Food reserves, strategic foodgrain stocks and port protests
Food inflation and industrial action have come together in a new signal about the unsustainability of consumption. Port workers in Argentina had stopped, for three days, the loading of vessels with soya, of which Argentina is a major producer. Their reason is the continuing high cost of food in their country, which in this Reuters report on the matter is recorded as having been 25%. They struck work and blocked loading to demand higher wages so they could afford to buy their household food needs. They’re also directly responsible for loading an East Asian food staple. Block food to buy food.
The blockade by members of Juarez’s cooperative targeted a terminal north of the city of Rosario shared by Bunge and Argentina’s AGD, and at another nearby facility operated by Cargill. Argentina is the world’s No. 3 soybean exporter and a major supplier of corn and wheat. About 80 percent of its soyoil and meal is produced around Rosario, located 180 miles (300 km) north of the capital Buenos Aires.
The two terminals account for about 16 percent of the South American country’s soyoil-processing capacity. Argentina is the world’s biggest supplier of soyoil and soymeal. Earlier on Friday, port workers suspended a brief protest that halted shipping activity in the southern grains ports of Quequen and Bahia Blanca, SOMU shipping workers’ union Omar Suarez told Reuters. He said the union wanted exporters to use a logistics company that hires its members, but had called off the protest following a request from the government.
Major grain importing countries are set to build more storage silos and expand strategic stocks after seeing the role played by record food prices in political upheaval in the Middle East and North Africa, Reuters has reported. Egypt, South Korea and Saudi Arabia are among nations which have already unveiled strategic plans as grain markets adjust to the prospect of further supply crunches over the next few years.
Global demand for grain has risen steadily as consumers in emerging economies grow richer and suppliers have struggled to overcome erratic climatic conditions, which last year included Russia’s worst drought in decades and heavy rains in Australia. The upshot has been a near-60 percent surge in key US wheat prices in the year to March, while global food prices as measured by the United Nations hit their second straight record high in February.
Importers also no longer have the safety net of large stocks held by exporters such as the European Union, which has sold off the grain mountains it first accumulated in the 1980s and moved to more market-oriented policies. Nomani Nomani, vice chairman of the General Authority for Supply Commodities (GASC) in top wheat exporter Egypt, said in February it was looking to improve and boost storage capacities.
“We have a long-term plan to improve storage capacity in Egypt and to build a network of silos that would allow GASC to purchase at the suitable time. We are also seeking improving performance of storage,” he said. South Korea, the world’s fourth-largest grain importer, is also among those building a strategic grain reserve, while another major importer Saudi Arabia hopes to double wheat reserves within three years. International Grains Council figures issued last week show a major shift in stocks from exporting to importing countries, said the Reuters report.
China is expected to hold 114.6 million tons of grain by the end of 2010-11, more than the combined total of 104.5 million tons held by all the major exporters, according to IGC estimates. Nie Zhenbang, state administration of grain head, said in an interview with the official Ziguangge magazine that China would continue to build up local government reserves of grains and edible oils and expand stockpiling capacities.
Mexico, the world’s second-largest maize importer, has not yet expanded its stocks but has plenty of space if necessary. Maize stocks currently total around 2 million tons, little changed from previous years, but the national association of warehouses (AAGEDE) estimates there is storage space for about 11 million tons. AAGEDE director Raul Millan said there is no deficit in storage space but that infrastructure is lacking in the southern part of the country where warehouses are not as well equipped. Mexico has no strategic reserves of grain, although there are some stocks held by the government to hand out to the poor.
In India, the government maintains a ‘Food Security Reserve’ of 3 million tons of wheat and 2 million tons of rice. This reserve – maintained from 2008 – is part of what the Indian government calls ‘buffer’ norms’. The buffer stock norms are recalibrated four times a year and as on 2010 October, the ‘buffer stock norms’ stood at 14 million tons for wheat and 7.2 million tons for rice. Against these norms, the government’s actual stocks were 27.7 million tons of wheat and 18.4 million tons of rice. From 2009 July, the actual stocks of total foodgrains in India has been held at around 50 million tons, much above what the government calculates it needs for the Public Distribution System and other welfare programmes.