Concern on grain supply tightness remains for I.G.C.

by Morton Sosland
Share This:

LONDON — After taking into account larger grain supplies this season than earlier forecast and the impact of the global economic slowdown, the annual meeting of the International Grains Council held this month in London was still marked by concerns over tightness in the short- and medium-term outlook for supplies. Persistent worries on this score were in the face of world availabilities turning out to be significantly larger than originally projected for 2008-09, primarily as the result of large outturns in the Black Sea region and the European Union.

Primary influences as the Council considered prospects were likely production and consumption trends. It pointed to the likelihood of a decrease in wheat plantings and a smaller crop in 2009-10 in the Northern Hemisphere, even though weather conditions have been generally favorable. Further, the likely crop decrease was not seen as causing a significant fall in ending stocks, in the wake of a climb of 24 million tonnes to 307 million as total grain holdings at the close of 2008-09.

Looking beyond 2009-10, the I.G.C. said, "A major shift in feed use from maize and other coarse grains to wheat could result in stocks again declining. The continuing rise in industrial use, especially in the U.S. ethanol industry, if at a slower pace than hitherto, is projected also to keep stocks of maize tight."

World trade in grains was expected to decrease by 8 million tonnes in 2008-09 to a total of 230 million.

"A marked upturn in wheat was more than offset by sharp falls in maize and sorghum after the previous year’s unusually big purchases by the E.U.," the Council indicated.

Council members examined the global grains situation on the basis of detailed Secretariat presentations. Attention was directed to sharp falls in export prices and ocean freight rates in the past six months.

"Declines in grain prices coincided with an improving supply outlook, but day-to-day price movements were mostly dictated by global financial and economic developments, other commodities, energy markets and currency factors," the Council concluded. "For many buyers, the financial crisis has made it difficult to arrange the necessary credits."

Grain production in 2008-09 was estimated at a new record of 1,769 million tonnes, boosted mainly by a 12% gain in wheat production. Consumption also was forecast to rise, with significant gains in both industrial use and feeding. Ethanol use was projected at 126 million tonnes, up 29 million from the previous crop year, with maize accounting for 117 million.

Council members reviewed the Secretariat’s "program of economic work."

The Council agreed in principle that the Grains Trade Convention 1995, as a part of the International Grains Agreement, should be extended for another two years beyond its scheduled expiration as of June 30, 2009. In line with an earlier accord reached last June, the Council formally expanded the Council’s coverage to include rice.

Touching on the current rice situation, the Council noted that output was likely to increase slightly in 2009, "but that market availabilities could remain tight." World rice trade in 2009 was likely to fall by 1% to 28.9 million tonnes due to a sharp cut in imports by the Philippines. Rice export prices have fallen sharply in recent months, "but remained at a significant premium to wheat."

An informal roundtable discussion focused on recent developments in world grain futures, particularly increased volatility, and whether lessons are to be learned from recent experience. According to the I.G.C., panelists exchanged views on the impact of expanded speculative flows and recent proposals to increase transparency in U.S. markets. They also wondered to what extent, if any, higher costs were affecting participation of commercial operators in futures markets.

Futures panelists were Lifeng Qu, executive vice-president, Dalian Commodity Exchange, China; Rod Gravelet-Blondin, senior general manager, JSE Limited, South Africa; Ian Dudden, director, Commodity Derivatives, Liffe, U.K., and Jeffry Kuijpers, associate director, sales and marketing, CME Group. U.K.

Presiding at the meeting as current I.G.C. chairman was Itumeleng Winston Makahanyane of South Africa. The Council approved the appointment of Matthew Koval of Australia as vice-chairman in 2008-09.

It also agreed that the next I.G.C. Grains Conference will be held in London June 9, 2009.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.



The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.