World foodgrain prices are likely to remain on the higher side through the rest of the current calendar year due to unfavourable weather, says the latest Rabobank report.
Russia, the world’s lowest-cost and third largest exporter in 2009, has banned export of all grain till December 31 following a massive crop damage due to drought. It seems likely that Ukraine and Kazakhstan’s grain exports will be restricted by quotas or will shift to specific regional trade in the 2010-11 season. Following earlier production setbacks in Canada and the European Union, world wheat demand will now have to be met by the United States, Australia and Argentina. Production setbacks in either of the latter two during the southern hemisphere spring would be extremely bullish for prices, said the report.
As a consequence, the US department of agriculture cut its wheat production estimate for 2010-11 by 16 million tonnes from its July estimate to 645.7 mt. Rabobank lowered its world wheat production forecast for the 2010-11 season by a further five million tonnes to 639 mt.
“India, therefore, should allow foodgrain exports now to cash in on higher global prices. Since the next season is also likely to remain favourable, the country should open exports,” said Vijay Setia, president of the All India Rice Exporters Association.
Foodgrain prices have started rising globally. In India, they have risen by 10 per cent, despite adequate availability. Food Corporation of India recently announced total grain storage at 60 mt, sufficient to meet the domestic demand until the next harvest.
“Prices are likely to go up further, at least by 10-15 per cent ,till December. But, if the government allows exports, as is expected by early September, foodgrain prices will rise sharply,” said V K Chaturvedi, managing director of Usher Agro, one of India’s largest grain processing companies.
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The Rabobank report said the major risks for the US and world fundamentals in the corn market “remain skewed to the upside, despite strong price performance in recent months. We accept prices may come under speculative profit-taking and seasonal harvest pressure over the next six to eight weeks”.
| PRICEY FOOD Price forecast | ||||||
| Commodity | Unit | 4Q’09 | 1Q’10 | 2Q’10 | 3Q’10 | 4Q’10 |
| Wheat | US cents/bu | 523 | 496 | 467 | 650 | 700 |
| Corn | US cents/bu | 386 | 371 | 354 | 385 | 400 |
| Sugar | US cents/lb | 24 | 25 | 15.5 | 17.5 | 16.5 |
| Soybean | US cents/bu | 1,003 | 956 | 957 | 1,000 | 970 |
| Soyoil | US cents/lb | 38 | 39 | 38.1 | 38 | 37 |
| Soymeal | US $/tonne | 306 | 279 | 280 | 295 | 285 |
| Source: Rabobank, bu = bushel (1 bushel = 0.021772 tonne), lb = pound (1 lb = 0.4536 kg) | ||||||
Maize prices have staged an impressive 25 per cent rally since June 30 to 425 cents/bu, its second highest level of 2010, falling only marginally short of the calendar-year high set on January 4.
“Pressure points on prices exist only in case of wheat, due to the crop loss in Russia resulting in lower global supplies, and to a certain extent in oilseeds. Higher existing stocks of foodgrain, rice and wheat can effectively counter the shortages. Therefore, prices would remain stable in the next four months. The present shortfalls and use of stocks will probably ensure that prices do not come down, which would have been the case if production was normal,” said Madan Sabnavis, chief economist, C Ratings.