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Black Sea questions, South Asian rice, the ethanol effect – IGC on grains in 2012 February

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IGC's supply and demand graphs for; top row - total grains, wheat, maize; bottom row - rice, soyabean, and IGC freight index

The International Grains Council (IGC) has released its grains market report for February 2012. In its market commentary, which is a cogent 250-word summation of 1,840 million tons of produce and where it will go, the IGC has said:

Grain and oilseed markets mostly strengthened in the past month, the IGC daily index (GOI) up 6% to near four-month highs. The upturn reflected concerns in early February about maize and soyabean crops in South America, as well as the impact of the recent severe cold spell in parts of Europe and the CIS.  Moreover, after a very high rate of shipments from the Black Sea region in the first half of the season, sales activity declined, with US grain, in particular, attracting much more buying interest.

Wheat export prices in Europe climbed by some 8%, in somewhat tighter markets, with reports of logistical problems and possible future export restrictions in the Black Sea region (though denied), seen as potentially bullish. However, global supplies appear ample, with the likelihood that a portion of upcoming large South Asian wheat harvests will be offered for export. US maize (corn) values remained firm, supported by reports of crop losses in South America and active export interest for remaining old crop supplies, although forecasts of a further rise in US plantings this spring added a bearish element.

Oilseed prices rallied strongly in the past month, reflecting worries about the final outcome of soyabean crops in Argentina and Brazil, good demand for US supplies, including a new trade deal with China, and rising crude oil values. International rice market trends were more mixed, with Thai prices supported by domestic support measures but those in Vietnam, especially broken grades, easing to compete with South Asian offers.

[The IGC 2012 February grains market report is here. The data files as excel spreadsheets are available in this zip archive.]

The IGC’s sectoral advice is:

Grains: The world production estimate is lifted by 11m. tons, to 1,841m., largely because of upward revisions in Australia, Kazakhstan, Ukraine, India and Brazil, the latter because losses of its main maize crop will likely be more than compensated by a larger second crop. These upward revisions outweigh a reduced maize figure for Argentina. To an extent, the forecast of world consumption is adjusted higher to reflect the bigger crop estimates, with total use of grains placed 5m. tons above the January forecast, at 1,836m. The change is mainly for feed use, now put at 775m. tons, 4m. more than before and 4% higher than in 2010-11.

Of particular interest is the marked slowdown in the annual increase in industrial use, expected to rise by only 2% this year, with ethanol use of maize in the US set to recede slightly from its peak in 2011. While the latest statistical forecasts of supply and demand suggest that, nominally, global carryover stocks will rise slightly in 2011-12 from last year’s low figure, to 378m. tons (373m.), the total carryover in the eight major grain* exporters is still expected to dip by 6m. tons, to 131m., the smallest figure since 2007-08.

As this pair of charts shows, the Baltic Dry Freight Index has dropped not only to a one-year low, but is at a three-year low. Charts: Bloomberg

Wheat: A further increase in the global wheat production estimate for 2011-12, to 695m. tons (653m.), boosts total availabilities to 892m., their highest ever. Projected food and industrial consumption are both revised lower this month, but attractive prices, particularly compared with maize, lift the forecast of feed use by 2m. tons, to 131m. (115m.), the most since the early 1990s. Strong feed wheat demand is reflected in the global trade figure, helping to lift total wheat trade to match the 2008-09 peak, at 136.8m. tons (125.7m.). Even though total consumption is growing at a faster than average pace, world stocks are projected to rise to 211m. tons (196m.), eclipsing the previous record in 1999-00.

Maize (Corn): Maize production in 2011-12 is expected to increase by 4%, to a record 864m. tons. The US crop, while disappointing, was slightly above average, and bumper harvests were collected in China, Ukraine and the EU. A severe drought has reduced yield prospects in South America, especially in Argentina, but Brazil remains on track to produce a record crop. Improved supplies in some countries are boosting consumption, with overall use forecast at a record high. Feed use of maize is expected to increase at a faster than average pace but, with US ethanol production likely to decline slightly, the rise in industrial demand will be below trend. With demand outpacing the increase in supplies, ending stocks are forecast to tighten further, including in the US. Amid solid buying by a number of importers, world trade is forecast to rise to a four-year high.

