The battle lines are being drawn – supermarkets vs service stations September 2006
Global grain stocks are called heading down to dangerously low levels in a report recently released by Lester Brown of the Earth Policy Institute. Lester states:
‘This year’s world grain harvest is projected to fall short of consumption by 61 million tons, marking the sixth time in the last seven years that production has failed to satisfy demand. As a result of these shortfalls, world carryover stocks at the end of this crop year are projected to drop to 57 days of consumption, the shortest buffer since the 56-day-low in 1972 that triggered a doubling of grain prices.’
Wheat stocks haven’t been this low since 1985 and similarly for corn, global stocks have fallen to their lowest level in 25 years. Lester’s calculations also assumed an ‘average’ grain crop in Australia of around 35-40 million tonnes. With dry conditions persisiting over much of Australia’s grain belt that figure could easily head down to 20 million tonnes.
As stocks decline, fierce competition is beginning to emerge for what grain exists in global inventories. And that competition will ultimately be won by the end user that is willing to pay more – food or biofuel manufacturers?
Odds are being taken now and early on it is anticipated that biofuel producers will figure strongly in the acquisition stakes as food manufacturers arrogantly undervalue existing grain reserves. As consumption rates increase and further worsen the global supply situation, food markets will reluctantly, though strongly counter bid, as consumers realise it is probably more important to eat than it is to drive.
