Friday, April 15, 2011

Global Crop Outlook 2011

The Crop Prospects and Food Situation report of Food and Agriculture Organization (FAO) released in March, 2011 paints a gloomy picture of world wheat production for the present year. It says that although world wheat production in 2011 will increase by 3.4 percent as compared to 2010 to reach the level of 676 million tonnes, production would still be lesser than the bumper harvests of 2008 and 2009. Prospects for 2011 winter crops i.e. wheat and barley remains favourable for India and Pakistan. Prospects for irrigation based rice harvest are also strong in 2011 for India despite weather irregularities. However, rice prices could soar in 2011 in India.

As per the second advance estimates released by Ministry of Agriculture on 9.2.2011, production of foodgrains during 2010-11 is estimated at 232.07 million tonnes compared to 218.11 million tonnes last year. This is only marginally below the record production of 234.47 million tonnes of foodgrains in 2008-09. The country is likely to achieve record production of wheat (81.47 million tonnes), pulses (16.51 million tonnes) and cotton (33.93 million bales of 170 kg. each) in 2010-11.

Crop prospect around the world

Due to the existence of inflationary forces as price signals globally, production side is going to receive strong responses. Increased yield recovery along with more plantings in Russia and Ukraine are expected to increase wheat production. Unlike the United States, larger plantings have been forecasted in Canada. Despite easing of drought situation in North Plain by recent precipitation, uncertainty over wheat production looms large in China.

Kazakhstan will maintain high planting level due to strong prices thus ensuring higher production.

Significant increase in wheat production is likely to be achieved in North Africa. Yields would return to average after bumper levels in 2010 for Australia and Argentina. Unlike Argentina and Uruguay, prospects of maize production are favourable in Brazil owing to good rainfall. Similarly, prospect for coarse grain production is positive in South Africa, Malawi and Zambia. Japan is going to face setback in rice production in the aftermath of tsunami.

The first 2011 season rice crop will see production increases in Argentina, Australia, Brazil, Indonesia and Uruguay.

The report also adds that the estimate for world wheat production in 2010 now stands at almost 654 million tonnes, 1 million tonnes above FAO's December forecast but still some 4 percent less than in 2009. Similarly, the estimate for coarse grain output is now put at 1117 million tonnes, 7 million tonnes up from the previous forecast due to favourable increased estimates for China, India, Ethiopia and Sudan. There has been a downward revision in rice production in India due to which estimate for global rice production in 2010 remains unchanged. World cereal stock in 2010/11 fell due to decline in world production in 2010 and rise in demand.

Price situation

Inflationary forces are keeping international prices of cereals buoyant. Wheat prices are likely to skyrocket due to widespread hoarding. Higher prices of wheat, rice, sugar and dairy products pushed the FAO Food Price Index – a measure of basic food prices at the international level to 236 points in February, up 2.2 per cent from January, the highest record in real and nominal terms, since the Rome-based agency started monitoring prices in 1990. The Cereal Price Index, which includes prices of main food staples such as wheat, rice and maize, rose by 3.7 percent in February (254 points), the highest level since July 2008. World Bank’s food price index, rose by 15 per cent between October and January and is now only 3 per cent below its 2008 peak.

The key challenges before world agriculture as identified by the United Nations are: soaring prices, weather-related disasters such as droughts, floods and fires, political changes and instability that are disrupting food supply chains and under-investment in agriculture.

Further readings:

Global wheat production to increase in 2011,

Crop Prospects and Food Situation, No. 1, March, 2011,

Recent oil price surge adds to concerns over high food prices, FAO, 3 March, 2011,

Global food prices increase for eighth straight month, UN agency reports, The United Nations, 3 March, 2011,

UN food experts call for increased agricultural investment to offset soaring prices, The United Nations, 18 February, 2011,

Wheat Hoarding Likely to Be `Widespread,' Prompting Price Gains, UN Says by Luzi Ann Javier, Bloomberg, 10 February, 2011,

Rising Food Prices May Not Signal New Crisis by Aprille Muscara, IPS News, 4 February, 2011,

Govt may lift ban on export of wheat by Sanjeeb Mukherjee, The Business Standard, 12 March, 2011,

Commerce dept wants wheat export ban lifted, The Economic Times, 9 March, 2011,

Wheat prices climb after Russia cuts crop forecast, The Associated Press, 18 March, 2011,