The cost of maize meal, a staple in many African countries, is set to go up, and wheat prices are heading in the same direction, according to the latest Food and Agriculture Organization (FAO) global price update.
Maize stocks in the USA, the world’s largest exporter, are at their lowest level for 30 years, and the high prices are also affecting wheat, which is increasingly replacing maize as an animal feed, said Abdolreza Abbassian, secretary of the Intergovernmental Group on Grains at FAO.
“The price of maize could impact on the budgets of aid agencies responding to the crisis in the Horn,” he added.
David Orr, spokesman for the World Food Programme - the world's largest food aid agency - confirmed that high commodity prices are having an impact on his organisation's purchasing ability, but the hikes have not been “debilitating.”
He explained that the agency had diversified their procurement strategy on cereals “as the extent of the [Horn of Africa ] crisis has become apparent. As the maize market was particularly tight (most of the Horn has maize as a staple) we looked to countries where wheat was also an acceptable staple [for example in Ethiopia], and switched.”
Globally, more maize is consumed than wheat as it is used by humans, animals and also to produce biofuels.
Earlier in 2011, a combination of higher fuel prices and increased biofuel production in the USA had reduced maize stocks. Now, high temperatures and poor rains in the US corn belt - roughly covering western Indiana, Illinois, Iowa, Missouri, eastern Nebraska, and eastern Kansas - have sharply reduced expected maize production, said the US Department of Agriculture in its August 2011 forecast.
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The Department’s September 2011 forecast expected next week is likely to reflect this, said Abbassian. Maize prices in August 2011 were up by 80 percent on August 2010, and up by more than 105 percent compared to August 2009, he said.
As global maize supplies get tighter with the USA exporting less, the pressure on wheat has been increasing. Wheat prices in August 2011 were up by 23 percent compared to August 2010, and up 54 percent compared to August 2009.
Global hikes can take up to six months to filter down to different countries.
The price of rice has also risen, mostly driven by a policy change in Thailand, the world’s largest rice exporter, which has set high purchase prices from farmers. “This hike is temporary and will come down as soon as there is pressure from markets on Thailand in the next few months,” Abbassian said.