Grain Market Review: World Grains

by Teresa Acklin
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Good 1996-97 harvests key to avoiding global wheat and coarse grains shortages.

   This season's tight wheat and coarse grains stocks situation is “not one of crisis,” according to a recent study by the International Grains Council. Nonetheless, maintaining market stability and assuring world food security will depend more than usual on production next season.

   In conjunction with a meeting with the Food Aid Committee, the Council recently analyzed the world grain market outlook. The focus included the current tight supply-demand situation for both wheat and coarse grains, the sharp reduction in stocks held by exporting countries and “the high level of international grain prices.”

   Supplies of wheat and coarse grains are exceptionally tight this season. At a projected total of 181 million tonnes, wheat and coarse grain ending stocks would be the smallest since 1974, when the total was 171.8 million.

   Although the current situation is similar to conditions two decades ago, the Council pointed out that many factors had changed in the interim to prevent shortages and enhance food security. Privatization and decentralization of grain marketing in many countries mean producers today are free to respond to higher prices by increasing planted area, the Council said. Improved transport, distribution and information systems also have advanced grain marketing efficiencies compared with 20 years ago.

   Even so, the projected ending stocks represent only a 48-day supply of grain, based on 1995-96 consumption levels. That tightness leaves little margin for problems to develop; the I.G.C. noted that adverse weather or shortages of essential inputs, such as fuel or fertilizer, in important grain-growing areas could curtail output and limit the rebuilding of stocks.

   For wheat, the I.G.C. earlier this year issued a tentative projection for 1996-97 world wheat production of 553 million tonnes. That level would be 3.8% higher than the 533 million tonnes estimated for 1995-96 and the largest since the outturn of 558.1 million in 1993-94. According to the I.G.C., that level should “cover consumption and permit a small rebuilding of stocks.”

   Among the regions where preliminary prospects point to wheat crop gains were: western Europe, 91.9 million tonnes, against 88.1 million in 1995; former Soviet Union, 66 million, against 58.2 million; North and Central America, 94.7 million, against 88.6 million; South America, 15.5 million, against 12.3 million; and Africa, 16 million, against 12.8 million.

   As for coarse grains, the Council said “the adequacy of total grain supplies will depend to a large extent on a recovery in output of feed grains in the United States.” U.S. maize supplies account for nearly 84% of world maize trade. The I.G.C. noted that developments in U.S. domestic use were important because two to three times more U.S. maize was consumed domestically than was exported.

   Advances in maize prices have tended to curb profitability in the U.S. livestock sector, particularly because wheat prices also have been high, discouraging feed substitution. But even though U.S. animal numbers have been reduced, the cutback has not been as large as many observers anticipated given the level of grain prices; the I.G.C. indicated strong export demand for U.S. meat products had helped to offset increased feed costs.

   U.S. maize supplies through mid-September, when widespread harvesting will begin, are expected to remain extraordinarily tight. The situation underscores the need for a large 1996-97 U.S. maize crop, the I.G.C. observed.

   U.S. producers will have no acreage reduction requirements, and high prices should encourage more plantings. But producers also will consider prices for competing crops such as sorghum, spring wheat and soybeans in making planting decisions.