- Rising prices for agricultural commodities are caused by demand for corn as a biofuel (corn is a commonly used feed for livestock);
- Expensive corn dents aid organizations' food budgets;
- Demand for agricultural production is increasingly being shaped by Chinese and Indians adopting "Western" diets;
- Growing more corn comes at the expense of growing other staples; in this instance soybeans whose diminished supply is causing upward price pressure.
It's very interesting stuff, indeed. Agricultural research may yet again become fashionable, but it already catches a lot of my attention:
The upward pressure on global food prices is set to ease after a US government report on Friday upgraded the expected size of this year’s corn crop, though world wheat supplies continue to shrink.
Soaring demand for corn from the biofuels industry pushed prices to a 10-year high in February, with higher grain costs rippling through the food chain and generating a debate over competing uses for the crop.
Companies such as Tyson, the world’s largest meat producer, have called on policymakers to police the competing demands of food and fuel amid a growing consumer backlash across the globe to higher food prices.
Aid and development agencies have also warned of a reduced ability to provide humanitarian assistance as rising food prices eat away at their budgets.
While biofuels are viewed as a key component of the supply-demand imbalance, market experts also point to rising consumption of corn, wheat and other grains in emerging markets. Higher living standards are changing the dietary demands of populations in China, India and other nations.
Corn prices have dipped over the past six months as US farmers increased planting and switched land from less-profitable soybean production.
The US Department of Agriculture said in its first survey of the upcoming crop that global corn production was expected to rise 9.9 per cent year-on-year to 771.5m tonnes in the marketing year starting on October 1.
The department also upgraded its forecast of production in the US, where the pressures from competing food and fuel users have been most intense, though weather in August will be a crucial factor in determining the size of the final crop.
The US corn crop is expected to be 24 per cent larger than a year ago as farmers boosted the planted acreage by 19 per cent and the USDA increased its forecast of the crop yield following improved weather conditions in key growing areas across the midwest.
The USDA had remained cautious about the yield in recent months, reflecting both weather conditions and the negative impact of growing more corn in less fertile areas and reducing the traditional rotation of crops which improves soil conditions.
However, US farmers have been using record levels of new-generation seeds from suppliers such as Monsanto which are more resistant to drought and pests, boosting yields.
The expectation of a record harvest of 13.054bn bushels from the US will counter some of the drop in European production following drought conditions in central Europe.
The switch by US farmers into corn will see the country’s soybean crop fall by almost a fifth this year, according to the USDA. Prices have climbed to a three-year high in recent weeks, and will continue to rise amid soaring Chinese demand unless South American farmers opt to boost their production in the upcoming planting season.
The USDA remains pessimistic about the outlook for global wheat supplies, cutting the forecast issued last month following poor weather conditions in key growing areas across the world.
The impact of Australia’s drought has been exacerbated by poor growing conditions in the US and Europe. Global reserves at the end of May next year are forecast to drop to 114.8m tonnes from the 124.9m tonnes at the same point in 2007.