Amidst predictions by FAO of a record world cereal production of 2279.5 million tonnes during 2010-2011, the bad news is that drought conditions may bring down Russia's domestic wheat production to 50 million tonnes in the current year from 63.7 million tonnes in 2008-09. Russia has already imposed a temporary ban on wheat exports. This has pushed up international prices of wheat contradicting the prediction of FAO's Food Outlook 2010 that wheat prices might plunge in 2010-2011.

Dry conditions have also affected wheat output in countries like Ukraine, Kazakhstan and north-western parts of the EU. Lower wheat production in Canada has added more worries. FAO has also said in a recent release (see links below) that the recent turmoil in the global wheat markets is because of the grain’s erratic yield in the black sea region, which continues to be a major supplier of wheat to the international markets.

FAO's Food Outlook earlier predicted world production of wheat to fall to 676.5 million tonnes in 2010-2011. The London-based International Grains Council has recently reduced 2010-11 world wheat output forecast by 13 mt to 651 mt. Following this, the global wheat production forecast of the FAO is 651 million tonnes in 2010-2011, down from the 676 million tonnes reported in June, 2010. The production shortfall is bound to affect the prices of food grain.

According to the United Nations, global wheat prices have jumped by over 50 per cent since June, prompting concerns about a repeat of the food crisis of 2007/2008. Although prices are still well below the 2008 levels and global stockpiles are much stronger than they were two years ago, wheat importing countries fear a repetition of the food crisis of 2008. In India the retail price rise of food items has been in double digits and there is no let up expected in the short term.

The long term estimates of FAO's Agriculture Outlook 2010-19 are that the food prices of all agricultural commodities would continue to rise in the coming decade. Jointly prepared by the OECD and FAO, the report includes prices of all cereals, oilseed and livestock. The publication calls for enhanced agricultural production and productivity as well as rules-based trading and a regime of fair competition.

The only silver lining, according to FAO, is that the record crops in the last two consecutive years have built up sufficient global inventories of wheat, which would not only cover the production shortfall of the current year but would also dispel any fears about a new global food crisis. It has noted that the traditional wheat exporters would also maintain their buffer stocks. “…Despite production problems in some leading exporting countries, the world wheat market remains far more balanced than at the time of the world food crises in 2007/2008 and fears of a new global food crisis are not justified at this point.”

As of now, the overall expectations of world cereal production (except wheat) continue to be upbeat at least for the current year. The FAO’s June report predicts that the global coarse grain production is expected to rise from 1115.2 million tonnes in 2009-10 to 1130.9 million tonnes in 2010-2011. There is expectation of yet another record maize crop in the United States, the world’s largest producer and exporter of maize. According to predictions made by Agritrade the global production of rice is likely to be better than the last year. According to estimates (see link below) ‘Global rice production for 2010/11 is projected at a record 459.7 million tonnes’, up 4% on 2009/10. All major rice-producing countries are expecting larger harvests. However, the Pundits are keeping a close watch on drought conditions in Vietnam and Thailand and floods in Pakistan, lest weather conditions become a spoilsport in the weeks to come.

Further Readings:

Food Outlook by FAO, June, 2010
http://www.fao.org/docrep/012/ak349e/ak349e00.pdf
 
Global wheat production forecast to be lower than expected – UN,
The United Nations, 4 August, 2010,
http://www.un.org/apps/news/story.asp?NewsID=35530&Cr=food+crisis&Cr1=
 
OECD-FAO Agricultural Outlook 2010-2019,
http://www.agri-outlook.org/dataoecd/13/13/45438527.pdf

International Grains Council,
http://www.igc.int/en/downloads/gmrsummary/gmrsumme.pdf

Agritrade estimates on global rice production:
http://agritrade.cta.int/en/Commodities/Rice-sector/News/Global-rice-production-expanding

Global Wheat Shortage Feared as Prices Surge by Liam Pleven and Tom Polansek, The Wall Street Journal, August, 2010,
http://online.wsj.com/article/SB10001424052748704905004575405381319151528.html
 
World Food scenario appears positive,
http://www.im4change.org/articles.php?articleId=2153

Wheat prices soar as Russia suspends exports by G Chandrashekhar, The Hindu Business Line, 6 August, 2010,
http://www.thehindubusinessline.com/2010/08/06/stories/2010080652841800.htm

Asia Times, 2 July, 2010,
http://www.atimes.com/atimes/Southeast_Asia/LG02Ae01.html

Wheat rises, food shares fall on Russia export ban, The Business Standard, 7 August, 2010,
http://business-standard.com/india/news/wheat-rises-food-shares-fallrussia-export-ban/403817/

Russian drought could push up food prices by Richard Wray, The Hindu, 10 August, 2010, http://www.hindu.com/2010/08/10/stories/2010081051341100.htm

Pakistan Floods May Rival Three Recent Disasters, VOA News, 9 August, 2010, http://www1.voanews.com/english/news/Pakistan-Floods-May-Rival-3-Recent-Disasters-100254644.html