WASHINGTON, D.C. – World grain stockpiles are shrinking to their smallest level in 23 years, which could affect prices if next season’s crop falters, says the head of a U.S.-based think-tank.
Declines were largest in China, where stocks have fallen by 132 million tonnes since the 1999 harvest, said Lester Brown, an economist and head of Earth Policy Institute.
Stockpiles of wheat, feed grains and rice have declined due in part to withering temperatures across Europe and drought in North America during the summer.
Overall, world grain stockpiles were forecast to drop to 320 million tonnes this marketing year, or a nine-week supply, because consumption would outrun production by 93 million tonnes. That would be the lowest since 1980-81.
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“You have to ask yourself – what if we have another bad harvest?” Brown told reporters. For the first time, harvests have fallen short of use for four years in a row, which will “focus attention on next year’s grain crop.”
Stockpiles were not likely to dip much below 320 million tonnes, Brown said because “rising prices will begin to choke off demand and we’ll achieve balance that way.”
But it will be difficult for the world to boost production by about 100 million tonnes to align output and use, he said.
Spotty weather, scarcer supplies of irrigation water and a limited selection of new crop varieties would impede production.
Other analysts say market prices have stayed low out of a common belief that adequate supplies will be available, so large stockpiles are not as necessary as they once were. Better communications and shipping systems can speedily fill gaps, they say.
China accounts for half of the drop in stockpiles but has purchased only small amounts of grain, Brown said, so “thus far, the world has been isolated from this steep drop.” But China’s reserves cannot last much longer, he said.
“I think it is going to have a substantial effect on prices,” whenever China decides it must begin imports. “It’s going to hit the world market like a ton of bricks.”
The U.S. Department of Agriculture forecasts China will consume about 46 million tonnes more of wheat, rice and feed grains than it grows this year. That would equal 12 percent of China’s output of 377 million tonnes.
China had 172 million tonnes of grain on hand this fall, by USDA estimates, compared to 304 million tonnes in 1999. A further drop, to 116 million tonnes or one-third of consumption, was forecast before China’s next crop comes to harvest.