Barley: Better than expected 2011-12 harvest results, including in Argentina and Australia, lift the estimate of world barley production by 1.1m. tons compared with last month, to 134.7m. World consumption is expected to remain steady, contained by uncompetitive prices in the feed sector, especially in the EU, and by sluggish growth in brewing demand. While higher than previously forecast, carryover stocks are set to remain tight, particularly in the EU and North America. The projection of world trade is raised by 1.2m. tons, to a three-year high of 17.8m., with a steep upturn in buying by Saudi Arabia.

Rice: Due to increases in Asia’s biggest producers, China and India, global rice output is projected to rise by 3% in 2011-12, to 463m. tons. The record outturn will be accompanied by a further expansion in demand, to 460m. tons (449m.), but the 2011-12 carryover is still expected to increase by 4%, to 99m. Much of the forecast rise in global stocks will be due to increases in the major exporters, notably in India and Thailand, seen 14% higher, at a record 32.7m. tons. World trade in 2012 is forecast to contract by 7%, to 32.2m. tons, owing to significantly reduced purchases by key Asian buyers, including Bangladesh and Indonesia.

Ocean freight rates between major export-import regions.

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Grains till 2016-17: the IGC speaks

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The International Grains Council (IGC) has prepared a summary of projections for grains and cereals. The IGC Secretariat has said of its work that “the figures represent the Secretariat’s view of the general development of the global grains economy in the period to 2016-17, taking into account a number of broad assumptions”.

These include assumed trends in population growth, prices, developments in agriculture and trade policy, as well as prospects for the global economy. “The latter have become increasingly uncertain over the past year”, the IGC Secretariat has said. The IGC has added the proviso that these estimates and the forecast derived from them are subject to risk, and this analysis assumes that current economic problems do not worsen. Here are the sections:

Total Grains
* World grains production in 2016-17 is projected to reach 1.98bn tons, a 158m. increase (+9%) compared with 2011-12; wheat output is forecast to rise by 30m. (4%) and maize by 94m. (11%).
* Despite heightened economic uncertainty, the analysis assumes any slowdown in global economic growth will be temporary and increasing prosperity will boost grains consumption, particularly for feed and industrial uses. Feed use is expected to rise at a slightly faster pace than in recent years, while increases in industrial use will slow from the very rapid rates in the past decade. Diversifying diets, particularly in favour of livestock products, will slow the rise in direct use of grains for human food. Total grains consumption is projected at 1.98bn. tons in 2016-17 (1.83bn. in 2011-12), including 659m. (630m.) for human food, 846m. (769m.) for feed and 343m. (302m.) for industrial uses.

World grains stocks are forecast to show little change in the medium term and are set to remain relatively tight, especially for maize. At the end of 2016-17, world grain carryover stocks are projected at 354m. tons (compared with 360m. at the end of 2011-12), including 118m. (123m.) of maize, 196m. (202m.) of wheat and 26m. (23m.) of barley.
* World grains trade is projected to increase by about 2% per year, to 273m. tons in 2016-17, with wheat and maize rising to new records. Increasing demand for wheat-based foods will lift wheat import needs in Africa and Asia. Imports of maize for feed will rise, especially in Pacific Asia, with China seen as a more regular buyer.

Wheat
* Increases in world wheat production in the five years ending 2016 are expected to be broadly matched by use, and global stocks are expected to be maintained at close to recent levels.
* Planting decisions will be influenced by likely attractive prices for alternative crops, especially maize and oilseeds. Nevertheless, some rise in global wheat area is anticipated, led by gains in the CIS. After a relatively sharp increase of 1.6% in 2012-13, including a recovery in North America, global areas are projected to expand by around 0.4% annually. Taking into account slightly increased average yields over the period, world wheat production is projected to reach a record 714m. tons in 2016-17, representing an increase of 30m. compared with the estimate for 2011.
* World wheat consumption is projected to grow by 1.1% annually, close to the long-term average, reaching 716m. tons in 2016-17, up by 39m. compared with 2011-12. A continued increase in human food use accounts for half the rise, driven by expanding demand in developing countries. At 0.8% per year, the average annual increase is only slightly slower than the longer-term trend of 1.0%. Increases in world feed use mainly reflect a tight S&D outlook for maize and expectations that the cost of wheat will be more attractive than maize at times. Gains in industrial use are expected to accelerate, particularly for biofuels, although overall amounts will remain small relative to total consumption.
* World wheat carryover stocks are projected to stay relatively ample in the next five years, receding only slightly, to 196m. tons. Those in the eight major exporters are projected to show an initial rise, but then fall back to about the same level as currently.
* World wheat trade to 2016-17 is forecast to increase by around 2% per year, reaching a fresh record of 138m. tons. Increases in milling wheat trade will be sustained by rising demand in developing countries in Asia and Africa, while feed wheat may show some further gains if import costs are competitive with maize.

