May 8, 2008

 

World grain prices to fall in second half of 2008 on bumper harvests

 

 

World grain prices are expected to weaken in the second half of this year as major grain exporting countries such as the US, Brazil, Australia and Canada appear to reap bumper harvests, industry analysts said.

 

Analysts expect 2008 to be a year of consolidation of world grain stocks, which have dwindled down to decades-low levels for most grains, according to Pransenjit Bhattacharya of Dow Jones.

 

Industry observers pointed out that if the sowing and harvesting of major grains crops around the world continue without a hitch, prices are likely to calm down by the end of this year.

 

Bhattacharya noted that most analysts are betting on a rise in wheat and soy acreage in the US to drive the fall in food prices later this year.

 

All major wheat producers such as Canada, the US and Australia are projected to harvest large crops.

 

According to USDA on March 31, the US is likely to sow wheat on 63.8 million acres in the 2008-09 crop year, a 6-percent increase from the previous year.

 

Canada's wheat acreage is likely to rise 16 percent on-year to 25.1 million acres, the Statistics Canada reported.

 

Increase of wheat acreage is predicted to be most dramatic in Australia, which is seen to harvest 27 million tonnes this year, more than double of last year's drought-ravaged crop.

 

Meanwhile, soy is also forecast to gain acreage globally, as high soy prices entice farmers to plant more of the crop.

 

According to the USDA, soy acreage is likely to rise18 percent on-year in the US to 74.8 million acres.

 

Among other major soy producers, Brazil will export 27.3 million tonnes of soy in 2008-09, up 14 percent on-year, according to the Brazilian Vegetable Oils Industry Association.

 

However, Argentina's soy output may remain close to last year's level, at 47 million-47.5 million tons.

 

While wheat and soy prices are expected to decline in the second half of the year due to a rise in acreage worldwide, corn prices may soar to unprecedented highs as acreage is likely to shrink in the US, the world's largest corn producer and exporter, Bhattacharya said.