Crop prices hit records in key grains

The UN’s Food and Agriculture Organisation published its most recent crops prospect and Food Situation Report. Key findings to chew over as you go to the report:

The global cereal supply and demand situation has continued to tighten in recent months, reflecting the deterioration of prospects for the 2007 world cereal production, which nevertheless is still expected to reach a record high. However, on current indications, this year’s harvest would only just meet the expected level of utilization in 2007/08, thus precluding a replenishment of cereal stocks, which are anticipated to remain at very low levels.

Record maize harvests were confirmed in South America, with production of Brazil increasing by one-quarter from last year’s good level. A record maize crop is also in prospect in Mexico, the largest producer in Central America. These good crops reflect expansions in plantings and exceptional high yields.

But in its press release the FAO says:

Maize prices are also well above last year’s levels, despite the bumper crop materializing this year, mainly reflecting continued strong demand from the biofuel industry.

It will be interesting to see if the set aside land in the US and European Union will be capable of delivering the additonal extra crops needed to meet biofuels demand…

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