Global rice, wheat, and coarse grains stocks as a percent of consumption have fallen to dangerously low levels that have not been experienced in several decades, with the global marketplace seemly paying little attention.
Rice — For the fourth consecutive marketing period global rice consumption is projected to exceeded production. Global rice stocks, which were a record high during the 2000-01 marketing year at 38.2 percent, continue to decline; 2001-02 stocks as a percent of consumption was 34 percent; 2002-03 was 26.9 percent, 2003-04 was 20.3 percent, and 2004-05 is now estimated at 16.5 percent.
Coarse grains — 2004-05 coarse grains, as a percent of consumption, are slightly above the previous marketing year's figure of 13.7 percent but significantly below USDA's data set going back to 1976-77.
Wheat — 2004-05 wheat mimics coarse grains stocks as a percent of consumption. It is slightly above the 2003-04 marketing period at 23.4 percent and is significantly below USDA's data set that goes back to 1976-77.
Why the price weakness?
Trauma: With no major economic, war, or weather trauma on the horizon, supply is believed to be adequate to meet immediate needs.
Food security: Despite all of the lip service that is given to the merits of trade, most countries are very conscious of food security and where possible, produce for their population. Developed countries fear giving up the security of basic food production, while transitioning and developing countries are motivated at becoming self-sufficient and even exporters.
Global trade: Trade is small relative to production. World rice trade is about 6 percent of production; world wheat trade is about 13 percent of production, and world coarse grain production is around 10 percent of production.
Global competition: The movement toward increasingly open markets and free trade is encouraging a level of global competition that has never before been experienced in the production of basic food commodities. Competition tends to be deflationary.
Global economic activity: One has to marvel at today's current level of global economic activity. With that said, global economic activity is less than uniform because countries around the world are spending a disproportionate share of their currency on certain commodities like energy and steel. This implies slower global growth and simply leaves fewer dollars to purchase other products, goods, or services.
Bobby Coats is an agricultural policy analyst with the University of Arkansas.