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Home / Bioethanol / News Cereals soar as exporters hoard their harvests
Commodities CHINA and Russia have slapped export duties on cereals and Argentina has suspended wheat exports—signs that the fever sending raw material prices higher is now sweeping through agricultural commodities. Strong global demand for food, a grim harvest in Australia and stepped-up speculation are all contributing to a new wave of price surges. China recently announced the imposition, effective January 1, of export duty on cereals, rice and soya of between 5 and 25 per cent. Simultaneously, Russia reported a near five-fold increase on cereals export duties for the next three months from E22 ($37) to E105 ($177) per tonne, a move that effectively removes Moscow from the international market. Those developments came as Argentina suspended wheat exports until further notice and amid reports of a major reduction in Australian grain output due to drought. Under such circumstances, only big exporters such as the US, Canada and Kazakhstan are left to fill the gap. France, the European Union's largest cereals producer, has also endured a nasty harvest, analysts noted. And with crude oil futures crossing the $US100-a-barrel threshold, pressure is building for the promotion of alternative energies, thereby sparking demand for wheat and corn, the raw materials for bioethanol, or soya, which furnishes biodiesel. Repercussions on the Chicago market were clearly evident. Soya futures closed last week at $US12.325, just short of their 1973 historic high of $US12.90. Wheat commodity prices for March delivery were up US30c, the maximum daily growth rate authorised by the Chicago Board of Trade. March corn prices also closed with a gain of US7.5c. ``The markets are tense,'' said Joe Victor, analyst at commodity research firm Allendale. ``Stocks are sitting at historic floor levels, and any further restrictions on exports can only lead to higher prices,'' added Abdolreza Abbassian, cereals market analyst at the Food & Agriculture Organisation of the United Nations (FAO). He said the impact on the market was primarily psychological, as the ``the vast majority of exportable Russian cereals had already moved''. But if China and Russia have enough grain reserves for their domestic markets, authorities there are concerned about a resurgence in inflation and rising prices for basic foodstuffs. They are trying to send out the message, sometimes election-driven as in Russia, that ``as long as prices (keep) rising, they won't allow cereal resources to leave the country'', said Mr Victor. Given that the FAO world food price index jumped almost 40 per cent in 2007, Mr Victor expects the trend to continue ``until early April'', when estimated yields for the 2008 harvest will become a little clearer. Demand from emerging nations continues to grow sharply. ``On December 31, we were still receiving inquiries from Pakistan for 610,000 tonnes of wheat and another 50,000 from Bangladesh,'' Mr Victor added. Analysts from merchant bankers Goldman Sachs expect the sharp upturn in raw materials values to continue this year, particularly in agricultural commodities, where they have raised their price outlook in the past three weeks, including a projected 60 per cent increase in soya.
Date: 07.01.2008 Leave your comment
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