[The IGC forecast document is available here (pdf)]
[The spreadsheet (xls) with the major grains’ data is available here]

Rice
* Only a modest expansion in the global paddy (rice) area is forecast in the five years to 2016-17, with the average year-on-year increase projected at just 0.3% (compared to an average of 0.7% in the prior five-year period). To some extent, this reflects an expected contraction in China’s sowings, amid a continued shift to diets that are richer in protein. Taking into account slightly reduced average yield gains, global rice production (milled basis) is projected to increase by 23m. tons, to 482m. by 2016-17, an annual average growth rate of 1%.
* Global rice consumption is projected to reach 482m. tons by 2016-17, up by 25m. from 2011-12. At 1.1%, average growth, while broadly in line with the global population trend, will be lower than in previous years. This is due to a forecast contraction in China, as well as more moderate growth in other parts of Asia. Elsewhere, sub-Saharan Africa is expected to be one of the fastest growing regional markets, the result of a rising population and a shift away from traditional, locally-grown cereals.
* The world rice carryover is projected to rise only slightly over the next five years, to 103m. tons. In the five major exporters, stocks are expected to initially increase – centred on inventory accumulation in India and Thailand – before edging slightly lower. Their share of the world total will average around one-third through to 2016-17.
* Global rice trade is projected to expand by nearly 3% annually, to 37.2m. tons by 2017, broadly in line with maize but comfortably exceeding the year-to-year rise in wheat. Growth will be underpinned by larger shipments to Far East Asia, especially the Philippines, and sub-Saharan Africa. The latter sub-region will remain heavily dependent on imports to meet domestic requirements; their share of total consumption is forecast to average 45%.

Maize (Corn)
* The supply and demand for maize (corn) is projected to remain tight, with world inventories projected to drop to historically low levels.
* With firm global demand and generally tight availabilities expected to support world prices, maize plantings are projected to remain high across the forecast period. Increases in area and improvements in yields, especially in the US, Latin America and China, result in large consecutive crops. World maize production is forecast to increase to 949m. tons in 2016-17, some 94m. higher than the estimate for 2011.
* Global maize consumption is projected to rise to 949m. tons in 2016-17, up by 86m. from 2011-12. Growth in use is forecast to decelerate, mainly due to slowing industrial demand. With use for ethanol in the US levelling out, industrial consumption is projected to rise by 2% annually, compared to 12% in the last five years. Despite high prices, rising meat demand in developing countries will lift feed maize consumption by around 2% per year. Population growth, rising per capita incomes and changing dietary preferences are expected to boost meat consumption in parts of Asia, Latin America and Africa.
* World closing stocks are expected to tighten but, with supply and demand seen broadly in balance towards the end of the forecast period, the projected 2016-17 carryover of 118m. tons would only be 5m. below that at the end of 2011-12. US ending stocks are forecast to increase from recent lows, but China’s will decline.

IGC’s 2011 wrap-up – Eurozone crisis has affected crops, barring rice

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The International Grains Council has released its grain market report for November 2011. As this will be the IGC’s last report for the year, grain traders in the major exporting countries and buying countries will use this as their end-2011 reference. Here are the main forecasts by the IGC for major crops:

Market commentary – After showing some strength in early November, global grain export prices were again in retreat, though with rice once more the exception. Overall, IGC’s GOI index fell by 16 points, or 6%, to a 13-month low. The recent market downturn can be partly ascribed to bearishly perceived market fundamentals, as harvests neared completion in the northern hemisphere and work started south of the equator. But it was also in reaction to deepening financial uncertainties, notably in Europe, affecting nearly all commodities. Heavy supplies of wheat amid strong export competition, including from new crop grain out of Argentina and Australia, mostly reduced fob values by between $20 and $30 over the past month, narrowing the gap with Black Sea quotations.

