High global grain stocks to inhibit grain price recovery

Grain prices will not recover until 2011 due to huge world grain stocks, according to an analyst.

Any real improvement in grain prices is likely to come only at 2011, said SAC business consultant, Julian Bell.

The surge in global production last year following the high spike in prices in 2008 had resulted in a huge increase in world grain stocks which were now at an eight-year high.

However, a relatively small fall in stocks could trigger a recovery, said Bell.

World demand for grain had increased by 166 million tonnes over the past five years - half of which was due to the demand for ethanol production in the US.

The weakness of the sterling had added GBP30 (US$48.7) per tonne to the UK wheat price and exchange rates would continue to play a crucial role in determining grain prices, he added.

Demand for wheat from the two new ethanol plants in the north of England, which between them would absorb 2.5 million tonnes of wheat this year, would also stimulate the market, he said.