Controlling Food Prices in Turbulent Times – An Agenda for South Asia

Session No. 29 - WTO Forum 2011 Geneva - 20 September 2011;

Rice to Reach 2008 Price by Dec 2011, Maize in Deficit, Wheat Looks Up as Thai Govt Stocks Up – News Report dated 29 August 2011

Global food costs will remain elevated because a potential slowdown in economic growth is unlikely to hurt demand and weather-related disruptions to supply could “ratchet up prices.

Combined global inventories of wheat, corn and rice will drop 2.5 percent to a four-year low as farmers fail to keep pace with demand, U.S. Department of Agriculture data shows.

“The food complex is relatively recession-resistant,” said Sunny Verghese, chief executive officer of Olam, one of the world’s three biggest rice suppliers. “Because of the growing imbalance in the demand and supply of food, and because the stocks-to-consumption ratios are low, if there’s any weather-related disruption, it can ratchet up prices.”

Global corn stockpiles were forecast by the USDA to plunge in the 2011-2012 season to 114.5 million metric tons. That would be the lowest level in five years as hot weather in the U.S., the world’s largest grower and exporter, curbs yields and demand climbs for the grain used in livestock feeds and ethanol production.

The corn market may have an 18.7 million-ton deficit in the 2011-2012 season, more than three times the 6 million tonne forecast by the USDA, according to the Rabobank analysts, who correctly predicted that yield concerns in the U.S. could push soybean prices above $14 a bushel.

The U.S. corn-crop condition deteriorated in the past week after hot weather hurt crops. About 54 percent of the crop was in good to excellent conditions as of Aug. 28, down from 57 percent a week earlier and 70 percent a year earlier, the USDA said in a report on 28 August 2011.

Rice prices will remain firm as the government of Thailand, the world’s largest shipper, buys the grain at above market prices, locking up some of the nation’s exportable surplus in state warehouses, Verghese said.

The export price of 100 percent grade-B Thai rice, the regional benchmark, may rally to $750 per tonne by Dec. 31, according to the median estimate in a News survey of seven exporters, traders and millers conducted last week. That forecast is $50 higher than the median estimate in a separate survey undertaken in the first half of this month.

The grain surged to a record $1,038 a tonne on May 21, 2008, a month after the Chicago rice futures advanced to an all-time high, as exporters including India restricted shipments.

Thailand’s buying policy will encourage farmers to boost rice planting, adding to global output and forcing Prime Minister Yingluck Shinawatra to sell the excess supply after six months, Verghese said.