Despite initial support from US cash markets and a smaller official crop estimate, CME maize futures in Chicago saw major speculative selling, partly due to increased competition from other exporters but with sentiment considerably dented by worries about the global financial crisis and the collapse of a major brokerage firm. Similar pressures were evident in oilseed markets, led by a decline in US soyabeans, values of which dipped to their lowest since October 2010. As measured by IGC’s sub-index for rice, export prices of this cereal remained firm in the past month: within this measure, quotations in Thailand saw further gains, attributed to the country’s severe floods, while those in Vietnam and South Asia weakened.

Grains – Reduced grain crop estimates for some major producers, including for maize in the US, are only partly offset by increases in the CIS and elsewhere, trimming the global production total for 2011-12 by 3m. tons from October, to 1,816m. This would still represent an increase of 64m. tons over last year, largely due to sizeable recoveries in output in Russia, Ukraine and Kazakhstan. Production of all crops except sorghum will rise this year, with the biggest increases in wheat and maize. Southern hemisphere prospects remain favourable, with rains in South America and Australia mostly boosting yield expectations for wheat and helpful for plantings of maize and sorghum. Consumption of grains will also increase in 2011-12, especially in the feed sector, including a marked rebound in Russia after the previous year’s drought.

At 1,826m. tons, world use is expected to show a rise of 2.2% from the previous year. However, a feature this year will be the marked slowdown in the expansion of industrial use, set to rise by only 1.7%, to 303m. tons. Within this figure, the use of grains in fuel ethanol, which has displayed huge growth in the past decade, is expected to stay close to last year’s 147m. tons, assuming the use of maize for this purpose in the US declines slightly. With the reduction in the global grain crop estimate largely balanced by an upward adjustment in the opening stocks figure and a slight cut in the use forecast, the projection of world carryover stocks is unchanged from last month, at 360m. tons.

[ Data – here are the IGC’s data files (all Excel): Total grains supply and demand ; Total grains trade ; Rice supply and demand ; Rice trade ; Soyabean trade ; IGC’s grains and oilseeds index ]

However, the total for the eight major exporters is trimmed by 3m. tons, largely because of a reduced stocks projection in the EU. World trade in grains in 2011-12 (July-June) is expected to climb by 11m. tons to a record 254m., 4m. more than forecast previously, reflecting larger than anticipated wheat purchases after this season’s marked upturn in medium and lower grade supplies, especially from the Black Sea region, whose total grain shipments are set to total 55m. tons, up from only 22m. last year.

Wheat – The second largest world wheat crop ever and ample carry-in stocks from last year, have sharply boosted global availabilities in 2011-12. While use is rising at a faster than normal pace, world stocks at the end of the season are still expected to climb to their highest level in a decade. Compared with last month, the estimate of world production is 1m. tons lower, at 683m., including a slight downward revision in the US, where the spring wheat crop was even smaller than expected.

Stronger than previously projected feed use adds another 2m. tons to the global consumption forecast, at 679m., boosting the annual percentage increase to about three times the longer-term trend. Because of the increased demand figure, the forecast of global carryover stocks is 2m. tons lower than last month, at 200m., but these would still be the largest since 2001-02. The world trade forecast is lifted by 3m. tons from before to nearly 135m., only slightly below the 2008-09 record. Rather than reflecting a supply shortfall in any one country or region (as it did in 2008-09, when Iran’s imports were higher than usual), import demand appears strong in a wide range of countries, aided by competitive pricing in the major exporters, especially for lower and medium grades.

Maize (corn) – While the US crop was slightly smaller than last year’s, larger outturns elsewhere are expected to lift world maize production to a new record of 853m. tons (826m.). With harvests in North America and Europe entering their final stages, attention is switching to the southern hemisphere, where farmers in Argentina, Brazil and South Africa are set to plant more maize than in 2010-11. Due to strong competition from feed-grade wheat and projected sluggish growth in industrial demand, world use is forecast to increase at a slower than average pace. However, with the total still expected to exceed output, 2011-12 ending stocks are forecast to fall to a five-year low. Trade in the year to June 2012 is forecast to increase by 1% due to strong demand from buyers in parts of Latin America, Asia and North Africa.

