Record global grain harvests end fears of volatile prices - think tank

by Emma Batha | @emmabatha | Thomson Reuters Foundation
Wednesday, 4 June 2014 15:22 GMT

Workers load rice onto the back of a truck after a harvest in a paddy field in Nakhonsawan province, north of Bangkok. Picture July 17, 2013. REUTERS/Chaiwat Subprasom

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World grain prices should be more stable in the coming years as a result of widespread efforts to raise output

LONDON (Thomson Reuters Foundation) - Fears of a continuing roller-coaster in grain prices, leading to a repetition of the riots of 2008, are unlikely to materialise, a think tank said on Wednesday after reporting a surprise boom in developing countries’ cereal production.

Global cereal harvests have risen in recent years, pushing prices down, and are set to hit a record 2.16 billion tonnes in 2013/14, Britain’s Overseas Development Institute (ODI) said in a report published on Wednesday.

“Doomsayers who have been predicting high cereal prices and more riots like we saw in 2008 have been proved wrong. What is really surprising is that most of this increase is not coming from traditional grain exporters but from poorer countries,” ODI Research Fellow Steve Wiggins said.

Poorer countries’ cereal output has risen by 240 million tonnes since the 2008 price spike – nearly three quarters of the global increase.

The ODI said national and international investment in production of wheat, maize and rice - especially in the developing world - had paid off and the cycle of price instability appeared to be ending.

The 2008 spike in prices, which sparked riots in countries including Egypt, Cameroon and Haiti, was caused by several factors including lower cereal stocks and wheat harvests, oil price rises and the growing use of grain for biofuel. Two smaller spikes followed in 2010 and 2012, but prices have since fallen back.

“Farmers, especially in developing countries, have finally adjusted to the roller-coaster ride of instability in cereal prices. This will create a new norm: higher prices than before 2008, but lower than levels seen recently,” Wiggins said.

The adjustment will help developing countries like Egypt and Mexico, which are net grain importers and have large poor, urban populations, he added.

The report said that rising rural wages in Asia, continuing biofuel demand and higher oil prices, which bump up transport costs, meant cereal prices would not return to the very low levels of the early 2000s.

The ODI said that world grain production had increased far more rapidly since 2008 than in the period 2000-2007.

  • East Asia has boosted its cereal output by 100 million tonnes since 2008, representing 42 percent of the total increase from poorer countries
  • Sub-Saharan Africa has increased its grain production by over 24 million tonnes since 2008, three times more than in the seven years before the spike
  • Latin America has increased its production by 38 million tonnes since 2008, up from a 23 million tonne increase in the seven years before the crisis

Increases in production result partly from farmers reacting to higher prices, but also from national and international efforts to raise grain supplies, including a G8 pledge in 2009 to provide $22 billion to promote agriculture, rural development and food security in developing countries.

The ODI said the bigger harvests were due mainly to farmers using more efficient farming methods to produce higher yields rather than clearing land to increase their crop-growing area.

But the report cautioned against “unbridled optimism”, warning that harvests could become more variable due to erratic weather caused by climate change. It stressed the importance of investing in research into creating farming systems resilient to changeable weather.

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