Seoul / KR. (kt) Grain stocks worldwide are expected to fall to their lowest level in 35 years in 2008, raising concerns that the economy will be hit by a double whammy of soaring grain and oil prices. The Korea Rural Economic Institute reported that the lowest level of grain stocks in more than three decades points to higher prices next year.
«Rising demand for grain commodities from China and other developing nations is driving up agriculture prices, but the problem we are having is that the world cannot meet the surging demand due to a supply shortage», said Sung Myung-hwan, a senior researcher at the institute, to «The Korea Times». He said this will intensify «agflation» – coined from the words, agriculture and inflation, adding that consumers, above all, will be burdened by increasing grain prices.
For instance, Korea has seen its wheat prices go up by 30 to 40 percent so far this year, and the country that depends on grain imports for everything except rice is going to feel the pressure even more next year. Sung said rice is the only commodity that the country massively produces, while the rest such as corn, wheat and soybean are «almost all» imports.
Amid skyrocketing oil prices, many countries are seeking to develop alternative fuel such as bioethanol created from corn, wheat and sugarcane. The development of bioethanol is raising demand for such agricultural stocks, and in return, driving up their prices.
According to the U.S. Department of Agriculture, the inventory-turnover ratio of grain is expected to reach 15,2 percent in 2008, the lowest level since the early 1970s. It said that worldwide consumption of corn, wheat, rice and barley will grow 2,5 percent to about 2,1 billion tons next year, but production is only expected to increase by 4,4 percent to 2,08 billion tons. «It is imperative that the country keeps track of the supply and demand trend globally, and find stable ways to secure goods abroad to lessen the inflationary impact», said Sung (source).
