Grain worth gold
Feeding animals increases demand and pushes up prices
IT’S NOT ONLY the growing trend to process food, including maize, into ethanol that’s leading to higher prices and concerns about the world’s assured food production in the future. Afgri Trading director Erhard Briedenhann warns that the increased use of grain in animal feed is aggravating the problem. He says there’s increasing consumer resistance to the use of waste products in animal feed, because of concerns about the occurrence of BSE (mad cow disease) and other problems.
In its December issue, the animal feed magazine Afma Matrix confirms the growing battle for the use of grain in human or animal diets. Meanwhile, the global population is expected to increase by 25% over the next 20 years, which, among other things, will increase the demand for grain and food for animals.
The sharp increase in grain consumption in China, especially to feed animals (see graph), puts further pressure on grain supplies. It’s estimated that China will increase its maize production by only 1% to 135m t this year, while its consumption will increase much more sharply.
Briedenhann says that a good maize price also leads to price increases for other kinds of grain. “It encourages the producers of other grain to plant maize. Shortages of other types of grain then occur, due to the reduced supply, which also pushes those prices up. Internationally, the supply of grain is tending towards disturb- ingly low levels. If energy prices remain high over the long term it will have a major effect on agriculture and its commodity prices.”
The US Department of Agriculture (USDA) predicts that world demand for maize could rise from around 690m t to 716m t this year, and that the rollover maize supplies could be approximately halved by the end of the current season.
Philip Theunissen, an economist at Computus Management Bureau in Bethlehem in the Free State, agrees that the low supply levels of maize could push the price up for at least two to three seasons. “And I don’t expect sharp falls to recur in the future.”
Theunissen also says that less and less land is available for agriculture, especially in Europe, and that will definitely affect the supply. “Fortunately, technology – including GM breakthroughs that will increase production – can make up for that to some extent.”
This year’s maize price will depend largely on the rainfall patterns over the next two months, Theunissen warns. “The price could increase sharply if the harvest is poor, and at this stage it doesn’t look good in certain areas. Over the long term the price depends a lot on the oil price.”
SA’s first ethanol plant only comes on line next year and an additional seven will be built or are in the pipeline to 2012. That will reduce the future supply for human consumption and push up the price.