9/11/2007
Global Cereal Prices Will Remain High, FAO Forecasts

World cereal prices are expected to stay high during the next year because of low global stocks, production problems and continued strong demand, according to the latest forecast of the United Nations Food and Agriculture Organisation (FAO), released this week.

The Food Outlook report warned that these high cereal prices are driving domestic food inflation across much of the world, sparking price increases for such retail staples as bread, pasta, milk and meat.

The analysis found there was “such a widespread and commonly shared concern about food price inflation, a fear which is fuelling debates about the future direction of agricultural commodity prices in importing as well as exporting countries, be they rich or poor.”

It also noted that record freight rates – driven up in part by soaring petrol prices – and high export prices mean many countries will pay more for importing cereals than they did in previous years, even though they are importing less.

For most cereals, “supplies are much tighter than in recent years, while demand is rising for food as well as feed and industrial use. Stocks, which were already low at the start of the season, are likely to remain equally low because global cereal production may only be sufficient to meet expected world utilization,” the agency said.

But the report added that at least one cereal crop, wheat, may experience a price fall next year thanks to indications that some countries are considering planting more wheat for harvesting next year, thus increasing the supply on the international market.

The price of maize, which reached a 10-year high in February, is also starting to come down in response to this year’s record crop reaching the market.

By contrast, the price of barley is soaring, due to a combination of supply problems in Australia and Ukraine and the tighter availability of other feed grains.

The greatest jump, however, is in the price of dairy products, which are rising by between 80 per cent to more than 200 per cent.