The global prices of wheat, rice and maize have seen a declining trend during the July-September quarter on better output prospects, large exportable supplies and softening crude oil prices. The apprehension of an economic slowdown in the US is expected to further weaken the demand for all commodities.
The United Nations Food and Agriculture Organization (FAO) estimates the world’s cereal production to increase by 2.8 per cent in 2008 to reach a record level of 2.18 billion tonnes. The bulk of the increase is expected in wheat, which is forecast at 658 million tonnes (mt), representing an 8.3 per cent increase from 2007. Rice production is expected to rise by over 2 per cent to 444 mt.
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“Farmers continue to expand area under these crops in response to high prices. And speculators, who had entered commodity markets in a big way, are finding their way out,” noted a commodity analyst.
According to the FAO, global wheat prices continued to slide in the third week of September, mostly driven by a record world production. The seasonal harvest pressure in the northern hemisphere countries, falling crude oil prices and financial turmoil in world economies also contributed to further decline in wheat prices. The US hard red winter wheat averaged $312 per tonne (freight-on-board Gulf) in September, 9 per cent below August and 35 per cent below its peak in March.
Average maize prices during September were marginally down from August levels. The markets remained largely influenced by favourable global crop prospects and anticipation of huge supplies of feed wheat that could compensate for any eventual deterioration in the level of maize export supplies. Maize prices were also influenced by the weakening crude oil price because of its use as biofuel. The US maize price averaged $234 per tonne (FOB Gulf) during the current month, close to the August level, but 17 per cent below the peak prices of June.
The ample supplies of rice from the 2007 secondary seasons, together with expectations of record crops in the northern hemisphere in 2008, are keeping downward pressure on rice export prices. The price of the benchmark Thai white rice averaged $796 per tonne in September, about 2 per cent below the August level.
Even after this decline, prices of both maize and rice are significantly higher over last September (more than double for rice and 50 per cent higher in case of maize). Only wheat prices are at a one-year low.