Rice – Flooding in parts of Asia has negatively affected crop prospects in some key exporters. Nevertheless, bigger outturns in China and India are expected to lift global production by 2% in 2011-12, to a record 459m. tons. Total rice use is also forecast to expand by 2%, with a further small increase projected in the global carryover, to 100m. tons (98m.). Within the total, inventories in the five major exporters are forecast to increase by 8%, to an all-time peak of 32m. tons. World trade in calendar 2012 is forecast to contract by 0.8m.tons, to 32.5m., on reduced imports by Far East Asia, especially by Bangladesh and Indonesia.

FAO March bulletin, Crop Prospects and Food Situation for 2011

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The FAO has released its Crop Prospects and Food Situation, the first for 2011, in March. The overview is:

  • Wheat production: leading producers, (million tonnes)

    FAO’s first forecast for world wheat production in 2011 stands at 676 million tonnes, 3.4% up from 2010. This level of production would still be below the bumper harvests of 2008 and 2009.

  • International grain prices remained volatile in the first three weeks of March.
  • The cereal import volume in low-income food deficit countries (LIFDCs) as a group is anticipated to decline in 2010-11 due to increased production. However, their import bill is forecast to rise by 20% following higher international prices.
  • In Asia, prospects for the 2011 wheat crop are mostly favourable. In China, the outlook remains uncertain but the easing of the drought situation in the North China Plain is a positive development. In Japan, a powerful earthquake and subsequent tsunami have caused devastation with a potentially significant impact on agriculture and food trade.
  • In North Africa, the current situation in Libyan Arab Jamahiriya has resulted in the displacement of large numbers of people and disruption to the flow of goods and services in this heavily cereal import dependent region. WFP has initiated a regional emergency operation to provide food assistance to the affected people.
  • In Southern Africa, prospects for the main 2011 maize crop are generally favourable and relatively low prices have helped stabilize food security.
  • In Eastern Africa, food insecurity has increased in drought-affected pastoral areas of Somalia, Kenya and Ethiopia despite bumper harvests in 2010 and generally low and stable food prices.
  • In Western Africa, post-election violence continues to cause a large population disruption and disturb trade and livelihoods in Côte d’Ivoire and the neighbouring countries.

Countries requiring external assistance for food, 29 of which 21 in Africa

Overall favourable outlook for global 2011 wheat production: At this stage of the season, with the bulk of the coarse grains and paddy crops yet to be planted in the coming months, it is still too early for even a preliminary forecast of global cereal output in 2011. For wheat, however, in the northern hemisphere, which accounts for the bulk of the global production, winter crops are already developing or soon to come out of dormancy, while spring planting is underway in some countries and a preliminary picture of global prospects is already available.

FAO’s first forecast for world wheat production in 2011 stands at 676 million tonnes, representing a growth of 3.4% from 2010. Plantings have increased, or are expected to increase, in many countries in response to strong prices, and yield recoveries are expected in areas that were affected by drought in 2010, the Russian Federation in particular. The global output forecast for 2011 would be still below the bumper harvests in 2008 and 2009.

In Asia, prospects for the 2011 wheat crop, to be harvested from April, are mostly favourable in India and Pakistan, where good harvests are forecast. However, the outlook in China is uncertain because of winter drought in the North China Plain despite recent beneficial precipitation.

Cereal export prices

In the Asia CIS subregion, Kazakhstan is the major producer and the bulk of the crop is yet to be sown this spring. Weather permitting, farmers are expected to maintain the relatively high planting level of the past two years, especially in view of strong prices. Assuming also a recovery in yields after last year’s drought-reduced level, a significant increase in production could be achieved. In North Africa, early prospects for the 2011 wheat crops are generally favourable, except in Tunisia where dry conditions point to a repeat of last year’s drought-reduced crop.

In the southern hemisphere, where the major wheat crops are still to be sown, producers are also expected to increase plantings in response to this year’s favourable price prospects. However, this may not translate to larger crops in Australia or Argentina, where yields are assumed to return to average after bumper levels in 2010.

World cereal production and utilisation

Estimate of world cereal production in 2010 slightly up on December forecast: The estimate for world cereal production in 2010 has been revised upward slightly since previously reported (Crop Prospects and Food Situation, December 2010) to 2,237 million tonnes (including rice in milled terms), just 1.1% below the bumper output in 2009. The decline in cereal production in 2010 was entirely due to lower output in developed countries while in developing countries production rose significantly by almost 5%. The estimate for world wheat production in 2010 now stands at almost 654 million tonnes, 1 million tonnes above FAO’s December forecast but still some 4% less than in 2009.

