By Theo Frei: Subscribe to Theo's RSS feed
September 3, 2010 11:42 PM EDT
A day after Russian Prime Minister Vladimir Putin said that the country's ban on grain exports will remain in place until the end of 2011, the United Nations' food agency (FAO) announced an international meeting of policy makers to discuss the recent rise in global food prices.
The UN Food and Agriculture Organization said Friday that the meeting will take place on September 24.
"The purpose of holding the meeting is for exporting and importing countries to engage in constructive discussions on appropriate reactions to the current market situation," the UN said.
The price of grains and especially wheat remains high, after the wheat-price spiked in July in reaction to the worst drought in a century in Russia. The price for delivery in Europe rose to a new high of about 230 euro per ton, as the quality of the German wheat harvest was reduced by several weeks of the strongest rainfalls in decades.
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In light of Russia's role as a major exporter of grain, some countries which heavily rely on Russian wheat such as Egypt will now try to buy from other sources. Together with speculative demand and other agents seeking to buy available supplies on the U.S. market, the largest supply worldwide, the price on the spot-market, investors are driving up the price.
The situation may not be as serious as it would seem despite the damage done to the harvest of several large producers and the 50 percent price increase in just two months.
The lowered wheat output is only slightly lower than projected onsumption, according to the August 26 Grain Market Report by the International Grain Council(IGC). The expected output was lowered by 8 million tons from last month's forecast, from 651 million tons to 644 million tons. The consumption remains about the same with 657 million tons. The large global reserves of around 197 million tons of wheat serve as an ample buffer and are expected to slightly shrink by 13 million tons.
The effects of the lower harvest of wheat is also being mitigated by a stable output of all grains combined, with other grains such as barley or rye able to substitute wheat for some uses. The IGC forecasts total grain output to be at 1745 million tons, compared to the 1753 million ton estimate one month earlier. In comparison, the total grains harvest preceding the food crisis of 2008 was significantly lower at 1697 million tons for the 2007/08 season, and only 1588 million tons for the 2006/07 season.
While there is no serious situation on the supply side, the steep increase in grain prices on the world markets is filtering through to some extent and affecting food prices. FAO maintains a global food price index, which consists of 55 food commodities. The index hit its highest level for two years in August, with the higher wheat prices being the main driver, according to this week's report. The higher prices for grain can also impact products such as bread and beer. The prices of dairy products, eggs and meat can also rise when the grains used for feeding significantly increase in price.
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