Brighter prospects around the corner, insist grain analysts

9 October 1998

Brighter prospects around the corner, insist grain analysts

Shippers and traders from

around the world took part in

the Grain and Animal Feed

Trade Associations first

biennial convention in

Prague. Philip Clarke reports

GRAIN traders are becoming excessively gloomy about their future prospects. The economic fundamentals suggest there are grounds for at least some optimism.

That was the view of most trade analysts at last weeks GAFTA conference in Prague.

Despite a progressive 1.5% a year increase in wheat output between now and 2005, Food and Agriculture Organisation economist, Abdolereza Abbassian, believed prices should now start to rise.

World population would continue growing at more than 1% a year, while rising gross domestic product in most regions would ensure strengthening demand for grains.

The effects of the economic crisis in Russian and south-east Asia had certainly caused the FAO to rein in its medium-term forecasts, said Mr Abbassian, but price increases of about 3% in real terms by 2005 were still anticipated.

Similarly, barley and maize should enjoy good medium-term growth. "The economic slowdown in Asia will dampen imports for three to five years, but the fundamentals of world coarse grain demand are strong," said Richard Vogen of the US Grains Council.

Last season had seen prices reach rock bottom. As output recovered, stocks expanded, China returned to the market as a net exporter and demand took a dive due to currency devaluations in importing countries.

But this was not expected to continue. "Asian demand will be back – especially when Japan gets serious about her economic ills," said Mr Vogen. "China will become a net importer again and other regions are also growing."

Additional "robust growth" was anticipated from Mexico, other parts of Latin America, Saudi Arabia and North Africa.

"The coarse grain industry is also entering a revolutionary new era of technological change," said Mr Vogen. "Todays innovative technologies promise not only to improve farming methods, but to produce new and better products that will add value for the producer and consumer."

As for oilseeds, William Motes, of US consultants Sparks, agreed traders were too pessimistic. "There is still a solid perspective there, despite the near hysteria of traders who are too close to the market."

Two years of strong prices and increasing output had led to rapidly growing stocks, while the Asian crisis had undoubtedly hit meal sales, as demand for livestock feed diminished.

But demand for oil remained strong and underpinned the market.

Dr Motes believed China would continue to provide an "engine" for oilseeds, driven by the need to provide a better diet for the emerging middle class.

And, despite the current problems in south-east Asia, he was optimistic about recovery. "We think the worst is near, or may be behind us. We dont see a collapse in Latin America and the Russian market never amounted to much anyway. We still have a very respectable export outlook."

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