The latest revision mostly reflects a better than expected outcome of the harvest in Argentina, which more than offset some downward adjustments to estimates in Asia (most notably Kazakhstan) and Europe (mostly the Russian Federation). For coarse grains, the estimate of output in 2010 is now put at 1 117 million tonnes, 7 million tonnes up from the previous forecast and just marginally less than the 2009 level. The upward revision was largely driven by increased estimates for China, India, Ethiopia and Sudan.

The estimate for global rice production in 2010 remains unchanged since December at 466 million tonnes (in milled terms). Improved prospects for Brazil, China mainland and Thailand largely offset a sizeable downward revision for India. At this level, the aggregate output of the 2010 rice seasons, which will close when the northern hemisphere countries complete the harvest of their secondary crops by May-June, would be 2% up from 2009, mostly on account of large gains in Asia, where Bangladesh, China, India and Indonesia, the leading world producers, are all expected to tally larger crops.

Grain market outlook, end October 2010

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The International Grains Council has released its October 2010 grain market report. The IGC has said that the outlook for world grains supplies in 2010-11 tightened further in the past month. Although prospects for wheat and barley crops are broadly unchanged from previously, the forecast of world maize production is cut, due to reduced crop expectations in the US and China.

Wheat: With northern hemisphere harvesting nearly complete, the IGC projection of world wheat output is kept at 644 mt, a fall of 33 mt from the previous year, with reduced estimates for some countries notably the US and Australia, offset by increases for others, including China.

Maize: Reflecting worsening production prospects in the US and China, the forecast of global maize production is cut by 10 mt to 814 mt (811 mt), still a record.

Rice: At 449 mt tons, the IGC forecast of global rice production in 2010-11 is almost 5 mt lower than in September, largely reflecting a smaller-than anticipated official projection of India’s main crop.

At 1,730 million tons, global grain output is projected 11 mt lower than in September and 3% below the previous year. By far the biggest decline is in the CIS – mostly in Russia – due to the drought. Within the total, much of the fall reflects smaller wheat and barley outturns, only marginally offset by a larger maize crop. In the southern hemisphere, prospects for wheat remain favourable, except for parts of Australia, while the maize outlook improved in Argentina.

World grains consumption is projected slightly higher, at 1,785 mt, mainly because of increased feed forecasts for the EU and US. In the US, where the total includes a residual element, it is largely an adjustment for the use of early-harvested maize before the new marketing year began. However, global use of grain will be 1.5% higher than in 2009-10, underpinned by increases in all demand sectors. With global grains use set to exceed output for the first time in four years, world end-of-season stocks are expected to fall by 54 mt, to 345 mt. Nevertheless, they would still be nearly one-quarter above the 2006-07 low.

Although wheat and coarse grains prices have posted large gains since July, world grains trade in 2010-11 is projected to be marginally above the previous year’s total, at 240 mt, reflecting this month’s upward revisions for maize and wheat. World wheat trade is expected to decline, but this will be more than offset by a rise in maize import demand. A shortfall of nearly 30 mt in CIS exports is expected to be balanced by larger shipments by other exporters, notably the US, Argentina, Australia and India.

Written by makanaka

October 30, 2010 at 19:35

Warning from a commodity trader

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Many young male adults have left their villages in search of subsistance means after the poor raining season in 2009 prevented them from harvesting. In the village of Garin Dagabi, north of Tanout in Southern Niger, the population at the beginning of 2010 was mainly made of old people, women and children. Photo: © Anne Isabelle Leclercq/IRIN

Many young male adults have left their villages in search of subsistance means after the poor raining season in 2009 prevented them from harvesting. In the village of Garin Dagabi, north of Tanout in Southern Niger, the population at the beginning of 2010 was mainly made of old people, women and children. Photo: Anne Isabelle Leclercq/IRIN

The news source Emerging Markets has a report based on an interview with financial speculator and commodity trader Jim Rogers. He is reported as saying that “the world is on the brink of a serious food crisis” caused by “decades of failure by governments to invest in farming during an era of low prices” which Rogers explains has now left the world “with insufficient capacity to deal with a likely surge in demand for commodities from both households and investors”.

