World grain prices falling sharply on eve of summit
Over the past 3 months, the price of wheat has dropped by 37 percent, that of rice by 23 percent. The trend is even stronger for milk and powder milk (a commodity imported on a large scale by developing countries): prices are down by more than a third, even though they weren't that high to start with. Low milk prices are making European producers desperate, and the fear of the reappearance of 'milk lakes' that go to waste is back. Farmers are protesting in France, Belgium, Spain and Germany.
Because of the sharp decline in rice prices, large exporting countries like Cambodia have already lifted their export ban; Vietnam is to lift its ban next month. Rice was under speculative attack, with prices increasing by 80 percent over a period shorter than 3 months.
Analyses of the positions of food commodity speculators indicates they are betting on continued falling prices for wheat and rice. Apart from oil prices, speculation is seen as the second most important factor determining movements in the market:
energy :: sustainability :: ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: food :: agriculture :: commodities :: speculation :: oil prices ::
Despite these rapidly falling prices, the food situation remains precarious. Price changes for raw commodities do not immediately translate into lower prices for consumers. Retailers in Europe have been accused of keeping prices high even after prices for raw materials have been falling.
This week, both the FAO and the OECD will convene important meetings to discuss the world food crisis. In a recent report, the FAO warned that food prices will remain high for the foreseeable future. It sees this situation as an opportunity to boost investments in agriculture in developing countries. A great number of countries, especially in Africa, can increase output relatively easily provided basic investments are made into access to input markets (seeds, fertilizers, tools), output markets, and infrastructures.
Over the past quarter of a century, investments in agriculture have been neglected by the international donors and community. For example, in 1980, the World Bank used 35 percent of its loans for investments in agriculture in developing countries. In 2007, this was a mere 11 percent. Only recently, after the crisis hit, has it pledged to make agriculture its top priority once again.
However, investments in poor countries' agriculturals sectors are seen as long term remedies only, and many analysts warn immediate action is needed to prevent putting 100 million food insecure people at risk. Surprisingly, though, the sudden and steep decline of wheat and rice prices, show farmers are capable of increasing production with today's means and infrastructures. At least to an extent, because speculation and the oil price are factors beyond their control.
References:
De Standaard: "Voedselprijzen dalen ondanks crisis" [Food prices falling despite crisis] - June 2, 2008.
Gazet Van Antwerpen: "Prijzen van tarwe en rijst dalen, wanneer de winkelprijzen?" [Wheat and Rice Prices Falling, When Do Retail Prices?] - June 2, 2008.
Het Laatste Nieuws: "Voedselprijzen dalen ondanks crisis" [Food Prices Plummet Despite Crisis] - June 2, 2008.
3 Comments:
i love this blog! keep up good works. See you again..
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Very informative! I love the explanation about the economic impacts. It's a great refresher on the nature of global economics and speculation.
Fair winds,
Sunny Lam
Ffenyx Rising
http://ffenyx.wordpress.com
http://www.linkedin.com/in/sunnylam
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