Corn farming in Brazil. Photo Credit: Owen Cortner

The FAO Monthly News Report on Grains (MNR) provides a collection of news articles on issues or factors considered critical in shaping the regional/global grains economy, as well as links to reports, statistics, and upcoming events. The latest MNR highlights how low grain prices and high stockpiles are catalyzing changes in subsidy and export policies and influencing crop choices among farmers for the 2016 growing season and beyond. Currency fluctuations are also predicted to have major impacts in agricultural markets in the coming year.

Leading agricultural financier Rabobank has predicted that the strengthening of the US dollar and weakening of Latin American and European currencies in 2016 will give countries with weaker currencies the incentive to expand output for exporting, reports The Zimbabwe Herald. Robobank says that Brazil in particular stands to benefit from the increased competitiveness of its soybean, corn, coffee, and sugar exports. (A recent blog here covered the FAO Sugar Price Index’s September-October surge.) In contrast, internal grain stocks are expected to increase in the US as the strong US dollar continues to limit the country’s market share of global agricultural exports, while increasing the competitiveness of grain exporters Russia and Ukraine.

Meanwhile, Ukraine’s agriculture ministry estimates that the country may lose up to 12 million tons of wheat in 2016/2017 due to severe drought during the autumn planting season, according to Hellenic Shipping News. With this in mind, the ministry has agreed with traders to cap the 2015/2016 season’s wheat exports at 16.6 million tons in order to leave enough stock to meet domestic demand. The export limit could be reviewed, however, depending on the outlook for next year’s harvest.

In other policy news, the Egyptian government announced in early November that it would no longer pay a fixed and highly subsidized price for local wheat procurement, opting instead to pay smaller direct subsidies to farmers and buy the wheat at global prices, reports Egypt Commercial News (via Reuters). This announcement came after the planting season already began and there is fear that the new system will make growing wheat unsustainable for farmers and will increase the country’s already substantial wheat import bill. Egypt is the world’s largest wheat importer, with an estimated 11.5 million tons of wheat to be imported during the 2015/2016 fiscal years according the USDA estimates, and the country is facing low foreign currency reserves.

AgWeb (via Bloomberg) reports that farmers in Argentina are standing by to ship an estimated $8 billion USD in stored crops if the ascension of President Elect Mauricio Macri to office in December results in the promised lifting of currency controls and export taxes. The crops in question include wheat, corn, and soybeans. Many farmers switched to unregulated crops such as barley to avoid the taxes implemented since 2006/2007, and some have been holding back crops in protest and due to the process of obtaining export permits.

Finally, a new proposal for tightening WTO restrictions on export subsidies and other protective measures was presented at an informal negotiation meeting in the lead up to December’s ministerial gathering in Nairobi, Bridges Weekly reports. The EU-Brazil proposal was co-sponsored by five other agricultural exporters (Argentina, New Zealand, Paraguay, Peru, and Uruguay). Australia, another major agricultural exporter, circulated a separate proposal; while in favor of restricting export subsidies, it is against allowing developing countries the additional flexibility that the EU-Brazil proposal seeks. The EU-Brazil proposal also touches upon food aid monetization, the special safeguard mechanism, and other contentious issues. (These proposals and the measures they focus on will be the subject of an upcoming blog here on Food for Thought.)

For more news, including coverage of South Africa’s rainfall crisis and China’s plans to cut domestic corn prices, read the full MNR Issue 118 - November 2015.

BY: Rachel Kohn, IFPRI

For Further Reading:

Guiding Macroeconomic Policy to Foster Agricultural Development and Food Security

The Doha Development Agenda and Expectations for Nairobi

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