Since the year 2005, the prices of agricultural products have risen
spectacularly at a rate of about 75 percent. The largest increase
has taken place in the last year, with a rise of 40 percent. One
example of a spectacular increase is that of wheat, whose price
has nearly tripled in one year from €130 per ton, to a record lev-
el of €290 per ton. But the prices of other agricultural products
have also gone up tremendously, such as corn, rice and soya
beans. Prices of rice, an important staple food in the developing
world, have more than doubled over the last couple of months.
These high prices have given rise to unrest in some developing
countries and have boosted infiation worldwide.
What causes these high prices? First of all there is the shrink-
ing of global food stockpiles, fuelling concerns over decreasing
supply and increasing volatility. Based on Rabobank's findings,
global wheat stocks, for example, have dropped from around
150 million metric tons at the end of 2004 to about 110 million
metric tons at the end of 2007. Global soya bean stocks could
also fall to as low as 50 million bushels by the end of 2008, down
from approximately 450 million bushels at the end of 2005. In
the past, global stocks were enough to meet a demand lasting
for four months, but the current stock levels are only sufficiënt
for less than two months. The resulting scarcity has driven up
prices.
This shrinking of stockpiles in its turn is caused by a variety of
reasons. The main reason is that consumption of grains and
oilseeds is structurally higher than production. Another factor
is the reform of the EU agricultural policy in recent years. As a
result, there are no intervention stocks available anymore and
that causes markets to get nervous. This policy reform was
mainly driven by obligations under the World Trade Organisation
ISSUE 16 THE WORD
