Sharp fall in world cereals production forecast 20 August 2012 The US Department of Agriculture has made the largest downward revision (12%) to its estimate for a maize crop in a quarter of a century which, with a 37% cut in its estimate for the end-of-season inventory, contributed to rises in prices (for delivery in December 2012) of 44% for maize, 45% for wheat and 17% for soya beans. According to the Financial Times, the USA accounts ‘for one in every three tonnes of the staple grains traded on the global market.’ The article asks whether it is correct to draw ‘comparisons with 2007-08, when a price surge triggered a wave of food riots in more than 30 countries from Bangladesh to Haiti, and 2010, when Russia banned grain exports, setting off a price jump that some have argued helped to cause unrest across the Arab world last year.’ The answer is ‘not yet’, not least because the rice producing states have not experienced the same adverse weather as the wheat/maize producers. It is stocks of maize and soya beans that are particularly tight; the situation on wheat and rice – staple foods in many developing countries – is less severe. The price at which rice is trading is over 40% below its 2008 high. Even if the outlook for other major cereal suppliers remains unchanged, however, there could be an indirect effect on the agricultural sector and overall economy of ACP states (as well as other countries) through the impact on the global economy. With the outlook for global recovery looking increasingly brittle, the inflationary effect of higher prices for some cereals may restrict the scope for major economies to boost growth. This could, in turn, impact on the agricultural exports of ACP states as well as other developing countries. The news comes only a week after the FAO reported that its food price index had fallen for the third consecutive month. Although the general easing of world supply relative to demand this year has reduced some of the pressure on stocks, levels in some cereals remain tight. Global maize stocks are forecast by USDA to fall to just 15% of annual demand, close to a record low. The capacity of the global cereal market to cope with any further ‘bad news’ may thus be limited. Sources USDA ‘World agricultural supply and demand estimates’, WASDE 508, 11 July 2012 http://www.usda.gov/oce/commodity/wasde/latest.pdf Financial Times, ‘US slashes corn production forecast’, 11 July 2102 http://www.ft.com/cms/s/0/7bd4791e-cb50-11e1-916f-00144feabdc0.html#axzz... Financial Times, ‘Food crisis fears as US corn soars’, 13 July 2012 http://www.ft.com/cms/s/0/ad1ec426-cd07-11e1-92c1-00144feabdc0.html#axzz... FAO, ‘FAO food price index falls again’, 5 July 20125 http://www.fao.org/news/story/en/item/150904/icode/