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Making local sense of food, urban growth, population and energy

One curious question for international grains traders

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The International Grains Council's charts for all grains and major traded grains. What is the connection between these charts and local food price inflation?

The International Grains Council’s charts for all grains and major traded grains. What is the connection between these charts and local food price inflation?

The International Grains Council’s monthly Grain Market Report for 2013 October finds its grains and oilseeds index down 16% from the same period a year ago because, as the IGC has said, “the supply outlook for grains, rice and oilseeds markets is significantly more comfortable than last year”.

Recent export prices for major traded grains. Source: IGC

Recent export prices for major traded grains. Source: IGC

The IGC has raised the output forecast for total grains (wheat and coarse grains) in 2013-14 by 10 million tons this month, to 1,940 mt, up 8% from the same period last year. Demand is also expected to rise, but by a slower 5% compared to the same period a year ago. The IGC has said that “inventories are seen recovering by 39 mt to a four-year high at the end of 2013-14”.

The global trade forecast is raised by 3 mt, to 273 mt, which will exceed the previous record in 2010-11. Hence the question ought to be: if the international trade in grain collects, moves and processes just under 15% of the world’s total grain, why do prices in our local wholesale and retail food markets get influenced so much by what the IGC’s monthly report describes? This is not an answer you can expect given to you with honesty and concern from your local administration, much less from the food retail and industrial agriculture representatives.

For the major grains, here are the IGC summaries. Wheat output is expected to rise by 6% in 2013-14 from the level of a year ago and closing stocks are seen up by 7 mt, at 182mt, although this would still be below the level seen in 2011-12. The 2013-14 forecast for the global maize harvest has been raised by 5 mt this month to a record 948mt, and stocks are seen recovering to a 13-year high of 152 mt.

Rice is considered by the IGC to be “mixed, with good export demand and weather-related crop worries underpinning values in Vietnam, but Thailand’s prices fell further on limited buying interest and pressure from heavy intervention reserves”. Rice output for 2013-14 is forecast up 1% from a year ago, with world ending stocks expected to rise for a ninth consecutive year. (The IGC’s report for 2013 October is available here.)

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