May 20, 2011


Global grain prices may rise up to 35%



World grain prices could soar to 35% from already historically-high levels in 2011-12.


Analyst Charles Robertson said growing demand, especially for corn, is likely to eat into already-low world stocks, even without a feared cut to yields from poor weather.


"We can easily imagine a 35% rise in corn prices and a 25% rise in wheat prices from August 2011 to July 2012. The food-price threat for 2011-12 is very significant, but may disappear in August," reported Renaissance Capital.


Grain prices have surged in recent weeks, with corn hitting a record high last month, as weather problems in the US and the most severe European drought in decades sparked fears of poor crops from the world's top exporters.


Markets are jittery after a succession of natural disasters in 2010 sapped output and left users eating into stock levels. Corn inventories in particular are now near historically-low levels and forecasters fear even a record world crop wouldn't be enough to replenish supplies.


Using a range of models based on historical supply responses, Robertson predicts corn output is most likely to rise by about 15 million tonnes in 2011-12 to 840 million tonnes, drawing stocks down to a mere 6.3 weeks of consumption.


"The global corn harvest may well fail to match demand, even if there is no severe drought in the EU, China or the US, suggesting stocks could fall further in 2011-12," he said.


In wheat, an average scenario would see output rise by 2.5 million tonnes to 650 million tonnes, leaving stocks flat and boosting prices by 10%. In a more negative scenario, output would fall and stocks would decline to 148 million tonnes, pushing up prices 30%.

Video >

Follow Us