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Western economies particularly Eastern Europe suffer a severe reduction in cereal crop value

 

Due in part to the global recession and detrimental weather conditions, the cereal crops market experienced a downturn in value for the 2009 – 2010 period. Production has recovered marginally in recent years however, resulting in a low but steady increase in market value.

Industry figures

The global cereal crops market grew by 1.6% in 2011, to reach a value of $430.6 billion, representing a compound annual rate of change of -1.1% for the period spanning 2007-2011.

Growth was primarily driven by regions of expansion in Asia-Pacific, as western economies particularly Eastern Europe suffered a severe reduction in crop value. Asia-Pacific’s growth was led by Singapore and India’s continued strong development.

Though cereal prices have experienced a sharp increase in recent years, sizeable wheat stocks in the major exporting countries (excluding Russia) after two significant harvests, particularly in the US, and a likely supply response by cereal producers, is all expected to result in an easing of prices.

Industry trends/issues

Traditionally the fourth largest supplier of cereal crops globally, Russia’s introduction of a cereal export ban in 2010, due to crop destruction from fire, resulted in a negative effect on the market as a whole.  The ban led to an escalation of wheat prices and forced the big importers, the Middle East and North Africa, to seek emergency supplies in Europe and the US. Though the ban was lifted in July 2011, a reintroduction due to natural disaster remains a possibility and would lead to a surge in cereal prices globally.

Weather conditions potentially have a profound influence on cereal crops’ future prices. The La Niña weather phenomenon is attributed with being the cause of Australia’s severe flooding and rain, parts of South America’s dryness, and the expanding drought conditions present in the southern and central US Plains. Unsuitable conditions can lead to a severe drop in crop yield and raise prices significantly.

 

Posted in Agriculture.

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