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Global record low grain stocks may engender food price crisis
Published in The Saudi Gazette on 25 - 08 - 2012

JEDDAH/LONDON – Devastating droughts in the United States and Russia are set to drive global stocks of maize (corn) and wheat to multi-year lows, the International Grains Council (IGC) said in its August report Thursday, heightening fears of a food price crisis on a scale last seen in 2008.
Wheat output from key global supplier Russia is now seen slipping below levels in 2010 when drought destroyed crops and sparked a surprise ban on exports.
The IGC said stocks of maize would fall to a nine-year low of 120 million tons with the smaller global crop to result in a drop in consumption in 2012/13 for the first time in nearly 20 years.
“Exportable (maize) supplies in the US and Ukraine had tightened and, while the next crops in Brazil, Argentina and South Africa may be large, harvests are still several months away,” the inter-governmental body said.
The US Midwest has suffered its worst drought in 56 years and the IGC cut its forecast of the US maize crop by 25 million tons to 275 million tons, bringing it broadly into line with the current US Department of Agriculture estimate.
Earlier this month, USDA cut its forecast to 274 million, a six-year low.
Maize prices rose to a record high earlier this month and wheat prices have also climbed sharply.
South Korean President Lee Myung-bak on Thursday sent a letter to G20 members calling on them to step up joint action to stabilize international grain prices.
Lee suggested five measures including the proposal that the Group of 20 countries should work together to ease export controls on food items and impose more regulation over market speculation in raw materials, the presidential office said.
A mix of high oil prices, growing use of biofuels, speculation on commodity markets and export restrictions pushed up prices of food in 2007/08, sparking violent protests in countries including Egypt, Cameroon and Haiti.
The IGC cut global maize production in 2012/13 by 26 million tons to 838 million tons, well below the prior season's 875 million. Global maize consumption was also cut sharply by 25 million tons to 853 million, now also below the prior season.
Wheat supplies are also tightening as the IGC cut its forecast for Russia's crop by 4 million tons to 41 million, now below the amount produced during the last drought in 2010, which led to Russia imposing a ban on exports.
The deteriorating outlook for Russia's grain crops has set off a wave of speculation that it could impose an export ban as it did in 2010. Russia exported 27 million tons of grain in its 2011/2012 season, of which 21 million tons was wheat.
SovEcon agricultural analysts cut Russia's wheat crop forecast to an even lower 39 million tons on Thursday after yields deteriorated in Siberia and Urals regions because of drought.
“World stocks (of wheat) are forecast to contract by 17 million tons to (a 4-year low of) 180 million. A projected fall in the major exporters is led by the Black Sea region,” the IGC said.
Global wheat production in 2012/13 was seen at 662 million tons, down 3 million from its previous estimate and well below the prior season's 696 million.
Despite some initial easing, global grains and oilseeds values were firm during August, underpinned by continued worries about deteriorating US maize (corn) and soyabeans production prospects as well as shrinking crop expectations in the Black Sea region.
Recovering from mid-month declines, the IGC Grains and Oilseeds Index (GOI) showed a net gain of 2 percent since the last Market Report, but remained below July's all-time high.
US maize and soyabeans production outlooks were the main focus of market activity. Rains were considered too late for maize, with output still expected to decline steeply year-on-year (y/y), while precipitation was only considered to have stabilized the soyabean crop's condition at best. While prices were pressured by profit taking at times, the GOI sub-Indices for both showed month-on-month (m/m) net increases, rising by 1 percent and 3 percent, respectively.
Global wheat values continued to respond to strength in row crops, but were also supported by a worsening outlook for Black Sea and Australian wheat. Black Sea exporters captured a high proportion of recent demand, but availabilities were soon expected to become short. However, good prospects for spring wheat harvests in North America capped overall price gains, the GOI sub-Index virtually unchanged m/m.
The IGC's daily rice index advanced marginally in the past month, although markets were mixed, with values easing in Thailand and rising elsewhere, including in Vietnam. – SG/Reuters

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