Dwindling stocks

Dwindling stocks

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FAO predicts that foodgrain prices will rise for another 10 years. For most cereals supplies are much tighter than in recent years, while demand is rising for food as well as feed and industrial use. Stocks, which were already low at the start of the season, are likely to remain equally low because global cereal production may only be sufficient to meet expected world utilization. Although the world cereal production in 2007-08 is estimated to have gone up by 5 per cent, most of it is attributed to a sharp increase in maize, the main foodgrain used for biofuel.

Wheat

Closing stock (2007-08) 142.6 mln tonnes; slightly down from last year; Current price (Feb) US $449/tonne; 115% up

Trends
In February 2008, wheat prices rose by 15 per cent due to record low stocks and poor winter-wheat crop prospects in southwest us and northern China.Between December 2005 and December 2007, wheat prices jumped from us $167 per tonne to us $381 per tonne.

The current global wheat stocks are estimated the lowest since 1982--it is expected to fall to 110.4 million tonnes by May 31, according to the us Department of Agriculture. According to fao's latest forecast, world wheat production in 2007-08 stands at 602 million tonnes, significantly below expectations and just 1 per cent more than the previous year. For 2008-09, the us Department of Agriculture forecast world wheat production to increase by 4 per cent to a near-record 617 million tonnes. But higher production will be partly offset by already low stocks.

Price pushers
The main reason was the drought in Australia, the second largest supplier of wheat. Australia harvests nearly 25 million tonnes of wheat in a good year but in 2006 the production was only 9.8 million tonnes. Exports from other wheat suppliers like Canada, eu, Turkey and Syria also saw a dip due to unfavourable climatic conditions. High demand for wheat for biofuel and feed further depleted the global supply.

Across the world
India buys wheat for the second consecutive year. In 2007-08, India imported 0.68 million tonnes of wheat; in 2006-07 it had imported 5.8 million tonnes. Estimates suggest imports will not be required for 2008-09, says T Haque, chairperson of the Commission for Agriculture Costs and Prices. However, there are speculations that India may have to import 3 million tonnes of wheat to shore up its stocks.

fao forecast slightly higher imports of wheat for China, where government procurement under the minimum purchase programme this year is down by 30 per cent from the previous season.

Italy had to import cheap durum.

Rice

Closing stock 107.6 million tonnes; slightly up; Current price US $500 per tonne; nearly twofold

Trends
The price of rice crossed the us $500-a-tonne mark in the beginning of March 2008, reaching the highest in the past 20 years. According to fao, demand for rice during 2007-08 is likely to be 429.2 million tonnes against a production of 429.3 million tonnes. Ending stocks are projected to be 107.6 million tonnes, up by 0.7 per cent over the previous season. Rice production in 2007-08 is estimated to increase by a mere 0.6 million tonnes.

Price pushers
Heavy demand from the Philippines, the largest importer of rice, and African countries. Supply shortage in Pakistan, where electricity crunch has hampered mills from functioning at full capacity. Ban on export by India and China. In March 2008, India banned export of the non-basmati variety at less than us $650 per tonne. The move was to compensate for wheat shortage in procurement for the public distribution system. However, India partially relaxed the ban for Madagascar, Mauritius, Comoros Island and cyclone-hit Bangladesh. China banned exports to ensure domestic availability.

Across the world
Vietnam sold broken rice to the Philippines at a record us $750 per tonne.

India allowed export of 3.2 million tonnes of non-basmati rice in the first half of 2007-08, but since October no new contracts have been signed.

In Thailand, rice and wheat prices went up by 30-40 per cent in the past three months. Exporters in the country are hoarding rice and wheat in anticipation of a further rise in prices.

Pakistan saw a 60 per cent jump in price in the past few months.

Maize

Closing stock 133 million tonnes, 14% up; Current price US $220 per tonne, up by 24%

Trends
Between December 2005 and December 2007, the price increased from us $103 a tonne to us $180 a tonne. Despite a record 9 per cent production growth in coarse grain -- the bulk of which came from maize -- in 2007-08, the maize price peaked at a 10-year high of us $220 per tonne in February 2007. It has now breached the us $230 per tonne mark.

Price pushers
Strong demand for biofuels coupled with a steady growth in demand for animal feed, particularly in Europe. The us supplies more than 60 per cent of world maize exports. But in 2007-08, a quarter of the us maize--that is 11 per cent of the global maize crop--went into biofuel production. us , the largest market for ethanol, used almost 54 million tonnes of maize for biofuel in 2006-07 and is estimated to have used 81.3 million tonnes in 2007-08, according to fao.

Oilseeds

Trends
In the past one-and-a-half years, soya bean and palm oil rates have seen a sharp increase. In fact, the rise in the prices of edible oils was the sharpest among all food items, and is likely to continue. The price of palm oil rose from us $350 per tonne to us $1,250 per tonne in the past one year. Soya bean price has increased to us $499.43 per tonne in a year.

According to fao , increase in oilseed production in 2007-08 is less than 2 per cent over the previous year. Palm, palm kernel, copra, rapeseed and groundnut oil production is likely to see a sizeable increase, while a fall is anticipated for soya bean and sunflower seed oil.

Price pushers
Biofuel accounted for almost half the increase in the worldwide demand for vegetable oils last year, according to Oil World, a forecasting service in Hamburg, Germany. Rising consumer demand in China and India. Floods in Malaysia, one of the big producers of palm oil, led to a shortfall in production. Palm oil is being accepted as a healthier option to trans fats.

Across the world
When a store in Chongqing, China, announced a cooking oil promotion in November 2007, a stampede in the store left three dead and 31 injured. Last year, China was the world's biggest palm oil importer.

Malaysia cleared tropical forests to make way for palm plantation to meet the demands of the European nations for biofuel.

Dairy and poultry

Trends
An increase in per capita income has led to a greater demand for meat and milk products worldwide, inducing a price rise. India and China have seen a significant shift in this regard. With increasing consumption of livestock products more grain is being diverted as feed. Today 200-250 million tonnes more grain is being fed to livestock than 20 years ago, according to fao. It forecast an increase in production of beef and sheep and goat meat owing to a growing demand in developing countries. Developed countries will witness a fall in the meat production. Asia, especially China and India, is estimated to have witnessed maximum growth in milk production. According to the us Department of Agriculture, milk prices jumped 12 per cent in 2007 and production is expected to rise by 2.7 per cent in 2008.

Across the world
In India, milk and egg prices have risen by about 20 per cent in a year.

In China in 1985, a person on an average ate 20 kg of meat annually. Now he consumes almost 50 kg.

eu expects milk demand to rise in 2008. The European Commission predicts the need for an additional supply of about 8 million tonnes of milk in eu by 2014.
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