“I’m worried about the world’s agricultural situation,” he told Emerging Markets. “The world is on a knife-edge. We could have gigantic food problems worldwide.” Commodity prices will rise whatever happens to the global economy, Rogers believes. If the recovery kicks in, then demand for basic foods will rise. On the other hand, if the economy fails to recover and governments ratchet up quantitative easing, the extra liquidity will end up in real assets such as commodities.

“There are shortages of farmers developing, because farming has been such a horrible business for 30 years. If things are going to get worse, then prices are going to go higher,” he said. “The main reason [for that] is a shortage of investment for 30 years.” Rogers founded his own index, the Rogers International Commodity Index. Emerging Markets – which is run by the Euromoney magazine, covers the meetings of the IMF and World Bank. It said that Rogers’s comments “come as the World Bank plans to use this week’s meeting to highlight its concerns over rising food prices”.

Resident Adam Mustafa says recent floods near Kemisse in Ethiopia's Amhara region are the worst in his lifetime. Photo: © Ben Parker/IRIN

Resident Adam Mustafa says recent floods near Kemisse in Ethiopia's Amhara region are the worst in his lifetime. Photo: Ben Parker/IRIN

The report also drew a link between Rogers’ comments and the World Bank’s report, released last month, about the growth of large-scale farmland purchases in the developing world – which the Bank said was alright if managed. Rogers says that politicians who blamed speculative investors for making money out of higher commodity prices would simply deter much-needed investment. “Agricultural prices are going to go up a great deal because of terrible fundamentals over the past 30 years. We even have a shortage of farmers. Politicians will blame the evil speculators, but they had better kiss investors’ feet. Without someone investing and driving up prices, we will soon have no food at any price.”

Meanwhile, The Guardian reports that accurate and timely information on the food stocks held by major grain exporters and importers, or “food intelligence”, could help prevent the sudden and abnormal price hikes that threaten food security. This was one of the proposals put forward at a day-long meeting of the inter-governmental groups (IGGs) on grains and rice at the UN Food and Agriculture Organization (FAO), held in Rome on 24 September.

A rice farmer in Bangladesh. Rice is a staple part of the Bangladeshi diet. Photo: © Matt Crook/IRIN

A rice farmer in Bangladesh. Rice is a staple part of the Bangladeshi diet. Photo: Matt Crook/IRIN

“We need better information on the food stocks, especially from the CIS countries [Commonwealth of Independent States – a regional organisation comprising the Russian Federation and other members of the former Soviet Union] and many other major exporters, such as China and India, and importers of grains,” said Abdolreza Abbassian, an economist who is also secretary of the IGG on grains. “The big drive of commodity price volatility, and of price spikes, is storage volumes, on which we have terribly unreliable and incomplete statistics,” said food security expert Chris Barrett.

“If FAO could develop credible, timely reports on global storage volumes – at least commercially and publicly held – that would help more than … earlier production reports,” he commented. FAO produces reports on crop estimates every two months. “It’s probably too much to ask for reasonable estimates of residential consumer holdings, which can cumulatively have significant effects on the market, as may well have been part of the story in … 2008,” said Barrett, who teaches applied economics at Cornell University in the US.

Abbassian suggested that the FAO should report every month on the area planted in major grain producing and importing countries, rather than every two months. Maximo Torero, head of the markets, trade and institutions division at the International Food Policy Research Institute (IFPRI), a US-based policy thinktank, said an independent “strong, research-based ‘intelligence unit’ was needed to provide information on stocks around the world”.

Wheat sends food prices up, US agriculture exports to be $107.5 bn

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Surging wheat prices drove international food prices up 5% last month in the biggest month-on-month increase since November 2009, the Food and Agriculture Organization (FAO) has announced. The FAO Food Price Index (FFPI) averaged 176 points in August, up nearly nine points from July, FAO said in its latest update on the global cereals supply and demand situation. The 5% increase brought the Index up to its highest level since September 2008, but still 38% down from its peak in June 2008.

