152.5 199,8 95.0 63.5 83.2 1990 43,0 28.3 35,9 23,0 151,6 191,8 185.0 121,9 154.2 269.0 177.3 224.3 105.0 69.2 87.5 1995 58.0 32.1 37.2 255.0 140.9 163.7 250.0 138.2 160.5 340.0 187.9 21f.2 130.0 71.8 13.4 2010 77.0 34.0 39.4 30D.0 132.4 )53.6 330.0 145.6 169.0 440.0 194.2 225.3 174.0 75.0 87.1 Pr i8xw of 75$ 31L Pock, PAS CAsbl3na through 1975; that of 722 8PL Pod.k in 1976-80; " that OF 707 31PL 8ck fic 1981 ar3sI. b/ A, f.o.b. N.W. ?zope. S 8Ik, f.o.b. iJ6 Glf. b1ak, f.o.b. US U.. fjatod by hwadccuring Iait Value (KiN) iD. j 1f3ated by ili 6 Defiator. S-,cs. Bsritish S.lr Corp. {oc1; br1d B.*, Int-ntt-l E:t-o N7PArtt (ptrtected). - 25? - PHOSPHATE ROCK CONSTANT 1985 DOLLAR PRICES ^) 180- 140- 120 . 60 ~ ~ ~ ~ ~ ~ ~ . a,A 80- 20- 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 OEFLATED SY MANUFACTURING UNIT VALWE (aUV ) INDEX ......''w'* DEFLAIID SY U.S. GNP DEFLATOR. * 1 - 87 ACTUAL; 1188 - 2000 PROJECTD . SOURCE: WORLD BANK. INRNAT1ONAL ECONOMICS DEPARTENT. - 258 - UREA (CONSTANT 1985 DOLLAR PRICES ) Is~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 600 0i i' 500- a' n l .,, .. , . , , . ., .................. 100 a 1960 1965 1970 1975 19S0 1985 1990 199s 2009 | DEFLATED BY MANUFACTURING UNIT VALUE M UV ) ;NDEX ......-- DEFLATED BY U.S. GNP DVFLATOR. * 1948 - 87 ACTUAL ; !988 - 2000 PROJECTED . SOURCE : WORLD BANK , INTRATIONAL ECONOMICS DEPARMNT. - 259 - TSP (CONSTANT 1986 DOLLAR PRICES *) 700 600 - *, X, 500 - 300 200- 1~~~~~ '" 100 - 0~~~~~~~~~~~~~ 196S tl0 ~ '1975 1980 1985 1990 199§~ 20 00 DEfLATED BY MANUFACTURING UNIT VALUE ( VUV IN1DEX a - .'..'. ' ... DEFLATED BY U.S. GNP DELTOR. * SA -g 9 ALAL ; 1S$8 -2000 PROJCTD . SOURCE: *woRLD BAIIK, INTERNATIONAL ECONOMICS DEPARTMET . __ _60 - DAP (CONSTANT 1985 DOLLAR PRICES ') 1000 r 800 A 600 I' . . . . I . . . . , . . . . , .. . . Ilb . . ., . . . ., . . . ., . . ., , . . . .I i9S5 1960' 19,6S 1970 1975 19t0 .. 1965 1§90 1995 2Q00 - DEFLATED BY MANUFACTURING UNIT VALUE ( MUV ) INDEX ........... DEQLATCD BY U.S. GNP DCELTOR. * 194 - 97 ACTUAL; 1988gg - 2000 PROJECTED . SOURCE: WORLD BANK . IKTRNATIONAL ECONOMICS DEPARTMNT . - 261 - POTASSIUM CHLORIDE (CONSTANT 1985 DOLLAR PRICES ) 180 140 100+ .~~~~~~~~~~~~~~~~I _ _ lc a,/ h$uildup in 1985/86 had about run its course by 1987/88. However, dry weather in the main Asian producing countries during 1987 seriously reduced foodgrain and other agricultural production. The resulting increase in prices for crops that compete with jute for land area therefore acted to delay an expansion of jute acreage until 1989. Therefore 1988 production will unlikely fully match consuaption, supplies will tighten further, and prices will continue to rise, particularly for the higher grades. Thus, we foresee the indicator price increasing from US$322.80/ton in 1987 to US$450/ton in 1989 in nominal terms. The expected recovery in food crop production in 1988 and the resulting moderation of food prices should result in a large jute crop harvested late in 1989, depressing jute prices during 1990. Of course, these forecasts can be greatly upset by adverse weather conditions during this period in Bangladesh or India. 30. In the longer term the indicator jute price (Bangladesh white, D grade f.o.b. Bangladesh) is projected at around $235-245 in 1985 constant dollars with prices on a downtrend. Comparison of the 1988 Price Forecast with the 1986 Price Forecast 31. Jute prices vary by type and grade. Generally, tossa jute is more valuable than the same grade of white jute due to tossa's longer and finer fiber, higher strength, and increased flexibility. The f.o.b. export price for Bangladesh white, grade D, is taken as the world indicator price for jute. 32. Comparisons of the 1986 forecast with actual 1986-87 prices and of the 1986 and 1988 forecasts for the period 1988-90 are showa in Table 3. The forecasts for 1986 and 1987 were in the correct direction, and the magnitudes were close to actual prices (errors were 1.8% in 1986 and 7.7% in 1987). TABLE 3: JUTE PRICESS,* COMPARISONS OF 1988 AND 1986 FORECASTS AND ACTUAL 1986-87 PRICES Year 1985 1986 1987 1988 1989 1990 -------------------------(US$/Ton)…-------------------- Actual Price 583 270 323 1986 Forecast 275 300 340 375 400 1988 Forecast 370 450 320 * Bangladesh, BWD, f.o.b. Chittagong/Chalna. - 291 - 33. The 1988 jute price forecasts for 1988 and 1989 are higher than the 1986 forecast due largely to the effects of the 1987 drought in Bangladesh and India and the floods in Bangladesh in 1988. Supplies of jute and food crops were lower than expected in 1987 due to unfavorable growing conditions, and changes in relative prices are unlikely to favor expanded jute acreage before the 1989 crop is sown early next year. A large expansion in the jute crop to be harvested in late 1989 is expected to result in lower fiber prices in 1990. TABLE Ali JUTE - PRODUCTION BY KAIN COUNIRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROW4TH RATES A/ COUTRtIES / 1987 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86, 1/' -86 2000 !----(-------------- ----------('000 TONS) ------------------------------------- ----- ; ANNUM) ----- INDUSTRIAL 0 0 0 0 0 0 0 0 0 °0.0 00 NON-XARX8T 53 48 45 45 45 46 44 43 42 0.3 -0.6 *0,5 DEVE1LOPINOG 3,112 3,652 3,610 2,880 3,640 3,975 3,566 4,042 4,153 1.1 2.3 2.9 ASIA 3,011 3,517 3,507 2,8lS 2,855 3,850 3,445 3,920 4,030 1.1 2.3 2,8 INDIA 1,189 1,469 1,440 1,170 1,150 1,600 1,300 1,575 1,625 1.1 2.7 2.6 8ANOLADESH 1,144 1,026 983 684 640 1,100 1,000 1,150 1,200 -0.8 0.6 4.4 CHINA 168 575 710 615 700 730 750 800 825 9.3 11.2 2.3 THAILAND 394 233 240 201 170 220 215 195 180 -1.6 -4.6 -0.8 WORLD 3,165 3,700 3,635 2,925 3,005 4,020 3,610 4,085 4,195 1.1 2.2 2.8 A/ Ll!ART SWARES REND FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PROJECTED PZRIODS (19S7-2000). B/ ESTIMATE. 8OURCeSI PAO, PRODUCTION YEARBOOK TAPES (ACTUAL), WORLD DANK, INTRNATIONAL ECONOMICS DEPARTMENT (PROJECTED). .. __ . _. . ........ _. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I. TALI A2t JUT! - APPARZNT COtISUMPTIOW BY MAIN COUNTRIES AND ECOOMIC REG1ONS ACTUAL PROJECTED GROWTH RATFA A/ COUNTRIESi 1;,87 - ECO"OWIES 1969-71 1979-81 1986 1987/P 1988 19B9 1990 1995 2000 1961-86 1970-86 2000 ----------------_--_---------- (UOOO TONS) --------- ------ -----_____ --_ ------ (X PER ANNUM) ----- INDUSTRIAI. 1,173 649 51S 520 515 504 495 465 395 -4.4 -5.1 -2.1 NORTH AMERICA 516 241 147 145 140 136 132 120 110 -5.4 -8.3 -2.1 EEC-ID 376 210 209 212 214 214 210 200 150 -5.0 -1.6 -2.6 JAPAN 107 78 63 62 61 60 58 52 45 -0.3 -3.1 -2.4 OCEANIA 95 108 94 95 94 94 93 91 96 -1.7 -0.2 -0.8 NON-MARPET 225 281 268 270 270 278 280 292 310 1.8 0.9 1.1 USSR 140 198 209 212 218 222 225 242 265 3.2 2.3 1.7 EASTERN EUROPE 86 83 59 58 57 56 55 SO 65 -0.7 -2.3 -1.9 DEVRLOPING 1,837 2,656 2,910 2,950 2,975 3,021 3,065 3,270 3,490 3.1 3.7 1.3 ASIA 1,322 2,141 2,420 2,460 2,487 2,535 2,580 2,808 3,045 4,4 6.9 2.7 INDIA 622 990 1,179 1,211 1,225 1,255 1,285 1,420 1,570 4.5 5.2 2.0 CHINA 378 534 592 604 615 630 640 710 780 5.3 4,1 2.0 PAKISTAN 60 97 132 140 144 148 153 170 190 3.9 4.1 2.4 AFRICA 292 258 237 235 232 230 229 215 205 -1.3 -1.9 -1.0 AMEI4ICA 190 209 224 225 226 227 228 220 215 -0.1 0.s -0.3 SOUTHERY EUROPE 32 49 29 29 30 29 28 27 25 -0.6 -0 2 -1.1 WORLD 3,236 3.588 3,696 3,740 3,760 3,003 3,S4R 4,027 4,19!3 1.0 0.8 0.9 - - - - ------ - --------- ----- ------------------------------------------------------------------------------------------------- -- Al LEAST SQUARES rREND FOR HISTORICAL PERZODS (19A1-86); END-POINT FOR PROJECTED PERIODS (1987-2000). SB ESTIMATE. SOURCES, PAO, INTERCOVERN)4ENTAL GROUP ON JUTE, UENAF AND ALLIED FIBERS (ACT"JAL); WORLD DANK, INTERNATIONAL ECOWOMICS DEPARTMENT (PROJECTED). TABLJ3 A3: JUTS - GROSS EXPORTS BY NATN COUNTRIES AND SOOBCIC REGIOIIS ACTUAL PROJECTED COGITh RATES AX COUNTRIUES/ 1987 - ECONOYIRS 1969-71 1979-31 1986 1987/8 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ---------------- ----------------((000 TONS) ------------------------------------- ------(2 r M )---- INDUSTRIAL 40 17 14 14 13 12 11 a 5 -4.9 -6.2 -7.6 MON-MART 3 0 0 0 0 0 0 0 0 ,,, 0.0 O.u DEVELOPING 859 535 488 471 487 486 484 490 505 -4.1 -4.5 0.5 ASIA 850 533 407 470 486 485 483 489 504 -4.1 -4.5 0.5 BANIGLADESH 541 353 417 359 420 410 403 410 419 -3.9 -2.2 1.2 THAILAXD 262 43 4 5 5 10 10 10 10 -14.0 -24.4 5.5 INDIA 17 19 8 9 10 15 2( 20 25 0.4 -9.2 0.2 WORLD 901 551 501 486 500 498 495 498 510 -4.1 -4.6 0.4 Al LEAST SQUARES TREND FOR HISTOICAL PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000), 8/ ESTIMATE. SOURCES, FAo, TRADE YEARBOOK TAPES (ACTUAL), wORLD BANK, rNTERNATIONAL ECONOICS DEPI RTMZNT (PROJECTED). lI TABLE A4t JUTS - GROSS IMPORTS BY MAIN COUNTRIES AND ECONOIC REGIONS ACTUAL PROJECTED CROWsT RATES At COUNTRIES! 1987 - ECONOHIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 -- --------------------------------'000 TONS)------------------------------------- ------(I PER AINUN)----- INDUSTRIAL 519 161 8V 78 72 65 60 45 40 -9.3 -*12.1 -5.0 NORTH AMERICA 30 17 15 14 14 13 12 8 8 -6.7 -4.3 -4.2 EEC-10 369 112 54 49 44 39 35 25 20 -9.8 -13.0 -6.7 JAPAN 95 20 6 5 5 5 5 5 5 -11.2 -15.7 0.0 NON-MARKET 82 94 79 79 79 80 80 81 82 -0.5 -0.9 0.3 USSR 30 47 38 39 40 41 42 47 52 2.3 2.3 2.2 EASTERN EUROPE 52 47 41 40 39 39 38 34 30 -2.2 -3.2 -2.2 DEVELOPING 268 304 336 327 349 332 35S 372 388 1.4 -0.2 1.3 ASIA 147 149 238 230 246 250 255 278 300 1.5 1.8 2.1 PAKISTAN 35 49 329 123 133 137 140 160 180 0.0 7.1 3.0 CHINA 52 34 41 0 0 0 0 0 0 -1.7 -6.8 o.0 AFRICA 63 94 71 70 70 69 68 65 62 3.4 -0.5 -0.9 AMERICA 18 29 4 10 10 10 10 10 10 -1.2 -8.6 0.0 SOUTHERN EUROPE 41 31 23 22 23 23 22 19 16 -2.7 -5.1 -2.4 WORLD 870 559 499 484 500 497 495 498 510 -3.6 -4.7 0.4 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). BI ESTIMATE. SOURCES: FAO, TRADE YEARiOOK TAPES (ACTUAL), WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). - 296 - TAILZ A5: JUT8 PRICS. a/ 1950-487 (ACTUAL) ANaD 1988-2000 (MltCTID). (S/Ton) Current S -1985 Const"at S- -(S/Tea)-- 1JY b/ US GNP ci Cu-rent S* Actual 1950 204.0 861.9 952.9 1351 262.0 960.1 1,167.6 1352 113.0 395.1 496.! 1953 155.0 557.6 669.9 1954 18!.0 665.7 769.9 1955 171.2 618.1 705.1 1956 219.2 763.8 873.7 1957 187.4 639.6 721.1 1958 154.7 519.1 583.1 1959 200.5 682.4 736.9 1960 333.0 1,1i0.0 1,203.5 1961 225.0 737.5 805.6 303.7 1962 184.6 593.2 646.6 211.2 1963 179.0 586.3 618.1 157.8 1964 223.0 718.0 757.4 193.2 1965 254.0 811.8 841.1 222.1 1966 306.0 944.7 979.2 205.6 1967 290.0 885.2 902.6 239.3 1968 271.0 835.1 803.4 194.8 1969 286.0 836.3 804.3 225.9 1970 274.0 753.8 729.3 219.1 1971 286.0 746.5 721.0 226.5 1972 299.0 716.2 719.4 218.3 1973 289.0 597.5 652.5 232.3 1974 353.0 599.0 731.8 223.9 1975 371.0 566.2 699.7 223.9 1976 295.6 445.1 524.3 253.4 1977 320.9 439.8 533.5 271.1 1978 398.4 474.5 617.1 319.0 1979 387.4 407.4 551.S 360.5 1980 308.0 295.3 401.9 368.3 1981 275.9 263.1 328.5 300.6 1982 285.8 276.4 320.0 280.3 1983 302.2 300.1 325.5 268.3 1984 530.8 536.4 550.3 331.8 1985 582.9 582.9 582.9 557.6 1986 270.1 228.3 264.8 298.7 1987 322.8 248.4 307.5 274.0 d/ Projected 1988 370.0 262.9 339.0 307.3 1989 450.0 301.0 394.3 359.0 1990 320.0 210.9 266.8 273.0 1995 440.0 243.2 282.4 352.0 2000 535.0 236.1 274.0 415,0 *Developing countries' export unit value. a/ Bangladesh BD, f.o.b. Chittagong/Chelna bi Deflated by Manufacturing Unit Value (KUV) Index. c1 Deflated by US GNP Deflator. d/ Estinates based on historical relationship to BED price. Source: World Bank, International Economics Department. - 297 - JUTE (CONSTANT 1985 DOAR PRICES*) S'9S 1200 1 1000 - S 800 W B 200 a o~~~~~~~ 194.5 1950 1955. 1960q~ 1965 1970 1975 1980 1985 ....1990 1995 20600 DEFLATED OY MANUFACTURING UNIT VALWE ( MUV) INDEX ........... EFL.ATED BY U.S. GNP DEFLATOR. 1946 - 87 ACiVAL . 1988 - 2000 PRtOJECTED. SOURCE : WORLD BANK * INTERNATIONAL ECONOMIICS DEPARTMIENT . - 299 - NATURAL RUBBER Summary 1. Over the 1987-2000 period world natural rubber consumption is projected to grow from 4.6 million tons to 6.5 million tons (an average annual rate of 2.6%). The United States will remain the single largest consumer, with consumption of 1.2 million tons by the year 2000. The increasing globalization of the auto industry and the "transplanting" of tire manufacturing facilities will be the cause of a slowdown of Japanese consumption growth in the next decade. The fastest growth in rubber consumption will be in the developing co-ntrles, especially in the newly industrializing countries of Asia, as well as China and India. The pattern of rubber consumption across different markets will be increasingly based on rubber quality and consistency differentials. The effect of the increase in demand for high-performance radial tires and high-value rubber goods in the industrial countries is to increase the demand for high-quality natural rubber (sheet and crumb rubber and latex concentrate). In contrast, lower-quslity rubber will go to the developing countries where nascent demand for road transportation in the lower-income countries, with poor road conditions, will. warrant continued use of the traditional cross-ply tires. Such tires sre less stringent in their rubber quality requireerents and have a higher proportion of synthetic than natural rubber input. Natural rubber demand *n the CPEs is projected to grow more slowly. This is due to the fact that e!astomer demand growth will be mainly satisfied by the projected increase in the production of general-purpose synthetic rubber in these countries resulting from joint- ventures with western multinecional corporatio..s. 2. The pr,Jjected increase in natural rubber production will come primarily from in-lonesia, Malaysia, and Thailand. Increased production in Malaysia will result from increased replanting by the estate and smalLholder sectors in the com.ing years in response to the recent price increase and to the new demand for rubber-based medical insulation products. The latter is expected to affect market perceptions sufficiently to slow the decline in natural rubber areas which has been occurring through diversification to alternative crops such as oil palm. Another likely consequence of this new demand is the momentum it will give to the smaller producing countries to focus their production efforts on improving their output quality so as to meet the more stringent quality requirements of the latex goods industries. Furthermore, as the volume of natural rubber used in these new products is small compared with that used in tire manufacturing, smaller producing countries that aim to produce high-quality latex concentrate or sheet rubber could be better poised to secure niches in the markets for premium rubber. 3. These new tire and rubber product developments will impact on -che volume and direction of world rubber trade. World r-ubb,er exports are projected to grow at 2.1% p.a. to reach 5 million tons by 2000. Of this trade, 90% wili originate from the four major South and Southeast Asian p7oducing-cum-exporting countries. The balance of exports will largely be from C6te d' Ivoire, Liberia, and Nigeria. From Table A4 on natural rubber imports, it is seen that intra-developing country trade in natural rubber is 0oo - projected to absorb one-third of total trade. The demand growth in the industrial countries also leads to higher import growth of 2.21 for the industrial countries, with their imports amounting to 2.9 million tons by 2000. The United States will remain the single largest importing country, with imports reaching 1.1 million tons in 2000. This increase in isports stems partly from tire manufacturing "transplants" from japan to the United States, which is also reflected in the lower growth for Japanese imports. Another developmenc has been the emergence of Republic of Korea and Taiwan, China, as significant importers since 1981. 4. Despite the price recovery since 1987 to levels surpassing the last peak in 1983, the picture is different when prices are measured in real terms. Using 1985 dollars, 1988 prices are still below -rices in 1983 and 1984. Given the projected synthetic rubber capacity expansions in the 1988- 2000 period, real prices in the longer term are projected to fall in line with the declining trend observed since the mid-1950s when synthetic rubber production firs_ became commercialized. S. P:ie' are projected to fall from $1,444/ton in 1988 to about $1,180/tor. in 1990 as synthetic rubber production increases with natural rubber supply increases, and alongside substitution by synthetic rubber in response to relative price movements. The low natural rubber price is expected to generate another phase of increased consumption in the first half of the 1990s, resulting in inother natural rubber price increase co $2,077/ton in 1995. Thereafter, prices should soften because of increased natural rubber supply from plantings and replantings in response to the recent price increase until near the end of the decade when higher consumption will once again provide support for firmer prices. The price in 2000 is projected to be about $2,400/ton. 6. The intra-period price projections are based on normal weather conditions and no petrochemical feedstock shortages that might cause higher synthetic rubber prices. In the event of such episodic developments, the intra-period price proiections would display different cycles because of the underlying distributed lagged price effects on production and consumption. However, the real price path should be unchanged over the longer term. Natural Rubber Supply Ohutlook 7. Natural Rubber Production. With increasing supplies from countries such as China, India, and others in West Africa, the aggregate share of world supply of the "Big-4" producing countries (Indonesia, Malaysia, Sri Lanka, and Thailand) has been declining, albeit slowly. Between 1966 and 1986, the share of the "Big-4" in world output declined from 84% to 78%. The decline in market share of the "Big-4" stems primarily from the declining shares of the Malaysian estate (from 22% in 1966 to 11% in 1986) and Indonesian smallholder (from 22% in 1966 to 17% in 1986) sectors. These declines were largely due to substitution of natural rubber with competing crops, such as palm oil and cocoa. These declines were partially offset by market share increases of Malaysian smcIlholders (from 16% in 1966 to 24% in 1986) and of Thailand (from 9% in 1966 to 17% in 1986). - 301 - 8. The post-World War II growth in natural rubber Lemand, albeit with increasing co etition from synthetic rubbers, led to concerted R & D efforts by the various national Rubber Research Institutes (RRIs) to increase productivity. In the earlier days the industry was characterized by a cooperative spirit among producing countries which was manifested in thse.r sharing of research results and new planting materials, with Malaysian contributions in the lead. Changes in the national and international economic environments since the mid-1970s have adversely affected both the cooperative spirit among the natural rubber producing countries and the foci of R & D activities. Reasons for reduced cooperation are the differences in resource endoi-sents among natural rubber producing countries and the economic development strategies adopted--both of which have led to changes in the pattern of comparative advantage among the key natural rubber producing countries. 9. It is the widening production cost differentials, especially among the three biggest producing countries, that have affected the cooperative spirit observed until recently, and which have begun to affect perceptions concerning the role of R 4 D in producing countries. Consequently, increasing emphasis is being given to R & D in rubber processing as a means to improve competitiveness. This shift in R & D focus is being reinforced by the shift from nonautomated to automated tire manufacturing. 10. Under traditional nonautomated tire manufacturing, tire manufacturers may use natural rubber of varying qualities. This is because nonautomated compounding processes permit adjustmeiit, whenever necessary, of the rubber compounds so as to compensate for quality variations of different rubber consignments. But as automated tire manufacturing is predicated on consistent rubber quality, "fine-tuning" of the rubber during the compounding stage is infeasible. 