More Evidence of Increased Pressure on Food Prices

From the WSJ:

Over the next decade, China's annual grain demand is likely to reach 573 million tons, which is above its current production levels. With marginal increases in crop yield shrinking and arable land harder to find, the bet is on that Beijing may swiftly become more reliant than ever on global markets for an essential class of commodities it is desperate to keep mostly home-grown.

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Inside China, this has already gone from just bourse play to a matter of public interest. In October, the price of staples like cooking oil and sugar sold in China's supermarkets jumped 10% to 13%. News of food shortages—in corn, wheat, garlic, mung bean, and sugar—have dominated local headlines this year.

Food is a political hot potato, and sharply higher prices in a short space of time can stoke public anger, encourage smuggling, and threaten to up-end China's cherished standard of 95% self-sufficiency in food. Food accounts for a third of the basket of goods used to calculate inflation.

From the FT:

Russia has warned that the extreme drought that ruined its grain crop this year has impeded planting of winter grain, raising fears of another poor harvest in 2011.

Elena Skyrnnik, Russian agriculture minister, said on Wednesday that Russia’s farmers were expected to plant about 15.5m hectares of winter grain crops this year, down from an earlier forecast of 18m hectares. Wheat usually accounts for about 85 per cent of total area of winter grain planting in Russia.

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Ms Skrynnik said planting of 15.5m hectares would allow for a 40m tonne crop of winter grain in 2011. Last year Russian farmers planted just under 18m hectares of winter grains before the crop was ravaged by drought.

But analysts were sceptical of the minister’s forecast, warning that delays to planting as farmers waited for signs of rain would put winter wheat seedlings at higher risk of failing.

“The government’s forecasts are over-optimistic,” said Andrey Sizov, the managing director of SovEcon, the Moscow-based agriculture consultancy.

From the FT:

The price of sugar is likely to surge to a 30-year high in the coming months, the top traders of the sweetener believe, as the world awaits fresh supplies from India.

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The commodity has had a roller-coaster 12 months, plunging from 30 cents a pound to 13 cents in a few months this year. But now it is once again near a 30-year high and this time some traders are even more bullish than last year.

The crucial issue for the global sugar market, just as 12 months ago, is India. But the tables have turned: whereas last year traders were forecasting a poor crop in the country, the world’s largest consumer, now they are looking to India to fill a shortfall in global supplies.

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At the same time, there are growing expectations that the harvest in Brazil, which accounts for more than half of world exports, may fall for the first time in years in 2011 as farmers are forced to renovate their ageing sugar cane plantations. In addition, Brazil has used up the stock of cane that it usually carries forward from one harvest to the next, increasing the chance that production will be lower next year.