THE possibility of another boom-and-bust cycle for farmers has re-surfaced, strengthened by global meat prices hitting a 20-year high.
For Irish farmers, a boom-and-bust cycle took milk prices from 34 cent in 2008 to 24 cent in 2009, and grain prices slumped 30%.
For poor countries depending on food imports, boom-and-bust sparked riots due to food shortages three years ago – which recently flared up again in Mozambique, where seven died in protests after the government raised bread prices by 30%.
Global food trading has been upset by Russia’s decision to ban grain exports, which sent cereal prices towards a two-year high – and subsequently by Prime Minister Vladimir Putin’s statement that the ban would last to late December 2011.
But he was contradicted this week by Russian President Dmitry Medvedev who said Russia’s grain export ban will be lifted as soon as it is clear how much has been harvested – which could be as early as October.
Meanwhile, global meat prices have hit a 20-year high, due to robust demand from emerging countries and a drop in production by exporters such as the US and Australia.
The Food and Agriculture Organisation (FAO) of the United Nations index of prices is at a 37-year high for lamb, and a two-year high for beef. Pork and poultry prices are rising also. Meat production has stagnated in top exporting countries due to severe droughts in Australia and south America, low prices in the early 2000s, and record high feeding costs during the 2008 global food boom.
As demand increases, farmers have an incentive to increase herds and flocks. But with grain prices climbing, they could be reluctant to expand.
Grain shortages are exacerbated by an estimated 25 to 35% reduction in Russian autumn plantings.
Although traders say grain supplies are more abundant than in 2007-08, there are concerns over weather damage to Australia’s crop, and any production setbacks in Australia or Argentina during their spring could dramatically affect prices.
For the moment, EU officials have reiterated there is more than enough grain in Europe, and have turned down member state requests for intervention stocks to be released.
And commodity shortage fears were downplayed by Andrew Wood, senior research analyst at Bernstein and Associates, who predicted 2011 commodity inflation for EU food manufacturers at no more than 2%.
He said 2007/8 was a grave period for manufacturers, but was followed by the first year of deflation in a decade in 2009. He said headlines on wheat prices looked overblown.
Wheat prices were up 27% since the low of February 2009, and up 12% since this time last year, but down 2% since January 2010, said Mr Wood.
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