11. One measure of rubber quality is the plasticity retention index (PRI), which is a measure cf oxidizability tested by aging the rubber at 1400C for 30 minutes. The influence of natural rubber contamination on the PRI lies in that the PRI can be adversely affected by excessive washing, excessive heat during drying, exposure to sunlight, or contamination with pro-oxidant substances. In this context, the technically specified rubbers (TSRs), such as the standard Malaysian or Indonesian rubbers, have low PRIs and are therefore lacking in some of the requirements for automated tire processing. 12. The importance of rubber quality stems from the fact that the PRI level is affected by the drying; method and heat level applied, both of which -re related to the rubber quality. Thus, ongoing efforts are centered on identifying the relationships between production, collection and processing techniques, and final product properties. It was for the purpose of undertaking such research that the Goodyear Tire and Rubber Company established its Singapore laboratory in 1986. In view of the new compounding techniques that have emerged for synthetic rubbers and tires production, it may be envisaged that Goodyear's current efforts will extend to processing that will go beyond the production of the basic and relatively homogeneous raw material natural rubber. 13. In a separate development, R & D towards developing new forms of natural rubber has led to the creation of epoxidized natural rubber (EMR) - 302 - using the epoxidization process. Epoxidization is regarded as one of the most significant f recent developments because it converts natural rubber latex into a different polymer that can compete with specialty synthetic rubbers. The largest potential for ENR is in the tires market wtere ENR25 is recognized as an attractive tire tread compound. 14. Another recent development from the Malaysian Rubber Producers' Research Association is that of the high stearic acid semi-EV curing system. Laboratory tests show that the degree of abrasion resistance resulting frrm this curing system is little affected by the type of overcure occurring in the retreading process. However, the implications of this development for natural rubber use in retreads are yet to be fully understood. 1S. The surge in latex concentrate demand since 1986 by the medical insulation industry has resulted in latex concentrate's share of natural rubber consumption growing from 8.5% in 1985 to 10% in 1988. Notwithstanding the fact that the recent -ight supply of Latex concentrate is transient, this new demand area will cooitinue to expand as adoption of nedical insulation habits becomes more extensive. Consequently, one dimension of ongoing structural change in the natural rubber market i s that associated with increased supply of latex concentrate to meet this new demand area. 16. Because of the stringent latex quality requirements in centrifugal latex concentrate production, significant volumes of latex concentrate are currently being produced only in Malaysia, Indonesia, and Liberia--with Malaysia much ahead as well as being a significant consumer of latex concentrate. In terms of dry rubber content of latex net exports, Malaysia contributes about 75Z of total exports while Indonesia and Liberia each contribute about 10X. The balance comes from Sri LHanka and Thailand, which jointly export only about 2,200 tons annually, compared with 245,000 tons from Malaysia. 17. Synthetic Rubber Production. Recent developments in synthetic rubber production activities can be put into two categories. One is related to R & D activities in the industry culminatiiag in either improved production technology or new products. The otber is related to changes in the location of production capacities resulting froir the changing pattern of comparative advantage among synthetic rubber producers. 18. The bulk of synthetic rubbers produced are known as general-purpose rubbers such as styrene-butadinne (SBR) and polybutadiene (BR). These general- puriwose rubbers are close but imperfect substitutes for aatural rubber and constitute the bulk of synthetic rubbers used in tire manufacturing. Recent efforts aimed at improving the applicability of general-purpose synthetic rubbers have focused, inter alia, on making SBR more amenable to a wider spectrum of blending mixes so as to extend and refine the range of technical properties obtainable from the different rubber compounds. This has led to the development of the more versatile solution SBR which extends the blending possibilities of emulsion SBR. Since the mix of natural and synthetic rubbers are, aside from relative price considerations, dictated by the performance and handling capabilities required of tires, solution SBR increases the possibilities of developing new rubber blends with properties that are lacking in natural rubber. - 303 - 19. Molecular engineering (that provides revolutionary compounding and multiplex extension techniques) facilitates optimization of the treadwear, traction, rolling resistance, and force variation properties required of tire rubbers for specific types of tires. The end result of molecular engineering has been proprietary compounding of tire rubbers. For example, proprietary compounding for all-season tires has yielded improved traction with longer tire life. 20. Other technological advances are in the areas of materials technology, nuclear polymer chemistry, and thermoanalysis. These developments are likely to impact on tire manufacturing by the end of the 1990s via the use of erndothermic vulcanization that will' eliminate the heat requirement stage of the vulcanization processes currently in use. The significance of these developments for the natural rubber industry lies ultimately in their impact on natural rubber's competitiveness in terms of price and performance. 21. Another factor that may affect natural rubber consumption and trade is the change occurring in the global location of synthetic rubber production. Broadly speaking, this follows from the development of new technoLogies in synthetic rubber production and from the establishment of the automobile, tire, petroc.:mical, and synthetic rubber industries in the industrializing developing countries. 22. Table 1 presents total synthetic rubber production in selected countries and years during the 1960-86 period. For the recent 1980-86 period growth was faster in the developing countries. Production in Republic of Korea and Taiwan, China, grew annually at 7-8% while for Mexico it was 12%. In contrast, growth in the EEC and Japan was 1.5% p.a. and 1.2% p.a., respectively, while North American production declined at 1.9% p.a.--with the output decline being sharper in Canada than in the United States. 23. To understand the implications of these recent trends in synthetic rubber production for natural rubber demand and trade, it is necessary to know, in some detail, the types of synthetic rubbers that are being produced in the new production locations and whether these new production facilities are the result of joint-ventures involving established synthetic rubber producers from the industrial countries. These details are presently not available. Supply Outlook 24. Formulation of the supply outlook for the 1988-2000 period has been primarily based on the traditional relationship between natural rubber demand and industrial production in the industrial countries, together with views about the growing demand in the developing countries and the new demand for medical insulation latex-based products. World natural rubber supply is projected to grow at 2.6% p.a. to 6.5 million tons by 2000. As ne.w plantings and replantings made after 1987 come into production after 1995, a higher supply growth rate of 3.9% p.a. is projected for the 1995-2000 period. 25. Asia. Malaysian output is projected to rease from 1.6 million tons in 1987 to 1.8 million tons in 2080. The v- tint natural rubber price recovery (despite buffer stock sales), and the new demand from the medical TABLE 1: WGAD SYWNETIC RMER MODUCTION BY OOUNlRr FOR SELECTED YEARS, 1960-46 ('000 Tons) _____- Nrth America------ ---- -- estern Europe---------------- UnIted United Germany, Taiwan, RepublIc of Totol Ycar Canaeda Stotet Total KFingdom France Fed, Rep. Italy EEC Japan Brazil Mexico China ,/ Korea b/ World 1960 159.7 1,436.4 1,596.1 90,4 17,2 79.8 65.8 332.2 23,0 .. ., .. ., 1,951.3 1965 206.2 1,842.3 2,048.5 174.5 148.3 164.0 120.0 727,5 161.3 38,7 ., .. .. 3,795.0 1970 20.4 2,232,3 2,437.7 315,6 315.9 30t.9 155,0 1,376.1 697.5 75.5 43.7 ,. .. 5,93.0 1975 173,3 1,969.5 2,162,8 260.8 350.4 315.9 200,0 1,473.6 7118,7 128,8 60.0 .. 24,2 6,855.0 1910 252.8 2,214.8 2,467.6 211.8 510.8 389.9 250.0 1,770.0 1,094.1 249.1 90.8 77.1 75.5 8,690.0 1961 263.3 2,225.1 2,48A,4 226.2 487.3 396.8 235.0 1,733.0 1,010.3 222.9 . 104.3 78.2 82.1 6,540.0 1962 101.7 1,817.2 1,996.9 246.3 479.4 383.8 210,0 1,700.0 930,7 228,1 1003. 70,8 64.0 7,860.0 1963 182.0 1,967.4 2,169.4 262.3 514.1 418.0 220.0 1,784.0 1,002.5 220.9 123.6 81,0 92.3 8,325,0 1984 217.8 2.218.6 2,436.4 288.9 551.2 437.6 215.0 1,877.0 1,160.5 258.4 139.4 99.6 103.1 9,105.0 1965 209.2 2,026.0 2,235.2 269.7 544.2 447.6 225.0 1,903.0 1,158.0 266.0 145.7 105.0 106.0 8,945.0 1966 187.1 2,119.1 2,306.2 289,4 542,1 452,5 235,0 1,906.0 1,150.1 270,8 130.0 124.1 1205, 9,240,0 a/ Production began around 1977. b/ Production began around 1972. Source: Rubbor Statistical BulletIn, IRSG, London (various Issues). - MS~~~~~~~~~~~~~~~~~~~~ - 305 - insulation industry will likely halt further diversificatior from rubber by the estate sector whose output share is projected to rise from 28% in 1988 to 33X in 2000. In the sLallholder sector, the recent price rise will induce more replanting thereby leading to higher supply growth after 1995. However, the availability of labor might be a constraint in Malaysia's ability to realize its production potential. 26. Indonesian output is projected to grow from 1.1 million tons in 1988 to 1.7 million tons by 2000. In both Indonesia and Malaysia, planting responses to the bullish market trends in 1)87/88 will result in higher pro,ected output growth, 5.1% and 2.31 p.a., respectively, during the 1995- 2000 period, vis-a-vis the expected 2.4% and 0.3% p.a. output growth during the 1987-95 period. Throughout the 1987-2000 period, estate and smallholder output shares. in Indonesia are projected to remain stable at 29% and 71%, respectively, given our premise that the production problems in the smallholder sector will likely not be overcome before the late 1990s. 27. Projecting supply for Thailand is specially hazardous as output growth ilinges on continued labor availability within an environment of rapid economic development and on new plantings on suitable land. The latter is pertinent because if current supply response is dictated by considerations of ease of transporting and marketing of latex, new plantings might occur on marginal land and thereby adversely affect yield. Thailand's output is projected to grow at 2.9% p.a. to 1.2 million tons under the assumption of normal replanting and some new planting. However, a combination of appropriate development strategy (without prejudice to the labor input requirements of the rubber industry) and area expansion could potentially result in Thdiland's rubber production level approaching that of Indonesia. 28. Among the secondary producers in Asia, the next decade will see slower output growth in Ch:na and India than in the 1970-86 period. This is primarily due to land and climatic constraints. Output by 2000 should be 383,000 tons in China and 350,000 tons in India. As production increases in these countries will be absorbed domestically, Sri Lanka will remain as the fourth largest rubber exporter. 29. Africa. In Africa, Cote d'Ivoire is projected to be the largest producing country, with output growth at 6.5% p.a. resulting in production of 132,000 tons by 2000. Production in Liberia and Nigeria is projected to grow at 1.9Z and 2.8% p.a., respectively, to 115,000 and 85,000 tons, respectively. In the event of improved management and infrastructure, production from these countries cc-.2!d be higher. 30. Latin America. In Latin America, rubber supply increases wili come predominantly from Brazil, where output is projected to reach 52,000 tons by 2000. Although there will continue to be interest in investing in rubber in Frazil because of the growing domestic demand for road transportation, growth in Brazilian rubber production is constrained by the vulnerability of the Brazilian rubber industry to the leaf blight disease. 31. Given the recent developments in tire technology, a pattern that is expected to emerge during the projection period is that of supply segmentation. This change will be a result of efforts by the major producing countries to put emphasiR on production of higher quality rubber to meet the requirements of tire and latex-goods manufacturers in the industrial - 306 - coantries. Lover quality rubber will largely be suppl.ed to the developing countries where production of cross-ply tires will impose Less stringent require*ents. Demand Outlook 32. Developments in Tire Manufacturing. Because nearl 70t: of naturaL rubib-_ is consumed in the transport sector, the outiook fo- nat*.ral rubber depends critically on the economic and technical factors that infiuence demand in this sector. One of these is the future path of oii prices, as the oil price affects rubber demAnd directly through its impact on vehicle use as well as indirectly through its impact on the price of 3yithetic rubbers. 33. Table 2 smmarizes the history of technical developments in the tire industrv since 1905. In view of the lengthy gestation lag for technoltgical developments in this industry, the focus here ir on developoents since 1960. During the 1960-72 period the major event was the West European development of the radial tire and Uts adootion, first in Europe, and then in the United States. In the ,,ost-1972 period technological developments have been significantly influenced by the heightened energy-consciousness precipitated by the two oil crises of the 1970s. As shown later, recent data seem to indicate a waning of this ene-gy-consciousness, especially in the United States. The generalization of this attitude elsewhere would have significant renercussions for natural rubber demand. 34. The penetration of the longer-life radiaL tare in the or_ginal equipment markets (especially of the industrial countries where good roads justify the use of radial tires) in the past decade has led to a dwindling of the replacement market. Ceteris paribus, the demard for natural rubber has declined because of the de-cline in the ratio ot repiacement tires to original equipment tires in the lifetime of a car/vehicle. In a recent study conducted by the International Rubber Study Group (lRSC), the 'tential loss in rubber demand resulting from the longer tire life was assessed. The Tire Replacement Factor (TRF), defined as the ratio of aianual replacement tire sales to the number of cars in use was measured; these are shown in Table 3 for the United States, the EEC, and Japan since 1965. Fc. al- three markets the TRFs followed rising trends during the 1965-1970/72 period, and subsequently declined. While the declining trend can be observed through 1985 for the EEC. it is seen to be reverting in Japan (ince 1984) and tne United States (s'nce i 81). In general, the decline in the TRFs haa been reinforced by the shift from rear-wheel to front-wheel drive cars, since front-wheel drive cars tend to have wear more evenly distributed across all fou-: tires thereby reducing overall wear rates by 20-30%. 35. High-performance (designed for enhanced handling capabi'lities that are manifested in the feeling of firmness attained whiLe driving at 55 mph or faster, and ail-season tires were introduced in the early 1970s, followed by variants called integrated tires which consisted cf a mixture of the different features from these two new tire types. In 1971, integrated radial performance tires were introduced in the United States but their large-scale production did not occur until 1982. By 1986, the sharet of high-performance tires in the US original equipment and replacement markets --ere about 15% and 20%, respectively (Yeager, 1987:17). Radial-performance tires are expected to be one of the fastest growing products in the history of the US tire industry. - 307 - ThBER 2: A RISTVtY OP PEUWATIC TIER DIVEK"44MT 1905': Introduction of vulcanization accelerators. 191 2: DeveLopment of carbon block reinforcement to improve treadwear. 1924: Antitoxidants were incroduced to improve resistance to aging and weathering. 192 5: Cord ply fabric replaced square woven cotton. 192 9: White sidevalls introduced. 193 1: Rayon-reinforced tires introduced. 1943: Commuercially available US-rade tires made with nore than one-half synthetic rubber. 1947: Tubeless tires marketed. 1948: Patent for radial tires. 1962: Polyester tire cord introduced. 1963: Radial tires produced in Europe. 1965: Radial tires produced in US. 1967: Fiberglass tire cord introduced. 1969: Bias-belted tires with glass belts and polyester carcass accepted as original equipmen_ tires in the United States. 1970: Radial tires accepr'. Rs OE in the United States. 1971: Radial perforrxrnce tire introduced in the United States. 1972: Comercial use of aramid as tire cord material. 1975: RadiaL tires capture 50% of OE market in the U'Bited States. 1977: All-season tire introduced in the United States. 1982: Large-scale production of integrated (high-performance and all- season) tires in the United States, 1983: Woven aramid belt developed. 1986: Revolutionary new method of tire building purchased by one of the lar-ger tire companies. Sox3rces: Robert W. Yeager (1987), "Tires of the Nineties and Beyond," Elastocmerics, February, pp. 12-19; private conownications with the tire manufacturing industry. TABLE 33 RADIAL TIRE ADOPTION AND TIRE REPLACEMehT FACTOR (TR) FOR CARS IN SELECTXE ODuirTRIs/REIos, 1965-85 …-- United States---------- ---------------EEC-------------- -------------Japan------------ Year O Radials Replacement OE Radials Replacement OE Radials Replacement (Z) Radials (2) TRF tZ) Radials (%) TRF (Z) Radials (2) TRh 1965 - - 1.28 37.5 34.0 1.02 - 1.0 1.32 1966 - 1.30 40.0 37.0 1.02 - 3.0* 1.32 1967 - - 1.35 44.0 40.0 1.01 - 7.0* 1.29 1968 - 1.0* 1.45 49.9 43.5 1.08 0.5* 12.0* 1.31 1969 - 2.0* 1.49 55.0 49.0 1.06 2.0* 16.0* 1.32 1970 1.0 3.0* 1.49 63.5 53.0 1.07 4.9 21.2 1.17 1971 2.0* 4.0* 1.52 74.0 61.0 1.07 9.0* 24.0* 1.14 1972 4.8 6.0 1.53 82.0 70.0 1.08 15.0* 27.0* 1.17 1973 17.5 11.5 1.46 88.5 77.0 0.98 18.8 30.6 1.21 1974 43.0 21.0 1.26 93.0 82.0 0.87 . 20.8 42.5 0.91 1975 63.8 27.0 1.21 95.0 84.0 0.86 26.3 49.4 1.06 t 1976 64.3 23.5 1.17 95.0 86.5 0.84 31.3 46.9 1.01 ° 1977 66.3 33.0 1.19 95.5 88.0 0.80 49.5 46.4 0.95 1978 67.2 37.5 1.20 95.5 90.0 0.80 56.6 49.4 0.99 1979 77.0 43.0 1.09 96.0 92.0 0.75 63.0 52.9 1.07 1980 80.0 50.0 0.94 96.0 93.0 0.75 70.8 55.8 0.93 1981 83.3 61.0 0.97 96.5 94.0 0.69 75.8 61.7 0.84 1982 83.6 66.0 1.04 97.0 94.5 0.68 80.8 68.1 0.81 1983 83.5 70.0 1.09 97.5 95.0 0,67 81.6 72.3 0.79 1984 83.8 76.0 1.09 98.0 95.5 0.66 78.9 76.1 0.80 1985 83.5 81.6 1.05 99.0 97.0 0.67 79.6 81.5 0.84 Notes: * denote estimated figures. OE - original equipment. Source: IRSC (1987), "Changes in Car Tire Replacement Factors and Their Effect on Rubber Consumption" paper presented at the 30th IRSC Assembly, September 28 - October 2, 1987. - 309 - 36. All-season tires, introduced amidst an energy-conscious setting in 1977, are fuei-efficient, relatively quiet, and have good wet traction and excellent snow traction. Furthermore, the initial wear problems associated with all-season tires on front-wheel drive vehicles have gradually been corrected, and all-season tires have become increasingly popular alongside the growing popularity of front-wheel drive cars. Thus, the US market is likely to be dominated in the 1990s by integrated all-season, high-performance tires. But while such tires are capable (in principle) of yielding 50,000- 60,000 miles driving, inadequate tire maintenance by users has generally resulted in mileages of only about 35,000 miles. 