Cereal Stockpiles Continue to Fall

Cereal stockpiles are expected to hit their lowest level in over two decades, contributing to keeping their prices high, a U.N. food agency said.

The low stocks combined with continuously strong demand — also driven by the growing biofuels industry — to keep prices elevated, the Food and Agriculture Organization said in a report on the global food situation, which was being released Wednesday.
By the close of the current season, stocks are expected to fall to 405 million tons — down 22 million tons, or 5 percent, from the start of the season, the Rome-based agency said. It would be the lowest level since 1982.

The food-and-supply demand remains tight, despite an increase in cereal production in 2007 and favorable prospects in 2008, the agency said.

“We do not anticipate a major downturn in prices even if production rises, because the increase would have to take into account the lower stocks,” said Abdolreza Abbassian, an agency official who was part of a team working on the report.

The report said that “it may require significant increases in production of more than one season’s cereal crop for markets to regain their stability and for prices to decline significantly below the recent highs.”

In recent years, food prices have soared amid rising oil prices — which have increased food shipping prices — and growing demands for biofuels.

Associated Press