October 1, 2008

World grain prices to be held above cost of production

Traders are holding world grain prices above the cost of production to ensure tonnage for next year.

Markets are nervous that if prices drop farmers will not continue to produce surplus grain.

Independent grains analyst Malcolm Bartholomeus says current prices could not fall too much further without falling below the cost of production.

Growers are showing resilience around the world and if they are not going to have a profitable price then production will be pulled back, he said.

Production really cannot be pulled back too far, so there is going to be some underlying support for grain prices, he added.