37. Other poter.tial tire developments are associated with the goal of increasing fuel efficiency of cars by elimination of the spare tire. The proposed solution is to develop a self-sealing and run-flat form of all-season tire. Such tires must meet several requirements, kost critical of which is the low-pressure warning system for reducing the incidence of flat tires. An unresolved problem related to the use of run-flat tires is the liability issue that involves having the means to verify that users liaqe used the run-flat tires in the manner intended. Tire manufacturers are striving to res-lve the problem by cooperating with automakers in developing cars with built-in warning devices for monitoring the performance and status of the run-flat tires. Thus, self-sealing and run-flat tires are not expected to be widely adopted before the turn of the century. 38. Until the early 1980s, any assessment of the natural tubber demand outlook was influenced 't perceptions about future developments in the fuel- efficiency of cars (and hence smaller or lighter tires) and prospects for increased penetration of longer-life, high-performance radial tires. However, recent market surveys suggest these factors are of declining relevance. With less concern about high and increasing oil prices, there now appears to be less concern over fuel efficiency (particularly in the United States which will remain the single largest market for tires). Thus, the trend towards miniaturization of cars appears to have been arrested. Based on US expe-ience, it is likely that the net impact of recent developments in tire technology on natural rubber demand will be neutral once radialization is completed in countries where good road systems make feasibie the shift to radials. This is because the higher natural rubber content required in radial tires is offset by the longer life of radial tires that translates into reduced demand for replacement tires (albeit to a smaller extent than warranted by proper use and maintenance of extended mileage tires). The natural rubber consumption throughout the life of a car therefore remains stable. 39. Non-Tire Manufacturing. Non-tire rubber manufactures consist of a heterogeneous group of products such as conveyor belts, hoses, dipped goods, adhesives, etc., for which data on individual natural rubber consumption are not readily available. Notwithstanding the lack of data for rigorous analysis, some of the key issues relating to this sector can be defined. 40. In this sector natural rubber has to compete with plastics as well as synthetic rubbers. The increase in the specialty synthetic rubbers developed for the heterogeneous end-uses of this sector, and the proximity of the synthetic rubber industry to the industrial countries where the bulk of the - 310 - market for these non-tire rubber goods are located, has heightened cGmpetition for natural rubber. 41. Only in the conveyor belting industry should natural rubber maintain its tradiitional stronghold, but this will require closer cooperation between the natural rubber industry and those involved in the design of engineering systems to ensure design developments favoring natural rubber. An example of such integration was in the production of the steel-cable belts required by the Chilean copper mining company Codelco which were developed after Codelco sent staff to work with the Japanese firm supplying the belting. 42. Until 1984, the non-tire industry absorbed 300,000-350,000 tons of natural rubber latex for the production of an array of dipped and molded goods. Since 1984, the AIDS-induced demand for medical insulation has precipitated a boom for the examination and surgical gloves industry. It is estimated that the volume of natural rubber latex for the production of examination gloves will double from the 47,500 tons (dry rubber content) used in 1986 to 95,000 tons in 1988 for the prcduction of 12 billion gloves. UJsing a conversion factor of 8 gm of latex (dry rubber content) per glove, and an estimate of new capaci-y coming on-stream in 1988 for the production of 3 billion gloves, an additional 24,000 tons of latex, or about 5% of total world suppLy of latex, will be needed. 43. The upshot of this sharp increase in natural rubber latex demand was the widening of the price differential between latex and RSS1 between April and May 1988 from US$0.20/lb to US$0.60/lb. The increase in the price differential prompts questions concerning the longer term development of these prices and the types of natural rubber production that will be displaced in the short term by this unanticipated rise in latex demand. 44. Expectations within the industry are that the enlarged latex-RSSl price differential will persist through mid-1989. By that time it should become clearer whether the current investment boom in glove-making capacities, particularly in the Far East, is justified. Continued increases in the price differential would induce increased latex supply from Malaysia, followed by Indonesia, Thsiland, and Liberia. In the latter countries, latex supply response is contingent on investments in facilities for supplying natural rubber in latex form and in port facilities for bulk latex shipments. If these investments are not made, the likely response will be a modification of the Malaysian output composition in favor of latex supply. The lower RSS1 production from Malaysia will likely be replaced with RSS and TSR output from Indonesia and Thailand. 45. The other uses from which latex supply might be displaced are in the production of rubber threads, adhesives, foam and carpetbacking (excluding washable rugs where natural rubber is essential for suitability in machine washing). However, these displacements are likely to be temporary. 46. Natural Rubber Demand Outlook. The projected growth in natural rubber demand stems largely from growth in the developing countries, especially in Asia, with consumption in the developing countries projected to surpass that in the industrial countries for the first time by around 1990. By 1990/91 world consumption is projected to reach 5 million tons. - 311 - 47. In the industrial countries, consumption is projected to grow at 2.4% p.a. to almost 3 million tons by 2000. During this period, consumption growth in North America (at 3.4% p.a.) will surpass that of Japan (at 1.4% p.a.) because of increased radialization in the auto and commercial vehicle tires sectors and because of the tire industry transplants from Japan to the Ur.ited States (see the later section on Trade for the factors leading to the industry transplants). US consumption is thus projected to reach 1.2 million tons by 2000. 48. Consumption in Japan is projected to grow more slowly than in the 1970s because of auto industry transplants to the United States, and Europe and tire industry transplants to North America, Republic of Korea, and Taiwan, China. Natural rubber consumption in Japan is projected to reach 640,000 tons in 2000, slightly under 25% of total consumption in the industrial countries. 49. EEC consumption is projected to grow very slowly from 740,000 tons in 1987 to 840,000 tons in 2000. Within the EEC, the highest growth of 2.1Z p.a. is projected for the Federal Republic of Germany. 50. For the CPEs, 1.6Z p.a. growth is projected for the 1988-2000 period, with total consumption reaching 432,000 tons. 51. Consumption in the developing countries is projected to grow at 2.9% p.a. from 2.2 million tons in 1987 to 3.1 million tons in 2000. This growth rate is accounted for in part by the rapid consumption growth stemming from more extensive and intensive road transportation projec-ed for China and India. Consumption in these two countries is projected to account jointly for nearl 65% of total consumption in the developing countries by 2000. The other high consumption growth countries are Republic of Korea and Taiwan, China., where consumption is projected to reach 280,000 tons and 220,000 tons, respectively, by 2000. 52. In Latin America, about one-half of total natural rubber consumption is in Brazil. Consumption in this region is projected to grow by 4.9% p.a. to 595,000 tons in 2000, of which 290,000 tons will be absorbed by Brazil. The projected continuation of the high growth rates of the 1970s is predicated on the "$transplants" of general-p4rj-)se synthetic rubber plants as well as of cross-ply tire plants that are taking place from North America to Latin America, particularly to Brazil and Mexico. These transplants consist largely of the production facilities for emwlsion SBRs that are used in the production of cross-ply and radial tires in conventional tire-making plants. 53. Under the projected oil price scenario of $35/bbl by 2000 and expansion of synthetic rubber production capacities from 12.5 million tons to 17.1 million tons between 1987 and 2000, 3ynthetic rubber will provide strong competition for natural rubber. With the new capacity planned in 1987/88 coming on-stream by 1989/90, natural rubber's share of the world elastomer market will erode from 32.5Z in 1987 to 29% by 1995. But given the increase in natural rubber supplies after 1995. which should lead to lower prices in real terms, this will trigger another cycle of input sub3titution favoring natural rubber so that the share of natural rubber will tend towards 32% by 2000. - 312 - 54. The expansion in synthetic rubber capacity will also follow the market segmentation patterns precipitated by the material requiresents of various new technologies. Synthetic rubber plants in the industrial countries wilL increasingly concentrate on the production of specialty synthetic rubbers and solution styrene-butadiene with greater blending possibilities. In contrast, the synthetic rubber capacities in the developing countries will largely be for producing synthetic rubbers required in the manufacture of cross-ply tires. International Trade in Rubbers 55. Natural Rubber Trade. While the evolving pattern of trade stems partly from the response of natural rubber producing countries to the changing demands of consumers in the tire and non-tire manufacturing industries, it is also being affected by the trade policies of the exporting countries. 56. Until the early 1970s, natural rubber trade was characterized by relatively strong "bilateral" patter-is with a large part of the trade beirg conducted through Singapore, and with the three major exporting countries oriented towards supplying one of the major industrial countries/regions. This "bilateralism" resulted from differences in quality requirements of the major end-users. Thus higher-grade Malaysian rubber went mostly to West European rubber goods manufacturers while lower-grade rubber from Indonesia and Thailand went mostly to manufacturers in North America and Japan, respectively. 57. Since the mid-1970s, rubber exports through Singapore have declined. This decline reflects the growth in direct trading by the producing countries as their communications and transport infrastructure improves. This is more so in the case of Malaysia and Indonesia but less for Thailand where lack of adequate port facilities remains a constraint. 58. Malaysian exports have been going to China and Taiwan, China, while the absence of diplomatic relations between Indonesia and China has deterred growth in direct rubber trading between these two countries. The growth of the automobile and tire industries in the newly industrializing countries is reflected in the growth of natural rubber exports, especially to Republic of Korea, Interestingly, this market is being supplied primarily by Malaysia and Tnailand, not Indonesia. Suggested reasons for this are (i) the suitability of rubber from Malaysia and Thailand for the Korean industry, and (ii) the a\ailability of timely cargo space on this route. 59. With growth in the automobile and tire industries in Republic of Korea and Taiwan, China, and the partial "transplanting" of the Japanese auto industry to Western Europe and the United States, Thailand's export pattern is likely to be most affected in the longer term. Recently, Thailand has begun shifting some prcduction to latex concentrates for export to China, as well as increasing domestic absorption through the joint venture establishment of domestic tire manufacturing facilities with Japan Synthetic Rubber. For the longer term, will Thailand seek to expand exports to Republic of Korea and Taiwan, China, or ' grade its rubber output to meet the requirements of the European market? Or .'1I Thailand develop its rubber exports to Europe and the - 313 - United States in accordance with the Japanese industry's "transplants," thereby continuing to supply the Japanese offshore tire-making facilities? Will export market diversification by Thailand be implemented via increased use of Siagapore's trading facilities, or will ongoing port developments in Thailand prove adequate in helping to enhance such market diversification? 60. The competition for shares in the elastomer market has led to heightened competition among the natural rubber producing countries-- especially between Indonesia and Malaysia. One manife.tation of the competition was the gradual reduction and then elimination of natural rubber export taxes by these countries with Indonesia in the lead. In mid-1982 the Indonesian Central Bank began gtanting extended credit facilities to eligible exporters. Together with the 1983 and 1986 Indonesian currency (Rupiah) devaluations, these policies caused much dissatisfaction within Malaysia where it was believed that Indonesian exports were able to undercut rubber prices because of these cheaper credits. 61. Synthetic Rubber Trading. In the review of recent developments in synthetic rubber production, it was indicated that the emergence of new types of synthetic rubbers and new production technologies, and the establishment of production capacities in the developing countries, raise questions relating to likely changes ir. synthetic rubber trading. These questions concern (i) the relocation of synthetic rubber plants from the industriaL to the develoDing countries; (ii) the policies of developing countries in respect of synthe-ic rubber production; and (iii) the increasing synthetic rubber production in some of the Comecon countries. 62. The relocation of older synthetic rubber plants from the industrial to the developing countries stems from (i) the shift in industrial countries' tire manufacturing to predominantly high-performance radial tires that entails a corresponding demand shift to the use, and hence production, of solution S3R and speciality synthetic rubbers; and (ii) the nonsuitability of radial tires for the generally poor condition of roads in the developing countries. Thus synthetic rubber production in developing countries is likely to be of those types required for the production of cross-ply tires. 63. Establishment of synthetic rubber facilities in the developing countries raises the question of the extent of their synthetic rubber exports. Given that the global tire industry is becoming segmented by the degree of sophistication of tires, the emergence of "south-south" synthetic rubber trade is a possible scenario. Such trade will likely be in the second- generation, general-purpose synthetic rubbers. This would likely have little impact on the synthetic rubber producers in the industrial countries as they will have shifted to solution SBR and speciality synthetic rubbers. 64. Natural Rubber Trade Projections. The trade projections are based on the recent developments of globalization and transplantation in the world auto industry which impact on the world tire industry. These developments are the upshot of the protectionist trade trends in recent years in the highly competitive auto industry. A "transplant" refers to the establishment of manufacturing facilities in the countries where the export markets are located, while "globalization" results from mergers and takeovers within the industry. Because of the worldwide competition within the tire industry, - 314 - transplants and globalization in the tire industry has followed on the heels of transplants and globalization or the auto industry. Such developments in the tire industry are reinforced by the technological developments associated in the manufacture of radial and high-performance tires. 65. Total world exports are projected to rise at 2.1% p.a. from 3.9 million tons in 1987 to S million tons in 2000. Production by the major producing countries will continue to be mainly for exports. Exports from Malaysia are projected to grow at 0.6% p.a. to 1.8 million tons. Indonesian exports are projected to grow at 3% p.a. from 1 million tons in 1987 to 1.5 million tons in 2000. Exports from Thailand are projected to grow at 2.9Z p.a. to 1.1 million tons. Exports from Sri Lanka are projected to grow at 2.5% p.a. to 183,000 tons. African exports are projected to grow at 2.9% p.a. to 312,000 tons in 2000. 66. Growth in rubber goods manufacturing in the developing countries will lead to changes in the natural rubber trade pattern. Higher-grade sheet and TSRs (primarily from Malaysia and Indonesia) will be exported to the industrial countries for the p-Iduction of high-performance radial and integrated tires. Similarly, higher-quality latex concentrate (from Malaysia, Indoresia, and Liberia) will be exported to the industrial countries for the production of higher-value, latex-based rubber products. 67. In contrast, the lower grades sheet and TSRs (from Indvaesia and Thailand) will be erperted to the newly-industrializing countries such as Republic of Korea; Taiwan, China; and Brazil; as well as to China, the Middle East, and the CPEs. 6a. As Table A4 on net rubber imports shows, import growth rates are projected to be highest in Taiwan, China, Republic of Korea, and Latin America where expansion in synthetic rubber production capacities (to complement the natural rubber imports) are also under way. 69. The result of tire "transplants" from Japan to North America, the radialization of Ehe auto and truck tire industries, and the waning concern about downsizing of cars (and hence of tires) are factors behind the higher import growth rate of 3% p.a. projected for the United States. US imports are projected to grow from 780,000 tons in 1987 to 1.1 million tons in 2000--the same level as for all of Asia. 70. As the EEC stock of cars tends towards saturation, natural rubber imports are projected to grow at 0.8% p.a. to 857,000 tons in 2000. The higher import growth for the Federal Republic of Germany partly reflects the growth in consumption in the nontransport sector for the production of hoses and conveyor and steel beltings. 71. Among the developing countries, significant growth in imports is projected for China, Republic of Korea and Taiwan, China. China's imports are projected to grow at 2.8% to about 510,000 tons in 2000, on the assumption that road conditions in China will warrant continued use of cross-ply tires for wnich only about 25% of rubber input need be natural rubber, and on projections of increased domestic supply of both natural and synthetic rubbers. -315- 72. Significant growth ir. tire manufacturing in the newly industrializing Asian countries has been observed so far only in Republic of Korea and Taiwaan, China, leading to rapid growth of rubber imports of 9% and 18%, respectively, during the 1981-86 period. It is projected that their import growth rates during the 1988-2000 period will be about one-half that during the early 1980s. Price Outlook 73. Before presenting the natural rubber price outlook for the 1988-2000 period, an analysis of natural rubber price movemen.s since 1983 and their impact on consumption patterns is useful for (i) illustrating the influence of distributed lagged effects on the underlying market dynamics; (ii) differentiating input-substitution due to relative input price variations from that due to widening of the tire radialization process; and (iii) demonstrating that natural rubber supply and demand is in fundamental balance and hence extremely sensitive in the short run to new and unanticipated areas of demand, especially because of the inelasticity of short-run supply. The analysis also highlights the versatility of natural rubber latex, which car be processed into latex concentrate, smoked sheet rubber, TSRs, or latex crepe. 