“IGC cuts grain stocks forecast to five-year low”

The International Grains Council on October 25 made changes on its estimate for the world grains stocks (maize and wheat) in 2012-2013.

In a monthly market report the IGC pointed out that the grain inventories from the major suppliers will be relatively small and the lowest for 17 years. As a result, the IGC made some cuts on its forecast of grains stocks, so it is forecasted 328 million tonnes, cutting 4 million tonnes from the previous estimation.

According to IGC the scarce availability of stocks and corresponding high prices have to rationalize the demand, leading to the shrinkage of consumption since 1998-1999.

To conclude, the IGC explains its forecast as a result of the decrease of world production of grains in main exporter countries such as Ukraine, Russia, Kazakhstan, and USA. The severe summer draught was main reason of the shrinkage of global supply that has compelled to impose restrictions on export in order to maintain a lower domestic price for the grain products (eg. Russia, Ukraine).

Briefly, this news has to do with what we have learnt in class, so an expectation of a higher price due to a lower storage can have a significant effect on prices because of arbitrage until it equals to zero or in other words to the level of storage costs.

Reference

http://www.agrimoney.com/news/top-exporters-grain-stocks-to-fall-to-17-year-low–5147.html

http://www.grainews.ca/news/igc-cuts-grain-stocks-forecast-to-five-year-low/1001797739/