October 10, 2012

Global food prices will likely be kept in check by the lower grain demand for animal feed and biofuel production.

There is some evidence of demand rationing for wheat in animal feed and a fall in the use of corn in biofuels, Abdolreza Abbassian, secretary of the United Nations' Food and Agriculture Organization's (FAO) Intergovernmental Group on Grains, told the Wall Street Journal on Tuesday (Oct 9).

These are positive signs that can help control prices, even though overall global grain stocks are tight, Abbassian said.

Ethanol production in the US averaged 785,000 barrels a day in the week ended September 28, down from 809,000 barrels a day in the previous week and 834,000 barrels a day in the week ended September 14, according to the US Energy Information Administration.

According to FAO estimates, global wheat consumption is expected to fall to around 687 million tonnes in the organisation's 2012-13 aggregate year, from 692 million tonnes in 2011-12.

Global wheat trade is expected to fall 6.5% to 135.5 million tonnes in 2012-13.

Corn on a delivered basis in East Asia is now around US$40/tonne cheaper than wheat, traders said.