74. The price run-up brings into clearer focus the trend in natural rubber purchasing that has developed, whereby RSS and TSR rubbers of different origins are gradually becoming treated as differentiated products by the tire industry. This development reflects the stringent property requirements increasingly being placed on natural rubber as a raw material input because of increased automation in tire manufacturing, tighter input specifications demanded in the manufacture of high-performance and all-season tires, and narrowing profit margins within the tire industry. 75. During the 1983-86 period, total natural rubber and synthetic rubber consumption increased by 10.2% from 12.4 million tons to 13.6 million tons. While the overall share of natural rubber consumption remained stable at 32- 33Z an analysis of elastomer consumption in the tire sector reveals that in the major tire-producing industrial countries the increase in the share of natural rubber ranged from 0.3 to 5 percentage points. In contrast, ratural rubb-er's share in elastomer consumption in the smaller, nontransport sector declined slightly with variaticns not exceeding 3 percentage points. Changing elastomer consumption shares in the two sectors are preserted in Tables 4-5 below. The general rising trend in natural rubber consumption share in the transporc sector since 1983 due to relative price effects is substantiated by the movement in the relative price indices in Table 8. Although relative prices moved in favor of natural rubber consumption from 1984, the natural rubber consumption response is seen to be faster in some countries than others. As relative prices continue changing in favor of natural rubber consumption, the distributed lagged effects are manifested in the higher natural rubber consumption share in 1985 and 1986. - 316 - TABLE 4: SHAR OF WT&URAL RUBBRi USE IN THE TRANSPORT SECTOR, 1983-86 -------------------------------------------------------------__-------------- Country 1983 1984 1985 1986 -------------------------------------------------------------------__--------_ ---------------------- ( )-------------- United States 31.9 34.5 36.6 36.2 United Kingdom 51.0 51.6 53.1 54.9 France 44.8 45.9 44.8 NA Germany, Federal Republic of 46.5 48.5 50.6 49.6 Italy 46.2 44.6 45.6 46.5 Japan 47.1 46.5 47.5 50.4 India 77.4 75.5 75.1 75.8 Brazil 32.9 35.7 36.7 37.6 NA - Not available. Source: IRSG, Rubber Statistical Bulletin, various issues. TABLE 5: SHARE OF NATURAL RUBBER USE IN THE NONTRANSPORT SECTOR, 1983-86 -----------------------------------------------------------_._---------------__ Country 1983 1984 1985 1986 -------------------------------------------------------------------__--------_ United Kingdom 22.7 18.3 22.5 21.5 France 21.4 17.4 15.0 NA Germany, Federal Republic of 18.8 18.8 19.5 16.8 Italy 21.6 21.4 21.8 22.1 Japan 21.0 20.1 18.8 17.3 India 82.2 82.8 79.3 81.1 Brazil 13.3 13.6 14.1 14.9 NA - Not available. Source: IRSG, Rubber Statistical Bulletin, various issues. 76. The increase in the share of natural -ubber consumption in the transport sector can, apart from the effects of radialization, be traced to the natural rubber price decrease and synthetic rubber price increase since 1983. The two sets of prices are shown in Tables 6 and 7. (Relative prices are shown in Table 8.) The decline in the relative orice of natural rubber was particularly strong in the non-US industrial consuming -ountries after 1985 with the depreciation of the US dollar. ?rom our econometric model of the world rubber market, wherein relative rubber prices for consuming countries are based on their respective input-mixes of natural and synthetic rubbers, it is found that the estimated relative prices are about 5 percentage points lower than the simple averages derived from Tables 6 and 7. - 317 - TABLE 6: NATURAL RUBBER PRICE INDICES IN PRIMARY AND TEINAL MARKt, 1983-87 Price of Natural 1983 1984 1985 1986 1987 Rubber INRO DMIP 100.0 91.3 75.8 81.8 96.5 RSS1, Kuala Lumpur 100.0 90.8 76.4 84.4 100.5 RSS3, Kuala Lumpur 100.0 90.2 75.5 84.9 99.1 SMR20, Kuala Lumpur 100.0 95.7 79.3 87.5 100.4 RSS1, Singapore 100.0 89.8 73.9 76.8 92.0 RSS1, London 100.0 101.4 85.1 78.6 86.1 SMR20, London 100.0 107.4 89.9 81.4 87.0 RSS1, New York 100.0 88.5 74.6 76.3 89.8 RSS3, New York 100.0 89.0 74.5 76.9 89.7 Source: IRSG, Rubber Statistical Bulletin, various issues. TABLE 7: SYNTHETIC RUBBER PRICE INDICES IN EUROPE AND CANADA, 1983-86 Country 1983 1984 1985 1986 i987 SBR1500, United Kingdom 100.0 107.2 115.2 117.9 117.9 SBR1500, Germany, Federal Republic of 100.0 100.0 101.6 97.1 93.2 SBRI500, Italy 100.0 113.9 121.3 102.2 106.3 SBR1500, Canada 100.0 101.7 105.3 105.3 105.3 SBR1712, United Kingdom 100.0 105.2 113.0 115.6 115.6 SBR1712, Germany, Federal Republic of 100.0 100.0 101.8 95.4 90.3 SB1712, Italy 100.0 114.0 121.8 102.8 108.7 SB1712, Canada 100.0 101.6 104.8 104.7 104.7 BR, United Kingdom 100.0 - - - - BR, Germany, Federal Republic of 100.0 100.0 105.9 90.7 84.1 BR, Italy 100.0 113.7 120.3 81.5 105.8 BR, Canada 100.0 100.G 100.0 100.0 100.0 PSR, United Kingdom 100.0 106.2 114.1 116.8 116.8 PSR, Canada 100.0 101.1 103.4 103.3 103.3 PSR, Italy 100.0 113.9 121.1 110.2 106.9 PSR, Germany, Federal Republic of 100.0 100.0 103.1 94.4 89.2 Note: SBR1500 is styrene-butadiene, grade 1500. SBR1712 is styrene-butadiene, grade 1712. BR is polybutadiene. PSR is the simple average of SBR1500, SBR1712, and BR list prices in the respective markets. Source: World Bank. - 318 - TABLE 8: INDEX OF rRATIVE PRICE OF NATURAL TO SYNTETIC RUBBERS, 1983-86 Relative Price of Natural to Synthetic Rubbers 1983 1984 1985 1986 1987 United Kin&dom (RSS1/SBR1500) 100.0 94.6 73.9 66.7 73.0 (SMR20/SBR1500) 100.0 100.0 78.0 69.0 73.8 (RSSl/SBR1712) 100.0 96.4 75.3 68.0 74.5 (SMR2G/SBR1712) 100.0 102.1. 79.6 70.4 75.3 North America (RSSl/SBR1500) 100.0 87.0 70.8 72.5 85.3 (RSS3/SBR1500) 100.0 87.5 70.8 73.0 85.2 (RSSl/SBR1712) 100.0 87.1. 71.2 72.9 85.8 (RSS3/SBR1712) 100.0 87.6 71.1 73.4 85.7 All. Markets DMIP/PSR (United Kingdom) 100.0 85.9 66.4 70.0 62.6 DMIP/PSR (Canada) 100.0 90.3 73.3 79.2 93.4 DMIP/PSR (Italy) 100.0 80.2 62.6 74.2 90.3 DMIP/PSR (Germany, Federal Republic of) 100.0 91.3 73.5 86.7 108.2 Note: PSR is the simple average of SBR1500, SBR1712, and BR list prices in the respec-ive markets. Source: World Bank. 77. By late 1986 the rising share of natural rubber consumption in the transport sector was occurring as natural rubber prices were tending towards the apparently critical level of 67-70Z of symnthetic rubber prices when either synthetic rubber production w'll rise to ease the price pressure or natural rubber price will rise because of its short-run supply inelasticity. Given the tightness in the synthetic rubber feedstcck market in 1987, the market forces were poised for an increase in rataral rubber price. The shift in latex use for increased production of latex concentrate since 1987 therefore reinforced the pressure for a price increase, and appears to have been a catalyst in the price recovery and boom since early 1987. 78. The natural rubber price projections are based on a smooth expansion of synthetic rubber production capacity from 12.5 million tons to 17 million tons between 1988 and 2000 and on an oil price (in current dollars) rising from $1,400/ton to $4,000/ton over this period ($14-40/bbl). 79. The New York current dollar spot price for RSS1 is projected to incrcase from $1,444/ton in 1988 to about $2,391/ton wn 2000. In constant 319 - (1985) dollars, these prices translate into $1,026/tor. n_ j_ 5/ton, respectively. Because natural rubber price increases since ::ave Shifted the natural-to-synthetic rubber price ratio frem 0.84 in 13U - - :pected 1.4 in 1988, substitution away from natural rubber in the :-: sector should begin to be observed from 1989. This movement would be reinforced by the new synthetic rubber capacity scheduled to come on-stream after 1989. Under this scenario, natural rubber prices are projected to decline during the 1989-91 period, followed by an upswing during the 1991-94 period. Significant increases in natural rubber output after 1995 3hould lead to lower prices again until the end of the decade when higher consumption due to lowaer relative prices will provide upward pressure on netural rubber prices. 80. If the synthetic rubber production capacity expansion is less orderly than here projected, or is subject to sharp increases in monomer costs (as was experienced during 1987-88 when the shortage of petrochemical feedstocks arising from their diversion to the production of packaging materials caused sharp increases in synthetic rubber prices and shifted the relative price in favor of natural rubber consumption), then the year-to-year path of natural rubber prices will differ from that presented here. However, the long-term decline in real price from the 1980 peak should not be disturbed. 81. The differerce between these price projections and those projected in 1986 stem largely from (i) the new area of demand for latex concentrate by the medical goods industry; (ii) the segmentation of the rubber market into high- and low-quality rubber, where the former will be less readily substitutable in the tire-manufacturing process; (iii) the shift in end-user concern from downsizing of tires to improved performance of tires; (iv) the shorter tire life than that which is technically feasible because of improper use and maintenance by drivers; and (v) the rapid growth in road transport in developing countries such as China. Thus, while the real price of naturaL rubber by 2000 is not greatly different in the two projections, the time path of prices in the scenario presented here differs significantly. To a large extent this is because of the sharp price increases in 1987 and 1988. TABLE Ali NATURAL RUBBER - PRODUCTION BY MAIN COUNTRIES AND ECONUMIC REGIONS ACTUAL PROJECTED GROWTH RLATES Al COUNTRIES/ 1087 - ILCON ONIES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-h6 1970-86 2000 ---------- - ---------------------('000 TONS) -----------------'------------------- ------(X PRR ANNUM)----- DNVELOPING 3,049 3,792 4,435 4,648 4,876 4,890 4,970 5,396 6,4(.3 3.0 2.4 2.6 ASIA 2,793 3,547 4,146 4,331 4,508 4,508 4,584 4,945 5,948 3.1 2.6 2.5 MALAYSIA 1,285 1,553 1,539 1,577 1,668 1,610 1,585 1,620 1,804 2.7 1.2 1.0 INDONESIA 838 955 1,034 1,096 1,125 1,150 1,155 1,310 1,645 1.7 1.5 3.2 THAILAND 295 502 782 830 859 8$8 870 913 1,2o u 6.0 6.6 2.9 SRI LAIKA 150 137 138 138 140 142 145 154 196 1.4 -0.9 2.7 INDIA 90 151 219 220 240 250 265 300 350 6.7 5.7 3.6 CHINA C/ 11 116 211 202 211 225 240 311 383 ... 9.9 5.0 AFRICA 215 196 232 272 313 324 326 383 440 1.8 0.2 3.8 LIBERItA 78 76 89 90 119 123 100 S10 115 3.1 0.4 1.9 NIGERIA 63 49 55 59 74 77 70 80 85 -0.2 -2.1 2.8 COTE D'IVOIRE 11 21 49 57 65 68 99 130 132 29.2 9.8 6,7 AMERICA 35 44 57 45 53 58 60 68 7z 2.9 2.9 3.7 BRAZIL 24 28 33 23 30 32 34 43 52 1.5 1.7 6.5 WORLD 3,049 3,792 4,433 4,648 4,876 4,890 4,970 5,396 6,460 3.0 2,k 2.6 A/ L,EAST U ARES TREND FOR HISTORICAL PEfRIODS (1961-86)i END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. Cl EXCLUDES TAIWAN, CHINA. o SOURCES: PAO, PRODUCTION YEARBOOK T.PES1 IRSG, RUBBFR STATISTICAL BULLETIN ( 1982 ) ( ACTUAL ), WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TA8LE A2i NATURAL RUBSFR - APPAJl't CONSUKPTION BY KAIN COUNT8.IES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES A/ COUNTRIES/ 1987 - ECONOMIES 1969-71 19)9-81 1986 198713 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ... ..-U - -o.. ('000 TONS) ----------------------- P--- ------E PER ANN) ----- INDUSTRIAL 1,814 2,043 2.359 2,130 2,277 2,240 2,273 2,561 2,900 2.4 1.7 7.'A IUORTH AMERICA 631 750 829 859 987 ?39 934 1,105 1,320 2.8 2.0 3.4 UNITED STATES 579 664 743 765 623 830 832 980 1,160 2.7 1.9 3.3 EEC-o.0 771 764 820 736 732 731 763 790 840 1.4 0.3 1.0 GER4MANY, FED. REP. 198 X78 199 195 210 212 215 225 255 1.5 -0.1 2.1 PRANCE 134 176 159 173 170 169 170 170 176 0.7 1.0 0.1 JAPAN 299 429 540 535 558 570 576 666 640 4.0 3.8 1,4 NON-MARKET 479 432 350 363 385 396 400 420 432 -1.3 -2.4 1.3 DEVELOPING 797 1 36 1,697 2,155 2,215 2,271 2,317 2,734 3,128 6.0 5.3 2.9 ASIA 540 958 1,3,2 1,613 1,745 1,791 1,832 2,124 2,318 7.7 6.6 2.9 CHINA Cl 297 408 440 505 510 550 550 710 920 5.7 3.0 4.7 INDIA 99 173 232 278 288 318 318 385 550 6.6 6.4 5.4 AFRICA 68 137 95 138 142 145 150 170 195 4.4 1.6 2.7 AMERICA 129 225 250 320 328 335 335 440 595 3.1 4.2 4.9 BRAZIL 33 84 106 115 117 126 126 250 290 4.2 7.6 7.4 IJ WORLD 3,089 3,881. 4,406 4,648 4,877 4,907 4,990 5,715 6,460 2.9 2.3 2.6 Al LEAST SQUARES TREND POR IITRTORICAL PERIODS (1961-86)t END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIIPATE. C/ EXCLUDES TAIWAN, CHINA. SOURCES, PAO, PRODUCTION L TRADE YEARBOOK TAPES (ACTUAL)s WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A3s NATURAL RURBER - GROSS EXPORTS BE' MAIN COUNTRhEO AND ECONOMIC REGIONS ACTUAL PROJECTED oRO¶dTN RATES Al COUNTRIZS/ 19v7 - EOON(MINB 1969-71 1979-81 1986 198? 1988 1989 1990 1995 2000 1961-86 1970-S6 2000 -------------------------------('000 TONS) -------------------------------------- ------( PER ANM) ----- INDUSTRIAL 0 0 0 0 0 0 0 0 0 0°0 0.0 0.0 NON-MARKET 0 0 0 0 0 00 0 0 0.0 0.0 0. 0 DiVELOPING 2,851 3,259 3,615 3,857 4,003 4,012 4,024 4,73.3 5,023 2.2 1.6 2.1 ASIA 2,639 3,109 3,401 3,634 3,766 3,750 3,738 3,953 4,711 2.3 1,7 2.0 MUALAYSIA 1,364 1,553 1,485 1,660 1,600 1,695 1,500 1,604 1,800 2.1 0.6 0.6 INDOWISIA 787 886 959 1,011 1,036 1,058 1,062 1,120 1,485 1.5 1.4 3.0 THAILAND 287 483 746 784 811 820 826 862 1,132 5.8 6.5 2.9 SRI LAMKA 144 127 110 132 134 135 138 146 183 0.8 -2.3 2.5 AVRICA 194 142 203 215 237 243 250 282 312 1.5 0.1 2.9 WORLD 2,851 3,259 3,615 3,857 4,003 A,012 4,024 i,33i 5,C23 1.9 1.5 2.1 Al LZAST SQUARES TREND FOM HISTOUICAL PERIODS (1961-86), END-POrNT FOR PROIEC'TED PERIODS (1987-2000). L/ ESTIKATE. SOURCES, FAO, TRADE YEARBOOK TAPES (ACTUAL), WORLD BAFM, INT ATIOtIALi ECONOMICS DEPARTMENT (PROJECTED). TABLE AA i BAntAL R3UBUB - GRSOSS D@ORTS A mHAZ cCMWThXES AID ECOOUHC RWZION# ------------------------------------_---------------------------__--_-_____--__----------___-------------___ ____--__---._____- ACTUAL PROJECTED GROWTH RATIO Al -- - - - - - - - - - - -------._ __ _ ._ _ __ _ __ - ------------------------------------------ ---------- -------------- cOuraTIsSI 1987 ZoOUFWElB 1969-71 1979-81 1986 1987/P 1988 1989 1990 1995 20m0 1961-86 1970-86 2000 ----------------------------------(C000 TONS)------------------------------------- ------(X PER ANUM)----- INDUSTRIAL 1,854 2,083 2,228 2,186 2,283 2,309 2,364 2,582 2,907 1.8 1.2 2.2 NORTH AHZR!CA 65, 772 815 878 955 970 976 1,100 1,310 2.6 1.7 3.1 UNITED STATES 600 686 721 780 850 855 857 1,030 1,140 2.4 1.5 3 0 EEC-lO 788 780 790 773 770 769 795 816 857 0.5 -0.1 0.8 GEJAASNY, FED. REP. 199 180 192 196 210 212 215 224 252 1.5 -0.2 2.0 FRANCE 136 181 158 174 171 170 171 171 178 0.6 0.8 0.2 JAPAW 299 429 540 535 558 570 593 666 740 4.0 3.8 2.5 PON-MARKET 479 432 348 363 185 396 *00 420 432 -1.6 -2.5 1.3 USSR 286 217 168 186 190 191 192 195 210 -3.0 -3.9 0.9 EASTERN EUROPE 193 215 180 177 195 205 208 225 222 0.6 -0.8 1.8 DEVELOPING 598 873 1,039 1,308 1,335 1,307 1,260 1,328 1,681 3.9 3.9 1.9 ASIA 386 520 727 951 970 933 885 943 1,086 4.2 4.0 1.0 CHINA Cl 253 292 211 353 357 350 362 453 508 2.8 -0.2 2.8 KOREA, REPUBLIC OF .. 180 187 200 211 224 260 287 ... ... 3.4 TAIWAN, CHINA .. . 105 110 119 129 138 220 220 ... ... 5.5 AMERiCA 105 184 190 243 249 256 255 256 450 2.6 3.9 4.9 SO&TfKRN EUROPE 60 86 122 114 116 118 120 125 145 5.4 4.6 1.9 WORLD 2,931 3,388 3,615 3,857 4,003 4,012 4,024 4,330 5,020 1.7 1.3 2.0 ------------------------------------ _---------------------------------_ ---- ______------______-,.__------______------______ ---- Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). Bl ESTIMATE. Cl EXCLUDES TAIWAN, CHINA. SOURCESt FAO, TRADE YEARSOOK TAPES (ACTUAL); WORLD SAK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). - 324 - TABILE A5: NATURAL RtJ3ER - PRICES, a/ 1950-87 (ACTUAL) and 1988-2000 (PKOJECTED) (c/kg) --($/Ton) Current $ -1985 Constant $- Current $* HUV b/ US CN? c/ Actual 1950 90.6 382.8 423.2 1951 130.2 477.1 580.2 1952 85.0 297.2 373.1 1953 53.4 192.1 230.8 1954 52.1 191.6 221.6 1955 86.4 311.9 355.9 1956 75.4 262.7 300.5 1957 68.8 234.8 264.7 1958 61.9 207.7 233.3 1959 80.7 274.5 296.6 1960 84.2 280.7 304.3 1961 65.0 213.0 232.7 543.3 1562 63.1 202.8 222.0 492.1 1963 57.8 189.3 199.6 489.0 1964 55.6 179.0 188.9 452.5 1965 56.7 181.2 i87.8 438.2 1966 52.0 160.5 166.4 431.3 1967 43.9 134.0 136.6 362.0 1968 43.7 134.7 129.6 330.9 1969 57.8 169.0 162.5 423.3 1970 46.3 127.4 123.2 391.5 1971 39.9 104.2 100.6 330.3 1972 40.1 96.1 96.5 310.4 1973 78.5 162.3 177.2 570.0 1974 86.9 147.5 180.1 717.3 1975 65.9 100.6 124.3 541.7 1976 87.3 131.4 154.8 721.1 1977 91.7 125.7 152.5 791.5 1978 110.7 131.8 171.5 915.3 1079 142.4 149.7 202.7 1,180.6 1980 162.4 155.7 211.9 1,310.3 1981 125.2 119.4 149.1 1,067.7 1982 100.2 96.9 112.1 799.2 1983 123.8 122.9 133.3 963.7 1984 109.6 111.2 114.0 975.4 1985 92.4 92.4 92.4 756.0 1986 94.5 79.9 92.7 752.7 1987 111.7 85.9 106.0 916.4 Pjed 19S8 144.4 102.6 132.3 1,189.5 1989 127.2 85.1 111.4 1,031.0 1990 117.5 77.4 98.0 916.0 1995 207.7 114.8 133.3 1,423.0 2000 239.1 105.5 122.4 1,873.0 *Developing countries' export unit value. a/ RSS No. 1, in bales, spot, New York. bi Deflated by lmanufacturing Unite Value (MUV) Index. c/ Deflated by US GNP deflator. Sources: International Rubber Study Group, Rubber Statistical Bulletin (actual); World Bank, International Econouics Department (projected). - 325 - RUBBER (CONSTANT 1986 DOLLAR PRICES*) 700 6001 500 II 4001 h a'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' 00 1945 1950 1955 itco 1965 1970 1975 1980 1985 1990 1995 2000 - ~~~~DEFLAE BY MANUFACTRING UNIT VALUE ( MUV )INDEX '-'a''''''-DEFLAtED ?Y U.S. GNP DEFLATOR. 1948 - 97 ACTUAL ; 19811 - 2000 PROJECTED . SOURCE : WORLD BANK , INTERNA:TIONAL ECONOMICS DEPARTMENT. I~~~~~~,.... TOBACC~O 1I Sumary 1. Tobacco consumption growth is being increasingly constrained by consideration of the detrimental effects on personal heaLth of using tobacco products and the increasing cost of tobacco products due to rising costs of production and taxation. These factors have contributed importantly to the steepening decline in tobacco consumpticn in the industrial countries and to slowing the rate of growth of consumption in all other regions--except in the Asian developing countries where a surge in income growth in China stimulated a rapid rise in tobacco consumption during the 1980s. These regional trends imply an average rate of growth in world tobacco demand of 1.4% p.a. curing the projection period. Demographic factors and income growth expectations indicate that the developing countries will account for most of the Increase in tobacco use during the 1990s. 2. Tobacco production volume over the medium term will benefit from the substantial reduction in surplus tobacco stocks that has occurred in recent years. Over the longer term the tendency for tobacco production to increase faster than consumption will likely result in an accuraulation of stocks late in the projection period. The bulk of the increase in tobacco production needed to satisfy projected demand is expected to be grown ir. the developing countries, where lower farm wage rates make tobacco cultivation most competitive. Trends in the manufacturing of ble.ded cigarettes indicate that flue-cured tobacco will continue to account for an increasing share of total demand. 3. A structural shift in tobacco manufacturing is under way. Investment in manufacturing capacity is increasing in the countries where tobacco consumption is increasing fastest, while capacity in some traditionally large cigarette-exporting countries is declining. 