Devastating droughts in the United States and Russia are set to drive global stocks of maize (corn) and wheat to multi-year lows, a world cereal body said on Thursday, heightening fears of a food price crisis on a scale last seen in 2008. Wheat output from key global supplier Russia is now seen slipping below levels in 2010 when drought destroyed crops and sparked a surprise ban on exports.
The International Grains Council (IGC) said in a monthly report that stocks of maize would fall to a nine-year low of 120 million tonnes with the smaller global crop to result in a drop in consumption in 2012/13 for the first time in nearly 20 years. "Exportable (maize) supplies in the US and Ukraine had tightened and, while the next crops in Brazil, Argentina and South Africa may be large, harvests are still several months away," the inter-governmental body said. The US Midwest has suffered its worst drought in 56 years and the IGC cut its forecast of the US maize crop by 25 million tonnes to 275 million tonnes, bringing it broadly into line with the current US Department of Agriculture estimate.
Earlier this month, USDA cut its forecast to 274 million, a six-year low. Maize prices rose to a record high earlier this month and wheat prices have also climbed sharply. South Korean President Lee Myung-bak on Thursday sent a letter to G20 members calling on them to step up joint action to stabilise international grain prices.
Lee suggested five measures including the proposal that the Group of 20 countries should work together to ease export controls on food items and impose more regulation over market speculation in raw materials, the presidential office said. A mix of high oil prices, growing use of biofuels, speculation on commodity markets and export restrictions pushed up prices of food in 2007/08, sparking violent protests in countries including Egypt, Cameroon and Haiti.
The IGC cut global maize production in 2012/13 by 26 million tonnes to 838 million tonnes, well below the prior season's 875 million. Global maize consumption was also cut sharply by 25 million tonnes to 853 million, now also below the prior season. Wheat supplies are also tightening as the IGC cut its forecast for Russia's crop by 4 million tonnes to 41 million, now below the amount produced during the last drought in 2010, which led to Russia imposing a ban on exports.
The deteriorating outlook for Russia's grain crops has set off a wave of speculation that it could impose an export ban as it did in 2010. Russia exported 27 million tonnes of grain in its 2011/2012 season, of which 21 million tonnes was wheat. SovEcon agricultural analysts cut Russia's wheat crop forecast to an even lower 39 million tonnes on Thursday after yields deteriorated in Siberia and Urals regions because of drought. "World stocks (of wheat) are forecast to contract by 17 million tonnes to (a 4-year low of) 180 million. A projected fall in the major exporters is led by the Black Sea region," the IGC said. Global wheat production in 2012/13 was seen at 662 million tonnes, down 3 million from its previous estimate and well below the prior season's 696 million.