FAO Food Price Index

FAO Food Price Index, 2010 September

The FFPI surge mainly reflected the sudden sharp rise in international wheat prices following drought in the Russian Federation and the country’s subsequent restrictions on wheat sales. But other drivers included higher sugar and oilseed prices. FAO’s update said that the forecast for world cereal production in 2010 has been lowered by 41 million tonnes to 2,238 million tonnes from 2,279 million tonnes reported in June.

However, even at this lower level, world cereal output in 2010 would be the third highest on record and above the five-year average. Among the major cereals, wheat accounted for most of the cut, reflecting mainly smaller crops in the leading producers in the CIS due to adverse weather. Under the present forecast world cereal utilization would slightly exceed production in 2010-11. This would trigger a 2% contraction in world ending stocks from their 8-year-high opening levels and to a small decline in world cereal stocks-to-use ratio. At 23%, however, the ratio would still remain well above the 19.5% low witnessed in the 2007-08 food crisis period.

A further cut in the forecast for 2010 world wheat production since FAO’s last update on 4 August puts this year’s wheat crop at 646 million tonnes, down 5% from 2009 but still the third highest ever. The latest revision reflects a further cut in the estimate of this year’s harvest in the Russian Federation to 43 million tonnes (from 48 million tonnes in August) more than offsetting higher forecasts for crops in a number of other countries including the United States and China.

FAO Food Commodity Price Index, 2010 September

FAO Food Commodity Price Index, 2010 September

The forecast for world wheat ending stocks in 2011 was also lowered, to 181 million tonnes, down 9% from their 8-year high opening level. The stock-to-use ratio for wheat in 20010-11 was projected at 27%, down 3% from the previous season but still 5% higher than the 30-year low in 2007-08.

World production of coarse grains was forecast to reach 1 125 million tonnes, down 6 million tonnes from the previous forecast in June but up marginally from 2009 and the second highest on record. Maize production was heading towards an all-time high of 845 million tonnes, with expectation of record crops in China and in the United States. But world barley production was forecast to fall by 22% to a 30-year low of only 129 million tonnes in 2010, driven mostly by a sharp cut in production in the CIS and in the EU as a result of poor weather.

The forecast for global rice production in 2010 was also revised downward and now stands at 467 million tonnes, 5 million tonnes lower than the June 2010 forecast but still 3% more than in 2009 and a  historical record. Much of the revision was the consequence of Pakistan’s floods but it also stemmed from lower expectations in China, Egypt, India, Laos and the Philippines. The recent disturbances in  world cereal markets will be examined by delegates meeting at a special one-day session of FAO’s Intergovernmental Group on Grains and Intergovernmental Group on Rice convened for 24 September at FAO headquarters in Rome.

World Food Day 2010

16 October is World Food Day 2010

Industrial agriculture news sources such as Agweb are reporting the United States Department of Agriculture’s (USDA) agriculture products exports for financial year 2010, which have just been released. Increased exports of grain and feed at higher values along with increased livestock, poultry, and dairy product exports all helped to push up the forecast for US ag exports in fiscal year (FY) 2010. USDA has said the value of US ag exports for FY 2010 will be US$107.5 billion, up US$3 billion from their May forecast. And their first look at FY 2011 has the value of those shipments projected at US$113 billion, up US$5.5 billion from FY 2010 forecast.

On the import side, USDA now puts FY 2010 imports at a value of US$77 billion, up US$500 million from their May forecast. For FY 2011, USDA sees the value of US ag imports rising to US$81.5 billion. USDA now expects a slightly larger trade surplus for US agriculture for FY 2010 – US$30.5 billion, up US$2.5 billion from May, and for FY 2011 they expect the trade surplus will be US$31.5 billion. Analysts for USDA’s Economic Research Service (ERS) also included this caution:

“The three major threats to world growth in 2011 are the EU economy tanking due to their debt situation, the U.S. economy going into a recession, and a continuing widening of the Chinese trade surplus. A major near-term risk to the world recovery is a potential spillover of the crisis brought on by high government debt in Greece, Portugal, Spain, Italy, and Ireland.

“The consensus forecast for 2010 and 2011 is of continuing recovery in both the developed and developing economies, with a few regional rough patches. The case for moderate world growth for the rest of 2010 and solid growth for 2011 is based on low interest rates, increasing trade flows, and the willingness of central banks to keep financial assets on current balance sheets, encouraging easier private credit and strong growth in corporate profits. At this time, that scenario is much more likely than any or all of the downside scenarios.”