4. The tobacco stock adjustments achieved in recent years have improved price prospects for the medium term. But over the longer term, supply growth is expected once again to overtake demand growth. Hence, the indicator price (the export price for Indian flue-cured tobacco) in 1985 constant dollars (MUv deflated) is projected at $1,492/ton in 1995 and $1,439/ton in 2000. Demand Outlook 5. Activity in the world tobacco economy is essentially demand-driven, and the continuation of the developing country trends of the 1980s are expected to result in substantial geographical restructuring of the global tobacco industrv during the remainder of the 1900s. In an increasing number 1/ Data in this report are based on the dry weight of tobacco leaves, except for those in Table 3. - 328 - of countries, concerns for the detrimental effects on health of using tobacco products have offset the historical positive relationship between population and income growth and the demand for tobacco. During the 1980s Japan and the EEC have experienced a declining trend in tobacco use similar to that experienced earlier in North America. Apparent consumption of tobacco in the indlistrial countries is estimated to have declined at 2.5% p.a. during the 1980-86 period (TabLe 1). In contrast, tobacco consumption in developing countries during that period declined only in the Latin American region, while tobacco use by develcping countries as a whole increased by 5.1% p.a. as consumption in China increased sharply in response to surging income growth. Apparent consumption of tobacco is also estimated to have increased substantially in the JSSR in the 1980s, while slowing decidedly in Eastern Europe. 6. The primary causes for the downtrend in tobacco use in the industrial countries are the economic cost of smoking and intensifying concerns for the adverse consequences to personal health from using tobacco products. Retail prices of tobacco products are being increased in many countries by higher taxation, as well as by the higher .osts of production. In the United States, for example, a 1987 assessment of state government taxation on cigarette sales found that the weighted average tax had increased by 9.2% over the previous year. Increased taxes largely explain why retail prices for cigarettes over the year to Octo5er 1987 increased by 65Z more than the consumer price index. In addition to state and local taxes, the federal excise tax on cigarettes was increased from 8C a pack to 16; a pack on january 1, 1983. In the United Kingdom, the real price of cigarettes increased by 26% between 1980 and 1984 and, althcugh cigarette consumption declined by 20% during that period, tax revenues frors tobacco increased by 10%. During 1986, receipts from duty on UK manufactured tobacco toteled 4,767.6 million pounds sterling- amounting to 61% of consumers' expenditure on tobacco products. 7. Health concerns related to the use of tobacco products have been heavily publicized in many indu3trial countries, particularly .n North America and Western Eurepe. Antismoking campaigns have derived substantial support from medical studies of tne relationships between tobacco and personal health, particularly with respect to cancer, co -onary/circulatory, and respiratory diseases. Recent attention has often been focused on the ill effects of secondary smoke on young children. 8. Policy in an increasing number o' countries has responded to the health concerns with measures to protect no,ismokers from the adverse effects of exposure to secondary smoke. A prevailing attitude was expressed by the Federal Minister of Environmental Affairs in the Federal Republic of Germany who reportedly favors the development of a general attitude that nonsmoking be regarded as normal and smoking be pe-mitted only in designated areas of official buildings and other work places. In US federal government buildings, smoking of cigarettes, cigars, and pipes has been restricted to designated areas since February 1987. Smoking is prohibited on airline flights of less than two hours in Canada and the United States. Nonsmoking areas must be designated ona flights exceeding two hours and in restaurants. Health warnings are widely required on tobacco products, and advertising of tobacco products is restricted in some media and at some sports events. The European Commission has proposed limiting the tar content of cigarettes to less than 15 milligrams by 1°,2 and to no more than 12 milligrams by 1995. - 329 ^ TA&Lt 1: APPARENT CRO(Th OF CONSUMPTI0 O! TOBACCO, 1960-86 Countries/ 1960-69 1970-79 1930-86 Economies 2z p.a.… Industrial 0.63 0.53 -2.50 North America -1.33 -0.81 -3.26 United States -1.63 -0.91 -3.39 EEC-10 2.08 1.52 -1.49 Japan 4.24 2.41 -3.00 Non-Market 3.39 2.69 3.33 tQ3SR 3.82 1.83 4.90 Eastern Europe 2.69 2.58 0.30 Developing 2.69 2.81 5.40 Asia 3.53 2.45 6.79 Cbina 3.14 2.92 9.71 India 1.03 1.55 1.92 Africa 1.82 3.39 2.02 Latin America 1.05 2.66 -0.62 Brazil 0.55 5.98 -2.13 Soutmarn Europe 3.68 6.59 1.78 World 1.92 1.90 2.89 World Less China 1.67 1.66 0.43 Source: Calculated from data trom the USDA. 9. The recent downtrends in tobacco consumption are projected to continue through the 1990s as a smaller proportion of the population participates in the consumption of tobacco products. [In the United States only about one-fourth of the adult population (18 years and older) now smoke tobacco products.3 Should the US Surgeon General's recent statements regarding rhe habit-forming nature of tobacco consumption be translated into further restraints on its use, tha decline in tobacco consumption in the United States could be at a faster rate than is currently projected. Legal challenges intended to make tobacco manufacturers liable for illnesses acquired by tobacco consumers have raised some concerns for investors in the tobacco industry. This, and declining consumption of tobacco products, are likely to result in a shift in tobacco manufacturing to those countries with more favorable demand growrh prospects. 10. Tobacco consumption in the USSR has been supported by increasing indigenous production and rising imports of tobacco leaf and cigarettes. However, the thrust of an article published in Izvestiya in August 1987 indicates that future growth could well be slowed. the article discussed the - 330 - adverse health effects of smoking, various antismoking programs in other countries, and lower import goals for tobacco and tobacco products. Taking this information into account, the growth of apparent consumption of tobacco in the USSR is projected to the year 2000 at 1.1% p.a., compared to the 1970- 86 growth rate of 1.4% p.a. 11. Cigarette production in the East European countries has continued to increase at less than 2% p.a. in recent years, and the net export of cigarettes has reduced the supply of tobacco products and the rate of growth of apparen, consumption to only 1.8% p.a. during the 1970-86 period. With moderate economic growth projected for the region, apparent consumption of tobacco during the period 1987-2000 is projected at 1.6% p.a. 12. Pro^pects for increased tobacco consumption in the developing countries to the year 2000 are favorable due to the number of people reaching adulthood and given that economic growth is projected at higher levels than achieved in the early 1980s. There are uncertainties, however, with possible responses to health concerns as per capita consumption rises. 13. Apparent consumption of tobacco in two of the developing country regions has been dominated by what happened in a single large3 country in each region. China is the world's largest tobacco producer and consumer, and the rapid expansion of its tobacco industry during the 1980s increased its snare of Asia's and the world's markets. While China's apparent tobacco consumption growth rate increased to 9.7% p.a. in the l980s (Table 1), the aggregate growth for the other Asian countries was 2.6X p.a. For all developing countries cther than China, the apparent consumption growth was a more moderate 1.8% p.a. 14. Similarly, developments in Brazil have greatly affected results for the entire Latin %merican region. Brazil's rapid increase in tobacco consumption during the 1970s and its retrenchment during the period of slow economic growth in the 1980s dominated the regional growth rates; the increase in apparent consumption in the remainder of the region was stable at around 0.5Z p.a. during both periods. Recent policy initiatives have improved prospects for economic growth in Brazil. Assuming success in this area, a turnaround in the downtrend in tobacco consumption in Brazil is projected over the medium term and positive growth is anticipated during the 1990s. 15. In China, cigarette production and consumption increased by over 9% p.a. during the 1980s as demand was stimulated by rising real incomes and as an increasing proportion of the population participated in cigarette use. A recent report estimated that 61X of adult Chinese males and 7% of Chinese females smoke. Considerable investment in manufacturing equipment in recent years has improved the quality and variety of products marketed, as well as increased the supply of manufactured cigarettes available to satisfy the demand for people switching from "roll your own" cigarettes. The tobacco consumption growth rate is likely to moderate in the future as the rate of growth of beginning smokers eases and as income growth moderates compared to the rapid pace achieved in the early 1980s. Also, increasing publicity is being given to the health hazards of smoking. During the last year smoking has been banned in Beijing's railway station-a facility that serves over 1 tillion persons per day--and in some 100 other public places such as - 331 - gymnasiums, subways, and hospitals. Articles in the press are drawing attention to the risks of smoking and the health benefits of moderation in tobacco use. 16. In India, tobacco consumption during 1988 is being constrained by the drought-shortened 1987 tobacco crop. With the expected return of better growing conditions, tobacco consumption is projected to resume moderate expansion. 17. Tobacco consumption growth slowed in Africa during the 1980s as many countries e-perienced negative real income trends; moderate increases of around 2% p.a. are projected through the 1990s.. 18. Apparent consumption of tobacco increased sharply in the Southern Europe region during the 1970s, but the growth rate slowed to 1.8% p.a. in the 1980s. Although demand for tobacco products is expected to recover somewhat during the projection period, the 1987-2000 growth rate of 2.9% p.a. assumes continuation of the moderating long-term growth. 19. Aggregating the divergent trends in the various regions, world tobacco consumption to the year 2000 is projected to increase at 1.4Z p.a. A major portion of that growth is accounted for by China, and the world less China is expected to increase tobacco consumption at only 0.5Z p.a.--about the rate experienced in the 1980s. Supply Outlook 20. Tobacco produces a high value product ler unit of cropland, and the area devoted to tobacco growing is very responsi'e to leaf prices. Moreover, :obacco's high yields limit the cropland requ red to produce the world's equ.irements; the global average tobacco-growing area durirg the last five -ears was only 4.3 million hectares. These production characteristics, in sssociation with the inelastic response of consumption to tobacco prices, lead to a general tendencv fcr tobacco production to outstrip consumption. 21. The periodic surpluses of tobacco stocks due to yield variability depress tobacco prices and often elicit policy measures in producing countries to reduce the excess supply. Several major producing countries have experienced such stock reductions during the 1980s (Table 2). The most dramatic instance was in China; produccion of 2.2 million tons in 1985 (35% more than in 1984) in response to increased grower incentives strained storage cspacity. Emphasis was subsequently placed on reducing production and imnproving the quality of tobacco produced. Within two years the restraint on p--oduction and the rapid expansion of tobacco manufacturing had eliminated the excess supply. it is estimated that production of over 2 million tons per year will be needed to meet projected consumption requirements during the remainder of the 1980s. However, the rate of growth in Chinese tobacco production is projected to ease in the 1990s in response to lower consumption growth. 22. Canada's sharp decline in apparent consumption of tobacco during the 1980s (down by 37X) has been accompanied by reduced production and lover - 332 - TABLE 2: RECENT CHANGES IN TOBACCO STOCKS IN SOME NAJMO PRODUCIN COUNTRIES Country Estimated Stock -------Stock Peak------- 1987 Stocks Reduction (Years) ('000 Tons) ('000 Tons) (Z) ------------------------------------------------------------------__---------_ Brazil 1984 212 171 19 Canada 1983 94 42 55 China i985 632 139 78 India 1983 307 216 30 Japan 1983 532 443 17 Korea, Rep. of 1984 152 116 24 Malawi 1984 29 14 52 Turkey 1983 381 277 27 United States 1984 1,724 1,500 13 World 1985 6,671 5,706 14 Source: USDA, Foreign Agricultural Service. stocks. Aggressive marketing of Canadian flue-cured tobacco in nontraditional export markets helped to reduce unmanufactured tobacco stocks by 55% from 1983 to 1987. Various government programs have assisted growers to leave the industry in recent years. Rising retail cigarette prices, increased health issue awareness, and antismoking laws passed at various levels of government are expected to perpetuate the downtrend in tobacco use in Canada, and production is projected to decline over the long term. 23. Tobacco production in the United States declined by an average of 1.6% p.a. from 1970 to 1986. The downtrend is projected to continu:e in the 1990s but rt a slightly slower pace. Legislation has reduced US support prices and will hold the line on future support price increases; this policy will increase the competitiveness of indigenous supplies and will slow the increases in the share of imported tobacco in domestically produced cigarettes (now over one-third). Moreover, the lower relative value of the US dollar is stimulating export demand for US unmanufactured tobacco and cigarettes (cigarette exports increased by 56% in 1987, raising cigarette production by 3% in spite of lower US cigarette consumption). 24. Tobacco production in the EEC-10 countries is projected to grow at a slower rate in the 1990s with the impact of declining smoking in several countries being only partly offset by reduced imports of unmanufactured tobacco. The decline in tobacco production in Japan is expected to accelerate, with an increasing share of the domestic market being supplied by increases in the recently allowed imports of cigarettes. 25. In the USSR, tobacco production is projected to the year 2000 at a rate of expansion only slightly slower than that of the 1970-86 period. This projection could be optimistic if the health issue develops into an effective - 333 - deterrent to smoking. Tobacco production in Eastern Europe is projected to continue increasing in line with past trends. 26. Most of the increase in tobacco needed to fill the growth in projected worLd demand to the year 2000 is expected to be produced in the developing countries. Of the 1.8 million tons of increase in world tobacco production projected between 1987 and 2000, China accounts for more than 800,000 tons (discussed above). Other Asian countries account for 225,000 tons, of which India accounts for 92,000 tons. Southern Europe is projected to increase production of tobacco by 95,000 tons, most of which would be the oriental type, although some areas are experimenting with flue-cured varieties. 27. Brazil is expected to remain the predominant tobacco producer in Latin America, while continuing to depend upon both the domestic and export market as outlets for their flue-cured crop. Production is projected to continue increasing at a moderate pace in Africa, with Zimbabwe and Zambia the major suppliers to export markets. 28. The increasing preference for blended cigarettes in many countries has resulted in an increasing share of world tobacco production being of the flue-cured varieties (Table 3). Therefore, the longer-term outlook is for expanded production of these varieties. TABLE 3: UNKAMUFACTURED TOBACCO-WiORLD AVERAGE ANNUAL PRODUCT1ON BY TYPE ---------------------------------------------------------------------__------_ Years Fiae-Cured Burley Oriental Other b/ Total --------------------------------------------------------------------__-------_ ('000 Tons, Farm Sales Weight) a/ 1979-81 2,635 596 867 1,419 5,517 1982-84 3,270 714 917 1,537 6,438 1985-87 3,382 645 933 1,486 6,446 Share of World (x) 1979-81 48 10 16 26 100 1982-84 51 11 14 24 100 1985-87 53 10 14 23 100 a/ Production on farm sales weight basis which is about 10% above dry weight normally reported in trade statistics. b/ Includes Light Air and Light Sun, Dark, and Fire-Cured. Source: USDA, Foreign Agricultural Service. - 334 - Trade Outlook 29. With the surge in indigenous production and consumption in China, the volume of world trade in unmanufactured tobacco has declined relative to world apparent consumption. This relative decline in tobacco leaf trade has also been partly due to an increase in cigarette exports--cigarette exports in 1986 were 25% greater than the 1977-81 average. The trade shift was magnified in 1987 by de--elopments in the United States, the world's largest exporter of tobacco; with cigarette manufacturing capacity being released from supplying declining domestic consumption, exports of US manufactured cigarettes increased by 56% in 1987, while US leaf export volume declined by 10%. 30. The penetration of industrial country markets by tobacco produced in developing countries has raised their share of world -Aports to 63%, up from 60% in 1969-71. Legislation reducing US price supports and restraints on future increases in tobacco price supports may slow the rate of Denetration in the medium term. Also, although US tobacco prices are still higher than for many competitive growths, the trend towards blended cigarettes and the lower- valued US dollar make better qualities of US tobacco more desirable for some brands of cigarettes. 31. The recent tendency for new investment in cigarette manufacturing facilities to be constructed in tobacco-producing countries where consumption is increa.3ing could alter the pattern of tobacco leaf trade flows. However, blended cigarette production, which is increasing fastest, requires supplies of several different types of tobacco, all of which are unLikely to be produced in one country. Therefore, a modest increase in tobacco leaf trade volume is projected throughout the 1990s. Price Outlook 32. Tobacco prices vary considerably by type of tobacco and quality; quality, in turn, responds dramatically to seasonal growing conditions. Generally, high-quality burley tobacco brings the highest price and it is followed closely by high-quality flue-cured tobacco. The dark, oriental tobaccos are lower-priced. In the absence of other more reliable prices, we use the export unit value for Indian flue-cured tobacco as the world indicator price for tobacco. These unit values (in constant dollars) have shown a sligbt downward trend over the 1960-87 period. The extent of decline depends on the deflator used--for the MUV it is -1.26% p.a. and for the US CNP deflator it is -0.67% p.a. During this period the share of world tobacco production accounted for by lower-cost developing countries was increasing. Moreover, during the 1980s, the declining trend in real tobacco prices steepened as efforts increased to liquidate surplus stocks in several producing countries while the growth in consumption was slowing. 33. 'Se have seen no reason to change our price forecasts for the period 1988-90. The recovery in real tobacco prices (MNV deflated) forecast for 1988-90 is supported by the progress in the liquidation of surplus world tobacco stocks. More specific to Indian tobacco, the Indian Tobacco Board reduced the 1988 flue-cured tobacco production target for Andhra Pradesh (the primary flue-cured producing state) oy 30% and poor yield prospects now meke - 335 - reaching the production target unlikely. The continued increase in forecast tobacco prices over the medium term is based on the determination of the Tobacco Board to regulate tobacco production in line with export market prospects. Although the improved stocks-to-consumption relationship has improved the prospects for some buoyancy in real tobacco prices in the medium term, the tendency for production to outstrip consumption growth in response to higher prices is forecast to rebuild stocks in the mid-to-late 1990s sufficiently to lower real tobacco prices around the end of the projection period. 