April 15, 2011

Global grain markets to strengthen further

Despite a near-record world crop, global grain markets are forecast to stay bullish in the upcoming season as production is not able to fulfil a new high in demand, analysts said.

While world grain demand is expected to rise by 44 million tonnes to 1.795 billion tonnes in 2011-12, world production is expected to fall three million tonnes short of the world record in 2009 even in the presence of good weather, said Daniel Basse, president of US grains analyst AgResource.

Global planting area will need to increase by 11.6 million hectares to 4987.4 million hectares in 2011 in order to boost production enough to build up stocks, he said.

"A very bullish landscape still exists in grain markets," Basse said. "We need another 52 million tonnes this year to build stocks and keep up with consumption," he added.

International grain prices have soared since last summer, reaching record highs in corn markets this year, as a succession of weather problems in key producers have failed to dent growing global demand.

Global food prices also hit record highs in February, according to the UN's food body, as gains in other markets like fats and sugar have pushed up the cost of staples the world over. The World Bank estimates 44 million people have been pushed into poverty by the rises.

Yet Basse noted that despite the rising cost of grains, meat consumption has not been dented as it has been in the past.

"Slaughter rates have not gone up in line with higher grain prices," he said. "As grain prices have rallied, we in the US have seen dramatic increases in meat prices, creating an economic incentive to keep producing meat."