Turkey's struggling wheat crop to add pressure for global price spike

By bne IntelliNews August 14, 2012

bne -

The struggle for the global grain harvest continues, with Turkey's 2012 wheat crop, the largest in the Middle East region, estimated to have dropped by 11% year on year. The news will add impetus to already elevated wheat prices, and push the threat to the global economy from a food price spike.

The United Nations' Food & Agriculture Organization reported the forecast on August 13, fretting that following a cold March and below-average rain in April, the Turkish harvest is set to provoke the current shortages on world markets. Harvesting has just finished, and production probably dropped to 19.5m tonnes - from 21.8m in 2011 - the FAO wrote.

That will only add to the global pricing pressures. Wheat gained 21% in Chicago trading in the past year as droughts in the US and Russia damaged crops, reports Bloomberg. Turkey exported 3.3m tonnes of wheat in the 2011- 12 season, accounting for 2.3% of world trade in the cereal, according to the International Grains Council.

"Turkey remains one of the leading exporters of wheat flour in the world," the FAO wrote. "Earlier forecasts were rather optimistic. Estimates indicate an average level of production." That will leave Turkey needing to become a net importer of grain this year, the report says.

Meanwhile, the FAO's Abdolreza Abbassian warned in a separate report that global grain prices are set to continue their rise in the coming months after seeing prices resume growth in July following three months of calming. The FAO Food Price Index averaged 213 points in July, up 12 points from June, and back to levels seen in April, the FAO said in a monthly index update.

Grain prices did practically all the damage. The FAO Cereal Price Index averaged 260 points, 17% up on June, and just 14 points below its all-time high of 274 in April 2008.

Meanwhile, France, the US and G20 president Mexico are set to hold a conference call at the end of August to discuss a potential emergency international meeting on the topic, reports Reuters.

The G20 is keen to be seen as a leader in the bid to avoid a repeat of the food price spike that helped trigger the global credit crunch in 2008. Analysts however say there's few levers available, although there could be further calls for the US to change its biofuel policy, while Russia will be encouraged not to impose another export ban.

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