34. Comparison of the 1986 forecast with the actual 1986-87 prices is made in Table 4. The downtrend in Indian flue-cured tobacco unit export values was interrupted in 1986 by the impact on export supply of low yields for two consecutive years due to unfavorable weather during the growing season and pest infestations in some areas. The recovery in production in 1987 depressed prices again. TABLE 4: TOBACCO PRICES, COMPARISO-IS OF 1986 FORECASTS AND ACTUAL 1986-87 PRICES a/ -----------…(Us$/Ton) … Year 1985 1986 1987 (US$/Ton) Actual Price 1,950 2,085 1,912 1986 Forecast i,900 1,980 a/ Indian flue-cured, average export unit value. 35. Since the 1986 forecast, changes in the US tobacco support price program has tended to lower the floor price and placed all growths on a more competitive footing. However, the improved world stock/consumption ratio (reduced from 1.19 in 1983 to 0.95 in 1987) has reduced the surplus supply which should improve market responsiveness to current production and consumption levels. In these circumstances, over the long term the observed tendency for production to outstrip consumption will have a greater depressing impact on tobacco prices than in the past. TAPLE Al, TO8tACCO - PRObDUCTION DY AIHN COUN I£9 ARb C R e t1MU ACTUAL PROJECTED OROWTH RATES Al COUNTRIES 19t 7 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-56 1970-86 2000 ----------------------------------('000 TONS) ------------------------------------- -------( PER MINUX4 . ZNrIJSTR1AL 2, 13. 1,218 863 863 860 835 830 795 765 -0.6 -0.8 -0.9 NORTH AMERICA 834 886 538 538 560 538 530 495 465 -1 2 -1.6 -1,4 UNITED STATES 740 787 4.75 503 495 480 475 455 430 -1.2 -1.6 -1.2 CANADA 95 99 63 55 60 55 50 40 35 -0.1 -1.5 -3.4 EEC-10 137 188 206 196 198 200 202 212 225 2.8 3.0 1.1 JAPAN 142 127 106 95 94 93 92 85 75 -1.2 -1.5 -1.8 NON-MARKET 463 533 643 624 642 650 660 700 745 2.1 1.0 1.4 USSR 227 261 345 345 352 359 367 400 437 3.0 1.4 1.8 EASTERN EUROPE 238 272 298 279 290 291 293 300 308 1.3 0.5 0o.' DEVELOPING 2,435 3,139 3,834 4,249 4,343 4,465 4,790 5,200 5,675 3.1 3.4 2.3 ASIA 1,583 2,006 2,637 3,047 3,118 3,214 3,514 3,800 4,109 3.7 4.2 2.3 CHINA 700 967 1,547 1,928 2,000 2,075 2,150 2,370 2,765 3.7 6.2 2.8 INDIA 332 432 413 421 305 375 455 496 545 2.0 2.3 2.0 1 AFRICA 164 241 249 270 270 280 290 330 390 1.9 3.0 2.9 w zImsABIUE S1 85 92 109 4,0 101 120 140 170 0.6 4.0 3.5 MALAWI 1S 48 51 58 61 65 68 87 109 7.8 7.9 5.0 AMERICA 431 565 578 584 593 605 616 670 736 2.2 1.8 1.8 BRAZIL 174 299 313 329 342 355 370 440 510 3.5 3.9 3.4 SOUTHERN EUROPE 257 327 361 348 360 366 370 400 440 A,9 1.8 1.8 TURXEY 135 161 134 145 146 148 150 157 165 2.1 0.6 1.0 GREECE 77 106 144 13u 134 138 142 165 185 1.7 3.5 2.8 WORLD 4,034 4,890 5,340 5,736 5,845 5,930 6,280 6,695 7,185 2.0 2.2 1.7 --------------------------------------------------------------------_________-__-_-__,-__-____-.,-___-_-_-_-_-__-_ A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)h END-POINT FOR PROJECTED PERIODS (1987-2000). 8t ESTIMATE. SOURCESt US DEPARTMENT OF AGRICULTURE, FOREICN AGRICULTURAL SERVICF (ACTUAL); WORLD BANK, INTgRHATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A2i TOBACCO - APPARENT CONSUMPTION BY MAIN COUNTRIES AND ECONOmIC REGIONS ACTUAL PROJECTED GRr0 TH RATES Al COUNTRIES/ 1987 - EC0)NOMIES 1969-71 1979-81 19a6 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 --------------('000---TONS)I., PER ANNUM) ---------------------------------- ('000 TONS)-------------- ------------------- ------- 1 YE-NUf------ ( INDUSTRIAL 1,587 1,665 1,417 1,369 1,373 1,345 1,315 1,210 1,115 0.0 -0.4 -1.C NORTH AMERICA 688 703 565 54o 550 530 505 40 385 -0.8 -0.9 -2.6 UNITED STATES 623 635 508 497 507 490 472 405 350 -0.8 -0.8 -2.7 EEC-10 612 646 580 558 568 562 557 530 500 1.0 -0.3 -0.8 JAPAN 194 226 194 193 192 191 190 183 180 0.7 -0.4 -0.5 NON-MARKET 521 649 780 771 780 789 798 850 903 2.3 1.6 1.2 USSR 337 413 533 S39 544 550 535 585 620 2.3 1,4 1.1 EASTERN EUROPE 184 236 247 232 236 239 243 265 285 2.1 1.8 1.6 DEVELOPING 2,032 2,810 3,843 3,860 3,936 4,032 4,125 4,635 5,165 3.3 3.9 2.3 ASIA 1,319 2,089 3,074 3,098 3,163 3,252 3,332 3,770 4,225 3.8 4.6 2.4 CHINA 734 1,125 1,939 1,978 2,058 2,110 2,160 2,500 2,9D0 5.8 6.5 3.0 INDIA 278 1'38 365 373 340 386 392 427 465 2.0 2.5 1.7 AFRICA 120 l 196 193 196 200 205 225 250 3.3 3.0 2.0 AMERICA 282 352 357 354 352 350 348 365 380 1.5 0.9 0.35 4 BRAZIL 101 162 139 160 158 157 155 170 183 1.9 1.5 1.1 SOUTHERN EUROPE 111 192 216 213 225 230 240 275 310 3.7 3.4 2.9 WORLD 4.140 5,124 6.040 6,000 6,09 6,166 6,238 6,695 7,185 2 1 2.3 1,4 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86) END-POINT FOR PROJECTED PERIODS (1987-2000). 8/ ESTIMATE. SOURCESi US DEPARTMENT OF AGRICULTURE, FOREIGN AGRICULTURAL SERVICE (ACTUAL)i WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABLE A3 TOBACCO - GROSS EXPORTS BY KAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTHi RATES Al COUNTRIESI 1987 ECONOMIES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961 86 1970-86 20.00 ----------------------------------(000 TONS)------------------------------------- ------- ( PER ANNUM)------- INDUSTRIAL 311 426 415 430 425 420 405 440 470 1.9 1.4 0.7 NORTH AMERICA 269 297 247 270 265 262 260 275 290 0.6 -0.5 0.6 UNITED STATES 239 267 218 240 235 234 235 247 260 0.4 -0.4 0.6 CANADA 30 30 29 30 30 28 25 27 30 1.0 -1.1 0.0 EEC-l0 33 121 153 145 144 142 140 150 1 0 10.2 8.5 0.8 NON-MAN ET 94 98 80 82 80 77 75 80 88 -0.7 -0.8 0.5 EASTERN EUROPE 91 96 77 79 80 77 75 so 88 -0.7 -0,8 0.8 DEVELOPING 612 881 853 874 860 850 850 90G 952 2.5 1.8 0.7 ASIA 206 263 217 215 212 210 215 225 235 2.7 -0.1 0.7 INDIA 53 89 62 64 66 65 68 69 70 1.7 1.1 0.7 AFRICA 96 170 168 182 170 177 175 188 200 2.2 3.4 0.7 ZIMBAWEE 40 94 99 104 102 100 100 107 115 1.9 3.4 0.8 MALAWI 21 52 61 70 68 e9 74 76 77 6.7 6.2 0.7 AMERICA 150 267 270 269 265 260 235 275 292 4.5 3.6 0.6 BRAZIL 55 144 176 175 174 172 178 180 190 6.9 8.2 0.6 SOUTHERN EUROPE 160 180 198 208 205 202 200 212 225 0.7 0.8 0.6 TURKEY 76 95 82 106 105 100 105 110 115 0.8 -0.2 0.6 GREECE 64 61 101 88 86 87 85 90 95 1.1 3.2 0.6 WORLD 1,017 1,406 1,348 1,386 1,365 1,347 1,330 1,420 1,510 2.2 i.6 0.7 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86): END-POINT FOR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. SOURCES: US DEPARTMENT OF AGRICULTURE, FOREIGN AGRICULTURAL SERVICE (ACTUAL); WOULD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). TABULE A4 TOACCO - GROSS IMPORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATES A/ COUNTRIES/ 1987 - ECONOMIES 1969-71 1979-81 1936 198718 1988 1989 1990 1995 2000 1961-86 1970-86 2000 --------------------------------- (000 TONS)------------------------------------- -------(X PER ANNUM)------- INDUSTRIAL 737 962 893 876 885 895 905 955 1,005 1.8 0.8 1.1 NORTE AXERICA 98 185 208 202 205 207 210 225 240 4.1 4.4 1.3 UNITED STATES 96 180 205 200 202 205 208 223 238 4.2 4.6 1.3 EEC-10 518 620 555 54', 5-!7 563 570 603 635 1.4 0.4 1.3 UNITED KINGDOM 130 151 101 10.5 1V4 102 100 98 95 -0.2 -1.0 -0.8 GIUMANY, FED. REP. 144 155 140 134 133 132 130 127 125 0.6 0.0 -0.5 OTHER WESTERN EUROPE 65 67 53 54 53 52 50 47 45 0.6 -1.9 -1.4 JAPAN 38 75 66 68 70 73 75 80 85 6.5 1.8 1.7 NON-MAREET 119 169 162 170 172 174 175 190 210 1.3 2.6 1.6 USSR 66 a5 67 75 75 76 77 82 90 0.8 1.1 1.4 EASTERN EUROPE 53 84 95 95 97 98 98 108 120 1.8 4.1 1.8 DEVELOPING 169 284 262 241 243 246 250 275 295 4.6 4.1 1.6 ASIA 84 138 113 102 103 103 105 115 125 6.0 5.3 1.6 Li AFRICA 55 93 100 91 92 93 95 105 110 3.7 2.6 1.5 tD AMERICA 13 23 20 19 19 20 20 22 25 1.6 1.9 2.1 1 SOUTHERN EUROPE 15 29 29 29 29 30 30 33 35 4.8 5.8 1.5 WORLD 1,025 1,415 1,317 1,287 1,300 1,315 1,330 1,420 1,510 2.2 2.6 1.2 A/ LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). St ESTIMATE. SOURCES US DEPARlMEHT OF AGRICULTURE, FOREIGN AGRICULTURAL SERVICE (ACTUAL) WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT (PROJECTED). - 340 - TABLE AS: TOBACCO PRICES, aI 1950-87 (ACTUAL) AND 198E-2000 (PROJECTED) ($/Ton) -($jTon)- Current 5 1985 Constant $ Current 5* MtU bl US GNP c/ Actual 1950 676.G 2,859.3 3,161.1 1951 641.5 2,350.7 2,858.7 1952 7S4.2 2,644.1 3,319.6 1953 747.4 2,688.5 3,229.9 1954 665.8 2,448.7 2,832.0 1955 630.5 2,276.2 596.8 1956 659.2 2,296.9 2,627.3 1957 749.6 2,558.4 2,884.2 1958 694.5 2,330.5 2,61'.8 1959 815.7 2,776.4 2,997.8 1960 807.0 2,690.0 2,916.5 1961 697.0 2,284.5 2.495.5 933.0 1962 783.0 2,516.1 2,742.6 907.0 )963 681.0 2,230.6 2,351.5 1,047.C 1964 787.0 2,533.8 2,673.2 976.0 1965 688.0 2,198.8 2,278.1 987.0 1966 893.0 2,157.0 2,857.6 971.0 1967 871.0 2,658.7 2,7;0.9 998.0 1968 979.0 3,016.9 2,902.5 920.0 1969 944.0 2,760.2 2,654.7 956.0 IS70 988.0 2,718.0 2,629.8 958.0 1971 970.0 2,532.0 2,445.2 979.0 1972 962.0 2,304.2 2,314.7 1,023.0 1973 962.0 '.988.8 2,172.0 1,154.0 1974 1,280.0 2,172.1 2,653.4 1,439.0 1975 1,517.0 2,315.3 2,86'.2 1,726.0 1976 1,411.0 2,124.4 2,502.7 1,826.0 1977 1,670.0 2.288.6 2,776.4 1,887.9 1978 1,690.0 2,012.6 2,617.7 2,071.0 1979 2,130.0 2,239.7 3,032.5 2,150.C 1980 2,300.0 2,205.0 3,001.4 2,179.0 1981 2,350.0 2,241.1 2,797.6 2,42;.0 1982 2,410.0 2,330.5 2,695.7 2,730.0 1983 2,245.0 2,229.2 2,417.9 2,498.0 1984 1,990.0 2,010.9 2,063.2 2,300.0 1985 1,950.0 1,950.0 1,950.0 2,229.0 1986 2,085.0 1,762.2 2,044.3 2,408.0 1987 1,912.0 1,471.1 1,821.3 2,129.0 d/ Projected 1988 2,053.0 1,458.9 1,880.7 2,279.0 1989 2,139.0 1,430.6 1,874.0 2,371.0 1990 2,238.0 1,474.9 1,865.9 2,476.0 1995 2,700.0 1,492.1 1,733.0 2,604.0 2000 3,260.0 1,438.6 1,669.4 3,199.0 * Developing countries' export unit value. a/ Indian flue-cured export unit value. b/ Deflated by Manufacturing Unit Value (MllV) Index. c/ Deflated by US CNP Deflator. d/ Estimated. Sources: US Department of Agriculture, Foreign Agricultural Service (actual); World Bank, International Economics Department (projected). - 341 - TOBACCO (CONSTANT 1985 DOLLAR PRICES ) 4000 i 3500 2500 -u''"~ 1500 ~ 5 1000 1945 1950' 1955 1960 1965 l970 1975 1980 1935 1990 1995 2000 OEfLATED BY MANUFACTUiRING UNIT VALUE ( MUV ) INOEX ..-.--....- .. DEf,LATED BY U.S. GNP DEFLATOR. 0 19480-87 AC0AL 1988-2000 PROJECTED . SCURCE: WORLD SANK. INTERNATIONAL ECONOMICS DEPARTMENT. TROPICAL TIMBER Susiary 1. Growth of tropical hardwood log production is expected to slow, mainly due to concern about increasing deforestation in many countries. Production of sawnwood is expected to increase at a marginally faster rate tban log production, and to shift increasingly from industrial and non-market countries to developing countries. This shift is the result of restrictions on log exports and the direct encouragement cf timber processing in developing countries as well as the fact that production costs of sawnwood are lower in developing countries. A similar scenario to that for sawnwood can be expected for plywood and other forms of processed wood. 2. Consumption of logs will also slow down because of the supply constr4ints. Sawnwood consumption growth is projected to be stronger in developing countries than in the other regions, given their higher rates of forecast economic growth. Furthermore, given the shift in timber processing towards developing countries--in particular to lcg-producing countries--we also expect higher demand growth for timber products in these countries. 3. Southeast Asian log prices are projected to increase by 5.3Z in real terms between 1987 and 1988 mainly iue to the continuing -igh levels of construction in Japan. Between 1988 and 1990 real log prices are expected to increase by only 0.6% p.a. due to leveling off in the rate of construction accivity in Japan. For the remainder of the period to 2000, real log prices are projected to increase at about 1.1% p.a. which reflects primarily the increasing constraints on the supply of logs. For African logs, prices are expected to rema5in almost constant in real terms up to 1995 due to stagnant demand in Western Eerope; thereafter prices are Likely to increase by 0.6% p.a. as production shifts to less accessible and, therefore, higher-cost areas. Sawnwood prices are projected to continue declining in real terms, reflecting the shift of sawnwood production towards lower-cost countries. Recent Developments 4. Supply. World production of temperate and tropical hardwood increased by about 1.3% p.a. over the period 1970-86. During the 1960s and up to 1973 world production was increasing by about 4.0% p.a. The rate of growth dropped considerably during the mid-197Cs and early 1980s (for the Period 1973-83 the average rate of growth was 0.5% p.a., while for the period 1983-86 it was 1.8% p.a.) for two main reasons: first, the decrease in world economic activity during the second half of the 1970s and early 1980s, and second, the increasing concern about overcutting and the resulting disappearatnce of vast forest areas. Forest depletion is an especially serious concern for some of the major Droducing countries of Western Africe, such as C8te d'Ivoire and Ghana, and in Southeast Asia, the Philippines, Indonesia and Malaysia. Partly to limit logging the governments of producing countries are encouraging the exportation of processed rather than raw wood--directly, by restricting log exports (to the point of prohibition) and indirectly, by providing export - 344 - incentive schemes in which the incentives increase with the degree of wood processing. Indonesia, and recently the Philippines, have completely banned log exports, while other major producers such as Malaysia, Brazil, Cate d'Ivoire, Nigeria, and Ghana have taken steps to reduce log exports. 5. Log exports from Peninsular Malay3ia are completely banned. However, the Malaysian states of Sabah and Sarawak have maintained high production and export volumes of logs. The rate of timber harvesti.Ag in Sabah is estimated to be roughly four times the current regeneration rate. This imbalance cannot be corrected inmediately due to the state's heavy dependence on the forest sector. Recently, the state -f Sabah lowered its production quota to 6 million cubic meters--down from 13 million cubic meters in 1978. However, while the state of Sabah is promoting the export of processed timber products with some success, it remains a large supplier of logs. The state of Sarawak maintains a very liberal forest harvesting policy, allowing high export volumes at the expense of rapid deforestation of its richest forests. 1/ The states of Sarawak and Sabah accounted for about 66% of world lcg exports in 1986, and it is expected they will provide about two-thirds of *otal export supply up to the year 2000. 6. Indonesia has quickly become a substantial producer and exporter of sawnwood, as well as the major exporter of plywood. Indonesia has in_reased its plywood exports from just over 2 million cubic meters in 1983 to 5.6 million cubic meters in 1987. The decline of the dollar against other hard currencies has made Indonesian plywood exports quite attractive, especially to the Japanese market, wnich is one of the largest buyers of Indonesian plywood. 2/ Hong Kong and China are also becoming very important buyers of Indonesian plywood (see Table 1). 7. Table 2 shows production, capacity, and capacity utilization figures for the Indonesian plywood and sawnwood industry. Capacity has grown quickly, especially plvwood capacity, and it is noteworthy that at the same time there have been healthy increases in capacity utilization. Over the past two years, the Indonesian Investment Board has agreed to the building of 63 new plywood mills with potential capacity of close to 2.8 million cubic meters and 35 new sawmills with capacity of over 600,000 cubic meters. However, restrictions on investments for sawmilling and plywood making are beginning to be implemented. These restrictions aim at pushing investors towards even more valuze-added production. Production of items like mouldings, window and door frames, special-v plywoods, flooring, and furnitu-e is now encouraged. One of the difficulties raised by these policy directions is that the more specialized the products become the more detailed is the knowledge required of the foreign markets. 1/ This policy has led to some politial unrest between competitors for the use of the forests. See Far Eastern Economic Review, April 28, 1988. 2/ 90% of Japan's plywood imports come from Indonesia. - 345 - TABLE 1: PLYWOOD KXPORTS FRO INDONESIA 1982 1983 1984 1985 1986 1987 -----------------('000 cubic meters)-------------- Hong Kong/China 295 264 782 1,103 1,152 1,660 Japan 50 64 145 311 545 1,560 Singapore 258 363 462 508 323 199 North America 200 599 822 1,008 959 1,073 Europe 121 227 238 31. 542 446 Middle East 227 447 417 381 411 224 Tctal 1,250 2,033 3,010 3,784 4,031 5,303 ____--------------------------------------------------------------__--------- Source: Japan Lumber Journal, May 20, 1988. 8. Papua New Guinea (PNG) is believed to have vast tropical timber resources, and the government has maintained e liberal export policy. However, the high cost of exploitation due to difficulties in accessing the forests, as well as shipping constraints, rose constraints in production and export. If demand for logs remains strong and shipping facilities improve, PNG exports can increase substantially. Recent developments show an effort by PNG to open up trading links for their timber exports and improve and expand shipment facilities. 9. As of August 28, 1986, the Phillipines formally banned all log exports. This measure was mandated partly to prevent illegal logging activities and partly to reduce the high rate of deforestation. Meanwhile, the processing sector has been hard-hit also. The plywood and sawnwood industries suffer stiff competition from Indonesia and from the lack of raw materials. In fact, the strong pressure to preserve forests and the demand for logs for the wood-processing industry have fcrced the Phiiippines to import logs. It i3 expected that the Philippine. will remain a net importer of logs. 10. In Africa, overcutting by many major producing countries has resulted in a sharp reduction of tropical forest area. Cote d'Ivoire and Nigeria have reached their production limits. C8te d'Ivoire's production and exports have in fact been decreasing since the late l970s. Cote d'Ivoire's export earnings derived from the timber sector decreased by about 42X between 1980 and 1985. - 346 - TAILX 2: InDOMESIA: PRODUCrION CAPACITY AND CAPACITY UTILIZATION IN THE SAIW DOO AND PLYWOOD INDUSTRIES Capacity Production Capacity Utilization ---(million cubic meters)--- (Z) Sawmills 1981 5.3 11.9 44.5 1982 5.7 13.0 43.8 1983 6.3 14.3 44.1 1984 8.3 14.9 55.7 1985 9.2 15.6 59.0 1986 9.9 15.9 62.3 Plywood Mills 1981 1.5 2.6 57.7 1982 2.1 3.3 63.6 1983 2.9 4.5 64.4 1984 3.3 5.4 70.4 1985 5.0 6.3 79.4 1986 5.4 6.9 78.3 Source: Tropical Timber, October 1987. Output over the next decade is expected to remain below the pre-1985 level; however, long-term yields may improve given that the government's reforestation program proves successful. 3/ Production of sawnwood and plywood is increasing. Preliminary estimates put plywood production at 48,500 cubic meters in 1987, up from 46,000 cubic meters in 1986 and 44,256 cubic meters in 1985. The major customer for Ivorian plywood is Europe, and in particular, France. Veneer production is also expected to be increasing as Cote d'Ivoire moves to more value-added wood products. 4/ 11. zn Nigeria, despite the government's efforts to encourage afforestation, its forests are shrinking. Nigeria had imposed a ban on log and sawnwood exports but, due to foreign exchange needs, which followed the 3/ Although reforestation has to be encouraged and praised, it is doubtful that the pre-1985 production levels in C6te d'Ivoire can be regained. 