World trade is collapsing, but somebody forgot to inform the world’s wheat traders.
“Despite turmoil from outside markets, trade in wheat has remained robust,” Pamela Kirby-Johnson, director-general of the Grain and Feed Trade Association, told the Canada Grains Council annual meeting.
“Although farming cannot detach itself totally from the financial crisis, trends show there is a renewed financial interest, a renewed focus on the sector, and agriculture is possibly in a stronger position than other industries.”
During the furor of the financial crisis in September and October, many feared the grain trade would stall during winter if importers and exporters were unable to arrange credit.
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However, with more than half the crop year completed, wheat shipments appear to be up from this time last year and business is steady, Kirby-Johnson said.
That hasn’t led to big price gains for crops, however, because the world produced an enormous wheat crop last summer that needed to be cleared.
What’s surprising, she said, was how well wheat moved to fill demand.
“The continuous slide in prices made wheat appear cheap and encouraged purchases and substitution (for) other grains, such as (corn),” she said.
“Large supplies of wheat replaced other grains for feed.”
The supply glut should lessen if the world produces 651 million tonnes of wheat this year, as forecast by the International Grains Council, instead of the 684 million tonne bumper crop produced in 2008.
Kendell Keith of the U.S. National Grain and Feed Association agreed that the food and feed trade has held up well despite the world’s economic problems.
“Clearly the grains and the meat sector are not affected like the durable goods sector,” Keith said.
“People still like to eat regardless of what their incomes are. They get used to it. That’s a good thing.”
He noted that the clearest historical parallel to the present world situation is 1982, when a severe recession cramped world trade in most products, and most countries’ buying power fell by about six percent.
However, grain consumption stayed steady, suggesting it could continue to do well during this crisis.
Credit didn’t seize up in 1982 like it did last fall, but double digit interest rates meant it was prohibitively expensive to conduct trade on borrowed money.
“Credit was available, but it was very expensive,” Keith said.
