Abstract
EXECUTIVE SUMMARY
Making projections into the future is always difficult. Two years ago, the
evidence seemed clear that it would be difficult for world grain production to
keep pace with demand. In six of the seven years from 2000 through 2006, world
consumption exceeded production and world ending stocks were drawn down. The
net deficit during that seven year period was nearly 200 million tonnes. But
the balance has been dramatically different during the last three years,
including the projections for the current year. Production has exceeded
consumption in each of the years, with a net surplus of 130 million tonnes.
The question is which recent period will the future look like?
It is helpful to look back at what happened during the 1999 through 2006
period and compare that with more recent developments. During the 1999 through
2006 period, world grain area and yield both increased, butworld demand
increased by an even larger amount. It is tempting to say that the surge in
demand was the result of the boom in the ethanol industry in the U.S. No doubt
that explains a part of the strong demand growth. World grain demand increased
by roughly 10 percent over those seven years, while world production increased
by a little less than seven percent.
But if we take the U.S. out of the calculation, we find that foreign demand
growth was almost as strong as the demand growth in the U.S. U.S. grain demand
increased by 10.6 percent over the period, while the increase in foreign
demand was slightly above 10 percent. The strength in the U.S. ethanol
industry shows up more dramatically in the 2006 through 2009 period. U.S.
grain demand increases by 18 percent over this period, while foreign
consumption increases by less than five percent.
The global recession has probably had a negative impact on foreign grain
consumption recently. However, the real key to the turnaround in the grain
balance appears to be on the production side. World grain production has
increased by about 10 percent since 2006, more than the increase recorded
between 1999 and 2006. The increase in production has been triggered by both
higher acreage and strong yields.
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