4/ Italy is considered the major customer of ivorian logs and the Federal Republic of Germany of veneers. Production of veneers is estimated to be 175,000 cubic meters in 1987, up from 148,408 cubic meters in 1985. - 347 - oil revenue slump, it has lifted the ban. Being the most populus country in Africa, Nigeria has a large domestic market for wood products--nainly through the adootion of timber-frame housing construction. Future timber production levels are not expected to be higher than today; indeed, stricter logging controls may be necessary. Meanwhile, the growing domestic needs will keep exports low. 12. Liberia, Cameroon, Gabon, Congo, and Central African Republic have potential for future expansion. While Ghana's recent successful rehabilitation of its timber sector led to substantial and steady increases in timber exports, it is expected to follow the examples of Indonesia, the Philippines, and Malaysia in imposing limitations on log exports and favoring more domestic processing. 13. Demand. World consumption of tropical hardwood stagnated from the late 1970s until 1984-85, increased in 1986, and the preliminary estimates for 1987 show a further increase. 5/ Tbe recovery of world consumption after a long period of stagnation is due to the improved conditions in the construction industry, mainly in Japan, but also in Northeast Asia and North America. 14. In terms of economic growth rates, 1987 was a very good year for the Asian region. In Hong Kong and Republic of Korea, growth rates exceeded 12%, white China's growth was around 9.5%. In Japan, timber demand increased by 9Z, reflecting the third best year in Japan's post-World War II housing starts. 6/ The highest increase in demand was recorded in plywood, with demand increasing by about 19% in 1987. 7! However, Japanese demand for timber in 1988 was expected to fall 1% following the expected decrease in housing starts. 15. Since the modest recovery, in 1983, from the low point in the late 19,0s-early 1980s period, consumption of wood in Europe has remained stable at low levels. In most European countries demand still remains below the 1970s levels. Despite the recovery in the rates of economic growth after 1984, housing construction activity has remained at low levels. However, the increase in house renovation has led to an increase in the demand for lumber and plywood. In the plywood industry, imports for the first time exceeded domestic production in 1986, which illustrates the increasing penetration of foreign supplies, particularly of South Asian producers but to some extent also the United States. In North America, the strong housing market led to increases in demand for timber in 1986. During 1987, the increase in interest rates caused housing starts to decline, and thus timber demand decreased somewhat. 5/ Note that the demand for plywood kept up with economic growth over the last ten years, while the demand for sawnwood fell in industrial countries but kept up with growth in developing countries. 6/ According to the Japan Lumber Journal, housing starts increased by 23% between 1986 and 1987. 7/ In Japan, log and plywood prices increased by about 46% between 1986 and 1987. _ ~~~~~~~~~~~~~~~~~~~ - 348 - Supply Outlo2.k 16. Production of hardwood logs is expected to increase little between now and 2000. The expected annual average rate of growth is 0.9% p.a. Production in industrial and non-market economies is expected to remain at almost the same level in 2000 as in 1987, while production in developing countries is expected to i.ncrease by 1.4% p.a.--well lown from the 2.9% p.a. growth experienced over the period 1970 to 1986. The overexploitation of tropical forests has caused rapid deforestation in most of the major producing regions, while the rate of afforestation has not been sufficient to replenish the forests. Even if recent reforestation efforts prove successful, there will be no impact on production before the end of this century. 8/ Thus, conservation is a necessary condition for sustainability of timber production. Areas where potential for future expansion exists and where good for_.st management policies can still be folhowed are the Amazon region, PNG, and some African countries such as Gabon, Cameroon, Congo, and the Central African Republic. While the Amazon region in particular has significant potential for expansion, the costs of exploitation are high due to difficulties in the accessibility of timber resources. 17. World production of processed wood products is expected to increase marginally faster than log production. As over time more and more timber- producing countries are aiming at processing a higher percentage of their log production, we expect an increase in the percentage of sawnwood production coming from developing countries. Production of sawnwood in industrial countries is expected to increase by onliy about 0.2% p.a.; for non-market economies sawnwood production growth is projected to be 0.7% p.a.; while for developing countries expected production growth is 1.8%. Brazil, Indonesia, Malaysia, and several Central-West African countries 3uch as Cote d'Ivoire, Nigeria, Ghana, Gabon, and Cameroon have potential for significant increases in value-added wood products. However, the switch to higher value-added products can entail a Loss of revenue until the exports of these products increase enough to compensate for the losses in export earnings from the reduction in log exports. Demand Outlook 18. World demand for sawnwood is expected to increase by 1.3% p.a. between 1987 and 2000, while demand for logs is expected to increase by 1.1% p.a. over the same period. However, demand for logs within developing countries is expected to increase and that of industrial countries to decrease since production of processed forms of wood is expected to continue growing in log-producing countries. Given their better economic growth prospects, faster growth in sawnwood demand is also expected from developing countries. 19. Given Japan's projected GDP growth rates, we expect the demand for hardwood to increase over the long term. However, a shift towarus more 8/ It should be emphasized, moreover, that reforestation brings a new type of forest with species and qualities of wood quite different from those of the original forest. - 349 - processed types of timber such as plywood and sawnwood will take place at the same time as the demand for logs decreases. The increasing competition from cheaper prcducers, such as those from Indonesia and Malaysia, will force Japan to import more processed forms of wood rether than process logs domestically. 20. In the rest of Asia, demand for logs is expected to grow by about 2% p.a. and sawnwood by about 1.8% p.a. China's growth rate in wood consumption is expected to decline from its recent level of 7.7%, mainly because of the government's nolicies of limiting wood use in nearly all timber-using industries. Wood-using sectors are being encouraged to use wood substitutes such as steel for construction, and metal and plastics in the furniture and packaging sectors. The government has been following an ambitious program of afforestation since 1981. A priority of the seventh five-year plan (1986-90) is the establishment of fast-growing tree plantations and a substantial reduction in the percentage of trees cut. 21. Indonesia's log consumption is expected to grow at around 2.7% p.a. given the continuing strong domastic demand for local processing and construction. The same scenario also applies for Malaysia. Given their expected economic growth rates, Republic of Korea, Hong Kong, and Thailand are expected to have strong demand for timber products. However, demand for logs in Hong Kong, Singapore, and Republic of Korea is expected to decline, since their plywood industries were dependent on producing countries, such as Indonesia, Malaysia, and recently the Philippines, which have imposed restrictions on log exports; moreover, it is expected that more producing countries will impose restrictions on log exports. 22. The lack of growth in the construction industry in Europe and the substitution away from wood were responsible for the low growth in the consumption of timber products in Western Europe durirg the past ten years. Since the possibilities for substitution have lessened we expect timber consumption in Europe to increase more in line with economic activity. Sawnwood consumption is expected to increase by about 1.2% p.a. Consumption of logs, however, should fall since log processing is getting to be cheaper in producing countries and given also the restrictions on log exports. Timber consumption is expected to show a higher increase in Southetn Europe than in Western Europe--reflecting the desire for improvements in the housing stock made feasible by higher incomes. Table 3 provides a summary of timber consumption scenarios made by ECE/FAO for European countries. Trade Outlook 23. Table 4 gives an indicative picture of exported volumes of tropical logs and tropical timber. Japan is an important consumer in both tropical logs and sawntimber. The regional flows in log trade, broadly speaking, are Far East to Japan and Africa to the EEC. However, recently Japan has been buying increasing quantities of logs from Africa. Japan imported 75,000 cubic meters of logs from Africa in 1986; in 1937 Japan imported 246,300 cubic meters, with by far the largest source being Gabon (216,900 cubic meters in 1987 versus 48,000 cubic meters in 1986). - 350 - TABLE 3: ECE/FAO FORECAST OP TIMBER ONSUMPTION GROVTH, 1980-2000 -----Low Scenario ------ -----High Scenario----- Countries Saw,. Hardwood Plywood Sawn Hardwood Plywood …CZ-------------------(z p.a.)---------------------- Nordic 2.1 0.7 3.4 1.4 EEC (9) 1.5 0.9 2.5 2.1 Central Europe 1.7 0.4 3.0 1.9 Southern Europe 3.0 3.4 4.1 4.8 Eastern Europe 0.1 - 0.8 - Europe 1.5 1.0 2.5 2.1 Source: ECE/FAO, European Timber Trends and Prospects to the Year 20C0 and Beyond. 1986. TABLE 4: INDICATrVE VOLUMES IN TROPICAL TIMBER TRADE FOR 1986 AND 1987 Exporters/ ------------Logs ------------- ---------Sawntimber-------- Imoorters Far East Africa America Far East Africa America =___________ _--_______________________________________________________________ ----------------------('000 cubic meters)--------------------- 1986 Japan 12,034 75 0.2 634 0.1 1 EEC 88 2,755 7 2,143 557 150 Hong Kong 561 - - 160 - - United States 9 3 0.2 187 7 218 1987 Japan 12,359 217 0.3 965 0.1 0.7 Hong Kong 594 - - 212 - - Source: Tropical Timber, March 1988 and May 1988. 24. Another trade pattern of interest is the Asia-to-Asia flow. The increasing economic activity of Northeast Asia over the past two years has provided plenty of cpportunitv for the proddcers of Southeast Asia to expand their sales. For Indonesia, about 71%, 65%, 60%, and 77.X of their export voluaes of sawntimber, plywood, veneer, and other wood products, respectively, - 351 - w-nt to Asian markets in 1987. 9/ For Sabah and Sarawak, about 97% of their lc>g exports go to Asian markets, while 51X and LiZ, respectively, of their smwntimber exports go to Asian markets. For Peninsular Malaysia, 38%, 72%, arLd 79% of their exports of sawntimber, plywood and veneers, respectively, w*nat to Asian markets. The importance of Asian markets for Asian producers is e-.pected to remain strong in the future given the projeczed rates of economic g rowth in the East Asian region. 25. The decline in log corsumption and the increase in sawnwood and ply.iood consumption, accompanied by a decrease in their production by the in2dustrial countries, points to an increase in imports of more processed forms of wood rather than logs. This shift of imports towards higher value-added wotod products by industrial countries is the result mainly of two influences: first, the severe restrictions on exports of logs by the major log-producing countries and second, the lower cost and the improving quality of processed wood products from log-producing countries. Therefore, we expect trade volumes in logs to decrease while trade volunes of processed timber products increase. This trend can be seen in the export trade data in Table 5. Most of tbe growth is expected to take place in veneers, plywood, and reconstituted bo:ards rather than sawnwood. Sawnwood exports from developing countries are e,pected to be increasing at about 2.7% p.a., while sawnwood imports by irndustriaL countries are projected to grow at ".1% p.a. and imports of sawnwood by developing countries by 2.6Z p.a. On the other hand, imports of lcgs by indtustrial countries are expected to decrease by 2.2Z p.a. and exports of logs by developing countries to decrease by about i.4% p.a. TABLE 5: SEARIY OF PROCESSED PRODUCTS IN HARDWOD EXPORTS FROM LOG-PRODUCING DEVMELPING CUiITRIES, 1961-2000 a/ 1961 1970 1980 1984 1990 2000 --------------------------------------------------------- --------------------- -- - - - -- - - ---------( k%)…--- - - - -- -- - - - Asia b/ 2L.0 13.9 29.4 52.2 72.5 87.4 Oceania 91.1 14.3 15.4 6.9 12.6 15.3 Africa 25.0 25.9 26.5 29.9 29.4 44.9 Uhn,ted States 88.9 91.9 98.4 98.5 73.6 84.5 Total 34.4 23.5 35.8 52.0 64.4 76.9 aJ Processed products include sawnwood, sleepers, veneers, and plywood. The share is based on the roundwood equivalent volume. bl Developing Asia excluding China, Hong Kong, Republic of Korea, and Singapore. Source: FAO, Yearbook of Forest Products, standard tapes (history); World Bank (forecasts). 9/ In TabLe 1, see the faster rate of growth of Indonesia's plywood exports to the Asian markets. - 352 - Price Prospects 26. At a global level there are two distinct regions in log trade--(a) within Asia and (b) Western Africa to Western Europe. 10/ Because of tt.e geographical separation of these two markets, the prices determined within each can be treated separately. Because of its importance within the Asian market, prices of timber and timber products in trade with Japan are taken as the indicator prices for that region. The price of Cameroon logs is used as the indicator price for Africa-Europe trade. 27. Log and plywood prices in Japan in current dollar terms increased by about 46% between 1986 and 1987 in response to very strong demand and to dollar depreciation versus the yen. 11/ The largest increase took place between the end of August and the end of November 1987. After November, prices decreased in response to the high stock build-up and forecasts of a slowing down of Japanese housing starts. Prices of African logs also increased by about 17% between 1986 and 1987, reflecting the more widespread use of log export restrictions and the inclusion of more species of logs in the restriction lists. 28. Southeast Asian log prices are expected to decline in real terms by 4.1% during 1988, mainly reflecting the weakening in demand in Japan and the stronger dollar vis-a-vis the yen (especially in the June-July period) (see Table AID). However, between 1988 and 1990 prices are expected to remain at about the same lezel in real terms. Over the next ten years they are expected to increase by about 1.1% p.a. as construction demand is projected to level off and increases in imports of processed forms of wood (sawnvood, plywood, particle boards, etc.) are expected to be increasing. However, log prices could be expected to increase at a faster rate between 1990 and 2000 if the increase in supply constraints were not accompanied by a reduction in log demand by Japan. In a recent issue, the Far Eastern Economic Review points out that Japan is committir.g about US$8 trillion to upgrading its infrastructure over the period to 2000. This may well lead to a higher demand for timber. 12/ 29. West African log prices in real terms are expected to remain approximately at their i987 level up until 1990 due to projected stagnant demand for logs in Europe and then to increase as production is pushed towards less accessible areas, and hence higher production costs (see Table A9). 30. For sawnwood we expect a decline in real prices by 0.3% p.a. between 1987 and 2000 (see Table All). As production moves towards log-producing regions where labor is cheaper and log costs lower, sawnwood costs of production in real terms are expected to decrease. Furthermore, the number of I0/ Trade in logs exists between Asia and Western Europe and from Africa to Asia. However, these volumes are about 1OZ or less of the total log inports of Asia and Western Europe. 11/ In yen terms the increase was about 24% for logs and 17% for plvwood. 12/ Far Eastern Economic Review, June 16, 1988. - 353 - countries producing sawnwood will increase as more traditional log exporters aim at moving to higher value-added products, leading to increasing competition for market shares. Policy Issues 31. The alarming rate of deforestation of tropical forests has prompted growing international concern and the development of programs of action. In a recent conference in Bellagio, Italy, government planners, international agencies, and the private sector addressed the problem of the vanishing tropical forests. It was estimated that every year 11 million ha of forest, an area of the size of Belgium or Austria, is being lost. A seminar in Japan in December 1987 identified the Amazon region, Gabon, and Cameroon as the only areas where "ideal (forest management) policies might still be possible." 32. Plans of action usually prescribe a stop to overharvesting, promotion of species that have been little utilized to date, and serious afforestation efforts. General prescriptions, however, are hard to come up with, and ideal policies likely will vary from country to country. It is evident that one key to a continuing supply of tropical timber is forest conservation. 33. An area where recent efforts have been directed is the discovery of alternative species to replace the declining supplies of tropical hardwood. 13/ One of these species is rubberwood. When rubber trees reach 25-30 years of age their yields decline and they are cleared for replanting. According to statistics on global rubber tree populations, and based on a 3% worldwide annual replanting rate, rubberwood production could amount to 50 million cubic meters--1O million cubic meters of which could be suitable for sawnwood. However, rubber has limited uses as sawnwood and cannot completely replace the more traditional sawnwood species. 34. Reforestation programs to grow desirable tropical species that have been proven to grow on plantations, such as teak and okoume, are also being considered. Pilot reforestation projects are also under way in countries such as C6te d'Ivoire, Congo, and Malaysia, using the species Triplochiton, Teruinedia, Cedrela, and Acacia mangium. 35. There are compelling reasons for developing countries to harvest more timber. For some of them it is, if not the major, one of the major earners of foreign exchange. By developing local processing, employment is promoted. Plywood, reconstituted boards, timber for appearance grades (window panes, door moldings, furniture), and veneers, are areas where development opportunities exist. Considerations in exploiting these possibilities are capital availability, quality of the processed product and cost. For new entrants into these markets, considerable effort has to be put into identifying the needs of the market in the consuming country, as well as evaluating the products from competitors in such export markets. Underlying the investment decision has to be an evaluation of the forest resource-- whether there are sufficient reserves to maintain a stable stream of production for several decades. 