Short cereal supply pressuring processors

October, 2007 – World
cereal production may be up this year, according to the FAO, but total
supplies still barely meet demand and prices are hurting manufacturers.

World
cereal production may be up this year, according to the FAO, but total
supplies still barely meet demand and prices are hurting manufacturers.
The EU’s stocks are at a low point, forcing processors to increase the
price of their products globally due to the recent increase in the cost
of raw materials.

Over the past year, wheat has risen 35 per cent and
sunflower oil by 25 per cent. The increase in commodity prices is not
only due to the demand for grain for biofuel production, but
drought-related supply shortfalls in some EU countries, and flooding in
others. Long-term and structural changes in supply and demand have
added to the financial crunch on processors, as well as in the U.K.,
the freezing of bank interest rates, which could prove problematic in
the future.

In the U.S., barring bad weather, the largest corn crop on
record and most acres will be harvested since 1933. Soybeans are down
almost 20 per cent and all wheat production is 17 per cent above last
year.