13/ Some scientists call them "multipurpose species." TABLE Alt SAWLOGS & VENEER LOGS ( NON-CONIFER ) - PRODUCTION BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTB RATES Al COUZS/ ------------- ---'--------'-------'-----' -------------- --------------------- - -----------'--- ------- cOUNmTRS/ 1987 - ECONOMIES 1969-71 1979-81 1986 1987/B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 -------------------------------('000 CUBIC METERS)------------------------------ ------(X PER ANNUM)------ IRDUSTRIAL 73,070 71,010 68,347 68,562 68,635 68,300 68,045 68,110 68,070 -0.5 -0.9 -0.1 NORTH AMERICA 38,727 41,922 41,990 42,240 42,330 42,050 41,870 42,220 42,500 0.0 -).1 0.0 UNITED STATES 34,551 36,681 37,240 37,440 37,500 37,200 37,000 37,300 37,500 -0.2 -0.2 0.0 EEC-10 17,832 16,808 16,421 16,560 16,750 16,900 17,000 17,500 17,500 -0.2 -0.8 0.4 OCEANIA 7,237 5,935 4,78' 4,700 4,600 4,480 4,400 4,000 3,550 -1.8 -2.9 -2.1 NW-MARIKT 34,812 33,386 35,187 35,300 35,350 35,250 35,200 35,350 35,500 0.2 -0.3 0.0 USSR 22,933 21,233 22,600 22,700 22,700 22,650 22,600 22,600 22,500 -0.3 -0.6 -0.1 EASThN EUROPE 11,879 12,353 12,587 12,600 12,650 12,600 12,600 12,750 13,000 1.1 0.2 0.2 DRVELOPING 101,523 153,080 160,873 167,275 170,894 173,565 176,452 191,470 206,660 4.8 2.9 1.6 ASIA 64,239 99,367 103,176 108,680 110,701 112,011 113,367 120,940 128,650 5.7 2.8 1.3 tAAYSIA 17,923 29,029 29,158 32,800 33,000 32,700 32,000 31,200 30,300 4.4 Cl 3.5 -0.6 INDONESIA 10,468 25,251 25,000 25,800 26,500 27,151 27,887 31,740 35,500 9.8 3.7 2.5 PHILIPPINES 10,762 6,023 3,039 3,000 3,000 2,950 2,950 2,800 2,750 -3.8 -7.8 -0.7 CHINA 8,606 17,617 21,220 21,950 22,700 23,300 23,900 25,800 27,800 5.5 6.0 1.8 IMDIA 7,898 12,548 15,812 16,080 16,350 16,660 17,030 18,S00 19,700 6.2 4.6 1.6 AFRICA 15,511 17,773 17,380 17,5!0 17,730 17.950 18,320 19,600 21,000 2.5 1.0 1.4 COTE D IVOIRE 3,915 4,628 2,973 2,930 2,884 2,835 2,762 2,590 2,447 3.4 -1.1 -1.4 AMERICA 17,410 28,849 31,860 32,536 33,885 34,899 35,950 40,600 45,580 3.8 4.2 2.6 BRAZIL 7,423 15,504 18,684 19,161 20,140 20,854 21,630 24,100 26,800 5.5 7.1 2.6 WORLD 209,405 257,676 264,407 271,137 274,879 277,115 279,697 294,930 310,230 2.2 1.3 1.0 … ---------------------------------------------------------------------------------------------…------------------------------------- IA LEA6T SQUARES TREND FOR HISTORICAL PERIODS (1961-86), END-POINT FOR PROJECTED PERIODS (1987-2000). /B ESTIMATE. /C GROWTH RATE FOR 1966-86 PERIOD. SOURCEZS ?AO, YEARBOOK OP FOREST PRODUCTS TAPES (ACTUAL)4 WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMFNT (PROJECTED). TABLE A.2 SAWLOGS & VENEEIR LOGS ( NON-CONIFEIR)- APXArleNT CONSUrMPTION BY MAIN COUNTRIES AND ECONOMIC REGIONSB ACTUAL PROJECTED GROWTH RATES Al coVtmRIES1 1987- EcmOteHIss 1969-71 1979-81 1986 198718 1988 1989 1990 1995 2000 1961-86 1970-86 2000 …-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - 1- - - - - - - - - - - - - - - - - - - - -- -------------- ('000 CUBIC METERS)--------------- --- (% PER ANUM ---- INDUSTRIrAL 99,113 93.004 83,60? 85,323 84,886 83,962 83,102 80,513 77.530 -0.1 -.1.7 -0.7 BOaT! AMERICA 38,801 41,663 41,857 4;..46 42,170 41.890 41,693 41,955 42,000 0.1l -0.2 0.0 UNITEZ) STATES 34,395 36,083 36,730 36,900 36,950 36,680 36.500 36,740 36,800 -0.3 -0.3 0.0 RNC-10 24,202 22,392 19,916 19,925 10,840 19,B00 19,750 19,300 19,000 -0.2 -1,6 -0.3 OCEANIA 7,337 5,937 4,785 4,700 4,600 4,480 4,400 4,000 3,570 -1.9 -3.0 -2.1 NOII-MARKET 35,075 33,681 35,287 35,402 35,450 35.349 35,301 35,460 35,605 0.1 -0.3 0.0 USSR 22,921 21,365 22,685 22,785 22,785 22,736 22,686 22,685 22,580 -0.2 -0.6 -0,1 EASTERN EVROPE 12,153 12,316 12,602 12,617 12,665 12,613 12,615 12,775 13,025 0.9 0.1 0.2 DEVEOPING 73,218 130,485 147,804 151,593 155,182 158,550 162,702 180,720 198,890 5.3 4.6 2.1 ASIA 42,943 82,402 94,833 97,779 99,639 101,594 104,080 114,235 124,960 6.2 5.1 1.9 HALAYSIA 6,763 13,227 10,164 9,946 10,000 10,100 10,200 10,700 11,300 4.8 Cf 2.9 1.0 INDMNSIA 3,021 12,290 24,974 25,773 26,473 27,134 27,860 31,740 35,500 8.6 16.1 2.5 PBILIPPINSS 1,605 4,667 2,687 3,000 3,000 2,950 2,950 2,800 2,750 2.0 1.7 -0.7 CHINA 10,273 23,754 26,781 27,734 28,746 29,560 30,385 33,260 36,560 6.4 5.7 2.11 AFRICA 8,702 12,468 13,926 14,150 14,400 14,650 15,170 17,100 19,100 4.5 1.4 2.3 AMERICA 17,289 28,827 31,938 32,600 33,954 34,9605 36,022 40,620 45,580 3.8 4.2 2,6 - BRAZIL 7,327 15,531 18,732 19.200 20,184 20,896 21.672 24,100 26,800 5.6 7.2 2.6 t.n WORLD 207,406 259,170 266,698 272,318 275,518 277,861 281,105 296,695 312,025 2.2 1,4 1.1 …-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - /A LEAST SQUARES TREND FOR HISTORICAL. PERIODS (1961-86); END-POINT FOR PROJECTED PERIODS (1987-2000). IB ESTIMATE. /C OROWTH RATE FOR 1966-86 PERIOD. SOURtCES; lAO, YEARBOOK OF FOREST PRODUCTS TAPES (ACTUAL); WORLD BANK, INTERNI.TIONAL, ECONOMICS DEPARTMENT (PROJECTED). TMR A3 .SAYLOCS & VENEER LOOS ( 3-coiiFR) - GROSS EXPORTS DY MAIN CO4NTIES MID ECOtIIC PyGXOMS ACTUAL PROJECTED GROWTH RATES Al couwrzsj 1987 - ICoUoiXZS 1969-71 1979-81 1986 19371B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 -------------------------------(tnOO CUBIC )ETUS)-----------------E----------- ------(Z FER AINtJ)------ INDUSTRIAL 1,689 2,592 3,055 3,135 3,114 3,138 3,173 3,350 3,520 3.2 3.1 0.9 IIC-10 1,087 1.276 1,808 1,835 1,860 1,s9v 1,940 2,100 2,200 2.5 2.0 1.4 MOP-MARIE? 272 357 201 1i8 190 187 185 160 125 5.7 -1.7 3.5 DEVLOPING 36,107 37,359 25,630 29,231 29,190 26,702 27,747 25,805 24,405 3.9 -3.0 -1.4 ASIA 28,151 30,502 19,733 23,281 23,3P7 22,967 22,152 22,805 19,290 5.5 -3.3 -1.4 )ALAYSIA 11,204, 15,E33 18,995 22,854 23,000 2L,600 21,800 20,500 19,000 4.0 C/ 3.7 -1.4 INDONXSIA 7,447 12,961 27 0 0 0 0 0 0 8.9 -25.2 0.0 PHILIPPINES 9,157 1,362 352 0 0 0 0 0 0 -9.7 -16.5 0.0 APICA 7,063 3,584 3,782 3,750 3,665 3,635 3,485 2,835 2,435 -0.8 -3.5 -3.3 COTE D'IVOXRE 2,923 2,829 1,020 1,000 954 900 900 600 400 1.0 -4.4 -6.8 GAiSo 1,504 1,119 883 895 887 890 885 842 790 -0.3 -2.3 -1.0 ORLD 38,068 40,308 28,886 32,564 32,494 32,027 31,10s 29,315 28,050 3.8 -2.6 -1.1 …-- - - - - - - - - - - - - - - - - - - - - - - - - - - lA LEAST SQUARES TREND FOR HISTORICAL PERIODS (lf16-86)i END-POINr FOR PROJECTED PERIODS (1987-2000). 11 ESTIMATE. w IC GROWTH RATE FOM 1966-86 PERIOD. 0' SOURCESt FAO, YEARBOOK OF FOREST PRODUCTS TAPES (ACTUAL)t WORLD LEU, INTERNATIONAL ECONOMICS DEPARTKENT (PROJ CTED). TAULB AMt SAIIOGS & VENME LOS ( NON-CONIFER ) - ROSS IMPORTS BY MAIN COUNTRIES AED ECONGEC RZIONS ACTUAL PROJECTED GROWTC RATES A/ COOMUBS/ 1987 - BCrEIKES 1969-71 1979-81 1986 19871B 1988 1989 1990 1995 2000 1961-86 1970-86 2000 ----------*--------------------('000 CUBIC METS)…---------------------------- ------(X PM A------ INDUSTRIAL 27,732 26,586 18,315 19,896 19,365 18,800 18,230 15,755 13,480 1.6 -3.4 -3.0 81C-10 7,457 6,861 5,203 5,100 5,000 4,800 4,700 4,000 3,400 0.0 -2.9 -3.1 OTHER WESTERN EUROPE 316 208 234 230 225 220 210 180 150 -3.8 -3.5 -3.2 JAPAN 19,394 19,050 12,231 13,920 13,500 13,!50 12,700 11,000 9,400 2.7 -3.7 -3.0 NO-MART 534 453 301 S00 290 286 286 270 230 2.5 -2.8 -2.0 DEVELOPING 7,802 14,763 12,560 13,534 13,478 13,677 13,997 15,055 16,435 8.3 1.4 1.S ASIA 6,855 13,536 11,409 12,38C 12,326 12,540 12,065 14,100 15,600 9.3 1.5 1.8 KOE, REPUBLIC OF 2,870 5,332 4,939 5,300 5,300 5,250 5,250 5,655 5,850 )1.4 1.0 0.8 SINGAPORE 1,764 1,123 114 56 55 50 40 15 0 -7.6 Cl -13.f -100.0 OmG KNG 400 570 497 594 610 615 623 595 560 2.1 2.7 -0.5 CHrNA 1,675 6,175 5,600 5,824 6,086 f,300 6,525 7,500 8,800 13.4 5.1 3.2 AFRICA 254 298 328 335 335 315 335 335 335 4.5 1.8 0.0 EUROPE 475 880 726 735 740 725 72.5 600 600 7.1 1.5 -1.5 WORLD 36,068 41,804 31,176 33,730 33,133 32,763 32,513 31,080 30,145 3.2 -2.0 -0.9 W -~~~~~~~~~~~~~~~~~~~~~ /A LAT SUARES TR.EN1D FOR HISTORICAL PBRIODS (1961-86); END-P0IIT FOR PROJECTED PERIODS (1987-2000). lb ESTrMATE. IC GROWTIH RATE FOR 1964-86 PERICD. SOURCES, FAO, YEARbOOK OF FOREST PRODUCTS TAPES (ACTUAL)t WORLD BANK, IlTERNATIONA ECONOMICS DEPARIKENT (PROJECTED). TABL ASs SAW_00D ( O-C0Il ) - PRODUCTION BY XAIN COUNTRIES AW ECtOMIC REGION| ACTUAL PI0JECTED GRO___ RATZS Al ooauut.zsi !981 - EoCoUNs8 1969-71 1979-81 1.966 1987/B 1988 1989 1990 1993 2000 1961-36 1970-CG 2000 -----------------0 --- -------------METERS) --- --------- - PER AM INDUSTRIAL 41,943 37,616 30,630 30,755 30,820 30,887 30,965 31336 31,581 -0.5 -2.3 0.2 NORTH AMFECA 19,035 18,056 15,796 15,875 15,954 16,05. 16,114 16,536 16,961 -0.6 -1.0 0.5 CANADA 1,291 1,183 1,396 1,4us 1,410 1,417 1,424 1,475 1,520 0.1 -0.4 0.3 UNITED STATES 17,743 16,'73 14,400 14,472 14,544 14,617 14,690 15,061 15,441 -0.7 -1.1 0.5 ESC-10 9,642 9,1q 1 7,697 7,727 772 7,720 7,720 7,600 7,500 0.0 *1,7 -n.2 OTHER WESTERU EUROPE 834 888 756 760 763 767 771 780 763 0.8 -1.2 0.2 JAPAN 9,873 7,485 4,580 4,564 4,543 4,526 4,510 4,420 4,340 -0.9 -5.9 -0.4 OCEANIA 2,559 2,067 t,O01 1,829 1,840 1,340 1,850 2,000 2,000 -1.5 -2.6 0.7 NON-XARXET 20,321 18,389 :0,405 18,536 18,654 18,762 18,887 19,495 20,260 -0.4 -1.0 0.7 USSR 14,470 12,300 12,400 12,486 12,574 12,662 12,751 13,200 13,670 -0.9 -1.5 0.7 EAST0RR EUROPE 5,851 6,089 6,005 6,050 6,080 6,100 6,136 6,295 6,590 0.9 0.2 0.7 DEVELOPING 32,747 55,509 66,931 69,340 71,071 72,385 73,758 80,936 87,862 5.2 5.1 1.8 ASIA 19,595 33,457 41,248 43,067 44,250 45,118 45,946 50,203 54,597 5.8 5.2 1.8 INDIA 3,579 9,272 14,834 7,283 7,538 7,802 8,075 9,591 11,392 11.0 9.7 3.5 KOREA, REPUBLIC OF 497 1,073 980 1,014 1,043 1,065 1,095 1,200 1,320 9.3 2.8 2.0 CO THAILAND 1,219 1,325 1,007 1,040 1,060 1,055 1,052 1,000 930 -0.1 -3.5 -0.9 MALAYSIA 2,898 5,878 5,346 5,880 6,320 6,535 6,700 7,450 7,958 5.8 C/ 4.3 2.4 XNDONESIA 1, 662 4,482 7.037 7,283 7,538 7,802 8,075 9,591 11,392 6.9 12.0 3.5 PHILIPPINES 1,223 1,458 978 995 1,013 1,031 1.050 1,148 1,254 0.9 -0.5 1.8 CHItA 5,571 7,779 9,208 9,308 9,4061 9,500 9,590 9,997 10,353 3.6 3.6 0.8 AFRICA 2,842 3,180 5,760 5,898 6,040 6,185 6,333 7,131 7.840 5.,4 5.2 2.2 COTE DTIVOIRE 328 648 685 713 740 766 789 894 1,000 7.3 5.0 2.6 AMERICA 8,167 13,446 15,295 13,647 15,995 16,340 16,682 18,462 20,212 4.1 4.8 2.0 BRAZIL 3,467 7,617 9,679 9,913 10,140 10,362 10,578 11,390 12,511 4.1 8.1 1,8 wORLP 95,011 111,315 115,966 118,631 120,54S 122,034 1'3,610 131,767 139,703 1.9 1.3 1.3 Al LEAST SQUARES TRE.D FOR HISTORICAL PERIODS (1961-86)1 END-POINT FOR PROJECTED PERIODS (1987-2000). Bi ESTIMATE. Cr GF*OWTr RATE FOR 1966-86 PERIOD. SOURCES: WAO, YEARBOOK OF PORE8T PRODUCTS TAPUS (ACTUAL)l WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMhEAT (PROJECTED), TAJLE AG SAMUWOOD ( ON-CONIJEU ) - APPARENT CONSIPSTION 2Y MAIN ODUNTRIES AND EC42ISOC REGIONS -------------------__---__----_----_---------------_-------__-__----_---------__-------_.----..-..__-___-------------------_------__ 4CTUAL PROJECTED GROWTH RATIS A/ COUNTRIES/ 1987 - scoFMHIss 1969-71 1979-81 1986 19871B 90as 1989 1990 1995 2000 1931-96 1970-86 2000 ------------------------------------ (00C CU.31C METERS)-------------------------------------- -------- ( PEP. AXNU INDUSTRIAL 45,181 43,063 35,679 36,002 36,154 36,300 36,451 37,597 39,011 -0.1 -1.$ 0.6 NORTE ,,4MRICA 19,457 10,432 15,779 15,807 15,915 15,950 16,010 16,290 16,710 -0.7 -1.2 0.4 UNITED STATES 18,320 16,76B 13,965 14,035 14,075 14,100 14,150 14,350 14,720 -0.9 -1.5 0.4 EEC-lo 11,913 13,334 11,507 1.1,621 11,700 11,786, 11,8?4 12,395 12,986 1.1 -.5 0.9 OTHER WESTERN EUROPE 984 1,022 935 946 950 958 965 1,010 1,065 0.7 -1.1 0.9 JAPAN 10,043 7,942 5,426 5,530 5,520 5,586 5,600 5,852 6.000 -0.2 -4.9 0.6 OCEANIA 2,785 2,332 2,032 2,039 2,020 2,020 2,000 2,050 2,150 -1.1 -2.5 0.4 NON-MARXZT 19,795 18,102 18,254 18,452 18,574 18,696 18,822 19,532 20,301 -0.4 -0.9 0.7 USSR 14,719 12,538 12,542 12,621 12,702 12,783 12,867 13,295 13,745 -0.9 -1.6 0.7 EASTERN EUROPE 5,076 5,564 5,712 5,831 5,872 5,913 5,955 6,237 6,556 1.1 0.7 0.9 DEVELOPING 29,684 50,452 62,042 64,182 65,935 67,204 68,575 74,718 80,473 5.2 5.3 1.8 ASIA 17,661 29,570 37,349 38,993 40,277 41,074 41,968 45,667 48,887 5.4 5-3 1.8 MALAYSIA 1,644 2,958 2,436 2,472 2,520 2,577 2,626 2,886 3,170 4.8 Cl 3,7 1.9 IdDONESIA 1,610 3,263 4,877 4,951 5,069 5,189 5,312 5,963 6,682 5.0 9.8 2.3 PHILIPPINES 1,024 724 483 491 500 N07 516 558 576 -1.9 *4.2 1.2 CHINA 5,512 7,885 9,852 9,988 10,125 10,261 10,393 11,052 11,726 3.8 4.1 1.2 APRICA 2,538 5,074 5,485 5,594 5,699 5,3Qv 5,902 6,500 7,050 6.3 6.0 1.6 AMERICA 7,786 13,109 15,314 15,867 15,915 15,950 16,010 16,290 16,710 4.2 5.0 0.4 BRAZIL 3,334 7,392 9,729 9,937 10,150 10,372 10,599 11,466 12,423 6.2 8.5 1.7 WORLD 94,660 1il,617 115,976 118,636 120,663 122,200 123,848 131,847 139,785 1.9 1.3 1.3 ---------------------------… …------------…-----------…------…------ -----_________---------------------------------------- Af LEAST SQUARES TREND FOR LISTORICAL PERIODS (1961-86)i END-POINT POR PROJECTED PERIODS (1987-2000). B/ ESTIMATE. Cl CROWTH RATE FOR 1966-86 PERIOD. SOURCES. PAO, YEARBOOK OF FOREST PRODUCTS TAPES (ACTUAL) WORLD BANX, INTERNATIONAL ECONOMICS DEPARTrdENT (PROJECTED). TABLE A7, SAWNWOOD t NON-CONIFER ) - GROSS EXPORVS BY MAIN COUNTRIES ANlD ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATSS Al --- --- ----___ - --- -- --- --- -- ___ __ __ __ __ __ --- --- -- --- -- --- --- -- --- -- -- - - - - - ___ -------------_ __ __ _ __ . . __ __ _ __ _ COUNIRIES/ 1987 - RCOWOMIES 1969--71 1979-81 1986 1987JB 1988 1989 1990 1995 2000 1961-B6 1970--36 2000 ----------------------------------------..------____-,---__----__------------__-----------------------___-------_-----_-------..-__-_ -------------------------------------('000 CUBrC METERS)------------------------------------- --------(X PER ANNU INDUSTRIAL 1,779 2,755 3,159 3,167 3,169 3,244 3,338 3,523 3,315 3.3 2.9 0.5 YORTH AMERICA 737 1,141 1,513 1,512 1,51.5 1,603 1,649 1.831 1,876 3.4 4.0 1,7 EEC-10 740 1,276 1,420 1,427 1,434 1,441 1,446 1,485 1,514 5.0 2.9 0.5 WON-KARU'T 926 579 338 269 256 234 227 100 22 -2.1 -5.3 -9.6 DEVELOPING 4,394 8,958 8,998 9,789 10,136 10,444 10,711 12,400 13,709 7.6 4.4 2.6 ASXA 2,524 6,423 6,613 7,291 7,529 7,840 8,016 9,122 10,314 11.9 6.0 2.7 MALAYSIA 1,280 3,091 2,991 3,824 3,881 4,U39 4,155 4,645 4,867 9.0 Cl 5.0 1.9 INDONESIA 53 1,219 2,160 2,332 2,469 2,613 2,763 3,628 4,710 32.9 25.3 5.6 PHILIPPINES 19C 735 495 504 513 524 534 590 678 8.5 7.1 2.3 CH1NA 67 36 56 56 56 54 S5 50 50 2.1 -6.1 -0.9 AFRICA 714 610 792 835 887 944 1,006 1,280 1,512 0.0 -0.8 4.7 AMEICA 544 1,079 735 782 8a8 923 980 1,386 1,678 6.0 2.6 6.0 BRAZZL 133 595 375 406 426 434 430 596 674 14.0 6.6 4.0 WORLD 7,098 12,292 12,495 13,225 13,561 13,922 14,276 16,023 17,156 5.4 3.3 2.0 A/ LEAST SqUARES TREND TOR HISTORXIAL PERIODS (1961-86), END-POINT FOR PROJECTED PERIODS (1987-2000). BJ ESTIMATE. C! OR WTH RATE FOR 1966-86 PERIOD. SOURCESt FAO, YEARBOOK OP FOREST PRODUCTS TAPES (ACTUAL), WORLD BANK, INTERNATIONAL eCO"NOICS DEPARTHZNT (PROJECTED). TAM AI I SANiEOMO ( 35-0OUI1U ) - CROS8 rMPOMTS BY H(X COMNTRIES AIA) SCOECKC REGIONS ACTUAL PROJECTED CROWT RATES Al COUNTRIES/ 1987 - ECOUFlxt 1969-71 1979-81 1986 1987/J 1988 1989 1990 1995 2000 1961-86 1970-86 2000 I----------------------------------- (000 CUBIC M ETEs)R------------------------------------ --------(X PER ANSU |INDtSIRIAL 5,017 8,202 8,209 8,414 8,503 8,657 8,824 9,784 10,855 4.2 2.7 2.0 10C-1o 3,010 3,490 5,230 5,321 5,414 5,507 5,600 6,380 7,000 5.0 3.1 2. OTR 4STERN siROPs 313 383 354 354 353 353 352 365 400 1.5 -0.1 0.9 JAPAN 274 504 863 966 952 1,000 1,045 1,250 1,500 16.4 7./ 3.4 IOU-MARKET 400 291 187 185 176 168 162 136 113 -2.9 -4.8 -3.7 DEVELOPING 1,331 3,901 4,109 4,636 5,000 5,263 5,528 6,183 6,320 9.3 7.4 2.4 ASIA 590 2,536 2,713 3,217 3,556 3,796 4,038 4,586 4,604 13.0 10.4 2.8 SINGAPORE 278 1,113 698 1,025 986 955 922 897 870 8.9 C/ 6.0 -1 3 CHIKA 8 142 700 736 775 815 857 1,105 1,423 33.2 40.2 5.2 APRICA 409 504 517 531 546 561 575 649 722 2.8 1.9 2.4 A8ZICA 162 742 754 760 768 775 782 806 834 12.3 9.2 0.7 BRAZIL 0 369 424 430 437 444 450 472 497 0.0 0.0 1.1 WORLD 6,748 12,394 12,504 13,235 13,679 14,088 14,514 16,103 17,288 5.1 3.6 2.1 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-86)i END-POINT FOb PROJECTED PERIODS (1987-2000). Bl ESTIMATE. C/ CROWTH RATE FOR 1966-86 PERIOD. SOURCES FAO, YEARBOOK Of FOREST PRODUCTS TAPES (ACTUAL)I WORLD BABK, INTZRRAYIOUAL ECONC*IICS DEPARTMENS (PROJZCTED), - 362 - TABLE A9: CMFOOh LOGS - PRICES a/ 1956-87 (ACTUAL) AND 1988-2000 (PROJECTED) ($/Cubic Meter) Current $ -1985 Constant MN b/ US GNP Deflator c/ Actualu 1956 36.0 125.4 143.5 1957 33.0 113.3 127.7 1958 33.0 111.4 125.1 1959 30.0 100.4 108.4 1960 34.8 116.0 125.8 1961 39.3 128.8 140.7 1962 37.5 120.5 131.3 1963 39.1 128.1 135.0 1964 39.5 127.2 134.2 1965 39.5 126.2 130.8 1966 38.0 117.3 i21.6 1967 37.5 li4.5 116.7 1968 42.0 129.4 124.5 1969 49.6 145.0 139.5 1970 43.0 118.3 114.5 1971 44.5 116.2 1!2.2 1972 52.5 125.7 126.3 1973 133.6 276.2 301. . 1974 120.5 204.5 249.8 1975 126.6 193.2 238.8 1976 142.3 214.2 252.4 1977 158.8 217.6 264.0 1978 191.3 227.9 296.3 1979 211.5 222.4 301.1 1980 251.6 241.2 328.3 1981 212.8 202.9 253.3 1982 175.9 170.1 196.8 1983 160.8 159.7 173.2 1984 175.6 177.4 182.1 1985 173.9 173.9 173.9 1986 221.6 187.3 217.3 1987 258.9 199.2 246.6 Projecd 1988 270.8 192.4 248.1 1989 290.1 194.0 254.1 1990 297.4 196.0 248.0 1995 365.5 202.0 237.2 2000 47 1.3 208.0 241.3 a/ Average weekly prices, Sapelli, high quality (Loyal and Marchand), f.o.b. Cameroon. b/ Deflated by Manufacturing Unit Value (ItUV) Index. c/ Deflated by US GNP Deflator. Sources: Marches Tropicaux er Mediterranes (actual); World Bank, International Economics Department (proiected). - 363 - LOGS ( SAPELU (CONS IANT 1985 DOLLAR PRICES *) 400 - 350 - 200 250 )o, ,I,,,,,,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ..... . 200- 50 1955 1960 1965 1970 1975 1980 1985 t990 1995 2000 DEFLATED BY MANUFACTURING UNIT VALUE ( MuV) INDEX - . . . . .. ... DEFLATC BY U.S. GNP DEFLATOR. 1948 - 87 ACTUAL; 1988 - 2000 PROJECTED . SOURCE: WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT . - 364 - TABLE A10: MALAYSIA LOGS - PRICES a/ 1977-87 (ACTUAL) AND 1988-2000 (PROJECTED) -----------($/Cubic Meter) - - - - - - - Current $ ----1985 Constant- --- KUV b/ US GNP Deflator cl Actual 1977 92.6 126.9 153.9 1978 97.4 115.9 150.8 1979 170.0 178.8 242.1 1980 195.5 187.4 255.1 1981 155.6 148.4 185.2 1982 155.9 150.8 174.4 1983 145.2 144.2 156.4 1984 167.2 168.9 173.3 1985 13b.2 136.2 136.2 1986 151.3 127.8 148.3 1987 221.4 170.3 10.9 Proected 1988 230.0 163.5 210.7 1989 246.7 165.0 216.1 1990 251.9 166.0 210.0 1995 320.1 176.9 205.5 2000 418.5 184.7 214.3 a/ Annual average monthly prices of Meranti, Sabah SQ best quality, sale price charged by importers, Japan. b/ Deflated by Manufacturing Unit Value (MUV) Index. C/ Deflated by US GNP Deflator. Sources: Nihon Keizai Shimbun (actual); World Bank, Internationai Economics Department (projected). - 365 - LOGS (MERAN11) (CONSTANT 1985 DOCLLAR PAIES * 400- 350- 300 250]* 200 ------ - 1501 01X 1960 1965 1570 1975 1980 1985 1990 1995 2000 DEFLATED BY MANUFACTURING UN1- VALUE ( MUV) INDEX ' '-' - ' CDEFLATED BY U.S. OMP DEFLATOR. 1948 - 8, ACTUAL; 188 - 2000 PROJECTED . SOURCE: WORLD BANK, INTERNATIONAL ECONOMICS DEPARTMENT. -366- TABLE All: MAIAYSIA SAWNWOOD - PRICES a/ 195,8-87 (ACTUAL) A.N9 1988-2010 (PROJECTED) (S/Cubic M4eter) Current $ -1985 Current- MJV bJ US GNP Deflator Actual 1958 74.0 249.3 280.1 1959 68.0 231.5 249.9 1960 84.9 283.0 306.8 1961 68.6 224.8 245.6 1962 71.8 230.7 251.5 1963 76.5 250.6 264.2 1964 82.5 265.6 280.2 1965 81.4 260.1 269.5 1966 73.1 425.7 233.9 i967 76.9 234.7 239.3 1968 84.1 259.2 249.3 1969 90.2 263.7 253.7 1970 92.9 255.6 247.3 1971 92.5 241.5 233.2 1972 109.5 262.3 263.5 1973 156.1 322.7 352.5 1974 142.1 242.8 296.6 1975 166.4 254.0 3i3.8 1976 168.1 253.1 298.2 1977 154.1 211.1 256.2 1978 205.4 244.6 318.1 1979 339.1 356.6 482.8 1980 365.1 350.0 476.4 1981 314.1 299.5 373.9 1982 302.0 292.0 337.8 1983 304.3 302.1 327.7 1984 306.8 310.0 318.1 1985 276.3 276.3 276.3 1986 265.2 225.0 261.0 1987 276.2 212.5 263.1 Projected 1988 29'0.4 206.4 266.0 1989 305.9 204.6 268.0 1990 308.8 203.5 257.5 1995 365.5 202.0 234.6 2000 460.0 203.0 235.6 a/ Annual weekly prices, Dark Red Meranti, select and better quality standard density, c.i.f. French ports. b/ Deflated by Manufacturing Unit Value (KUV) Index. c/ Deflated b7 US GNP Deflator. Sources: Marches Tropicaux et Hediterranes (actual); World Bank, International Econoaics De partnent (projected). 0 __________________________________ .0 0 I.' 4a L * * t e a a a 0 I 0 * 0 a - I S - a. 0 * 40 w 0 0 - 2 a a a Es Os I 0 * * * sO 0 * 0 w - 4 § 0; - 4 Z60 C '0 2 .ip 4; ;EE3 0 S 0 00 .5 * I )** . .5' 0 0 0 4 4 a *9.*, a I * 0 40 0 0 0 - 0 W g 0 The World Bank Headquarters 1818 H Street, N.W. Washington, D.C. 20433, US.A. Telephone: (202) 477-1234 Facsimile: (202) 477-6391 Telex- WUI 64145 WORLDBANK RCA 248423 WORLDBK Cable Address: LNTBAFRAD WASHINGTONDC European Office 66. avenue d'I&na 75116 Paris, France Telephone: (1)40.69.30;00 Facsi-mile: (1) 4720.19.66 Telex: 842-620628 loyko Office Kokusai Building I-1, Marunouchi 3-chome Chiyoda-ku, Tokyo 100, Japan Telephone: (3) 214-5001 Facsimile: (3) 214-3657 Telex: 781-26838 ISSN 1013-7440 Co7;er Design by Joqie Petruzzelli ISBN 0213-1191-3