GLOBAL GRAIN
STOCKS
Joseph W. Glauber
Chief
C
e Economist,
co o st, US
USDA
31 January 2013
1950
0/51
1954
4/55
1958
8/59
1962
2/63
1966
6/67
1970
0/71
1974
4/75
1978
8/79
1982
2/83
1986
6/87
1990
0/91
1994
4/95
1998
8/99
2002
2/03
2006
6/07
2010/11
2005 =1
100
Price index for selected grains and
oilseeds
700
600
500
400
00
300
200
100
Wheat
Corn
Rice
S b
Soybeans
Trend 1950-2005
0
1
1970/197
71
1972/197
1
73
1974/197
1
75
1976/197
1
77
1978/197
1
79
1980/198
1
81
1982/198
1
83
1984/198
1
85
1986/198
1
87
1988/198
1
89
1990/199
1
91
1992/199
1
93
1994/199
1
95
1996/199
1
97
1998/199
1
99
2000/200
2
01
2002/200
2
03
2004/200
2
05
2006/200
2
07
2008/200
2
09
2010/201
2
11
2012/2013
2
Global grain stocks as percent of use
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
World
Source: USDA
Major exporters
Factors
• Short crops
• Growth in global demand
• Biofuels
• Energy prices
• Monetary policy
• Speculation
• Export restrictions/import subsidies
1970
0/1971
1973
3/1974
1976
6/1977
1979
9/1980
1982
2/1983
1985
5/1986
1988
8/1989
1991/1992
1994
4/1995
1997
7/1998
2000
0/2001
2003
3/2004
2006
6/2007
2009
9/2010
2012
2/2013
1970/71
1=100
G
Growing
i global
l b ld
demand
d
600
500
400
300
200
100
Source: USDA
Wheat
Corn
Rice
S b
Soybeans
Other feed grains
0
US R
Renewable
bl F
Fuell S
Standards
d d
Billion liters
160
140
120
100
80
60
40
20
0
Conventional Biofuel RFS
Total RFS
US corn used
d iin ethanol
h
l
Mil tonnes
140
Percent
40
120
35
100
30
25
80
20
60
15
40
10
20
5
0
0
Ethanol corn use
Ethanol share of corn use (%)
Projected US ethanol production slows
Bil liters
100
90
80
70
60
AEO2013
AEO2011
AEO2008
50
40
30
20
10
Source: EIA, AEO2013
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
2010
0
1977
7/1978
1979
9/1980
1981/1982
3/1984
1983
1985
5/1986
1987
7/1988
1989
9/1990
1991/1992
3/1994
1993
1995
5/1996
1997
7/1998
1999
9/2000
2001/2002
2003
3/2004
2005
5/2006
2007
7/2008
2009
9/2010
2011/2012
More diversified supply: percent of
exports from Northern Hemisphere
100%
90%
80%
70%
60%
Wheat
Corn
Soybeans
y
50%
40%
Source: USDA
1990
0/1991
1991/1992
1992
2/1993
1993
3/1994
1994
4/1995
1995
5/1996
1996
6/1997
1997
7/1998
1998
8/1999
1999
9/2000
2000
0/2001
2001/2002
2002
2/2003
2003
3/2004
2004
4/2005
2005
5/2006
2006
6/2007
2007
7/2008
2008
8/2009
2009
9/2010
2010/2011
2011/2012
2012
2/2013
E
Emergence
off Black
Bl k S
Sea Wh
Wheat
50
40
30
20
10
0
-10
-20
20
Yield variability in major wheat exporting
countries
Exporting
country
Argentina
Australia
Canada
European
Union
United States
Black Sea
Yield
variability
11.0%
22.2%
9 2%
9.2%
4.9%
6.2%
15.4%
Market share
1999-02
2009-12
9.4%
5.8%
13.9%
13.4%
14 6%
14.6%
12 8%
12.8%
15.7%
25.3%
12.4%
14.2%
20.8%
20.0%
Source: USDA
2012
2/2013
2009
9/2010
2006
6/2007
2003
3/2004
2000
0/2001
1997
7/1998
1994
4/1995
1991/1992
1988
8/1989
1985
5/1986
1982
2/1983
1979
9/1980
100
1976
6/1977
120
1973
3/1974
1970
0/1971
Gl b l wheat
Global
h
stocks
k
Mil tonnes
Build up of public
stocks in US/EU
80
60
40
China
Major exporters
Other
20
0
2012
2/2013
2009
9/2010
2006
6/2007
2003
3/2004
2000
0/2001
1997
7/1998
1994
4/1995
1991
1/1992
1988
8/1989
1985
5/1986
1982
2/1983
1979
9/1980
1976
6/1977
1973
3/1974
1970
0/1971
Wh
Wheat
stocks
k as percent off use
45%
40%
35%
30%
25%
20%
15%
World
Major
j exporters
p
10%
5%
0%
Source: USDA
2012/2013
200
09/2010
200
06/2007
200
03/2004
200
00/2001
199
97/1998
199
94/1995
199
91/1992
198
88/1989
198
85/1986
198
82/1983
197
79/1980
197
76/1977
197
73/1974
197
70/1971
Gl b l rice
Global
i stocks
k
Mil tonnes
120
100
80
60
40
China
Major exporters
Oth
Other
20
0
40%
35%
30%
25%
20%
15%
10%
5%
0%
2003
3/2004
2000
0/2001
1997
7/1998
1994
4/1995
1991
1/1992
1988
8/1989
1985
5/1986
1982
2/1983
1979
9/1980
1976
6/1977
1973
3/1974
1970
0/1971
Ri stocks
Rice
k as percent off use
2009
9/2010
2006
6/2007
%
3
4.
5
%
3
6
6.
0
%
3
6.
8
%
3
6.
1
%
3
4.
6
%
3
3.
1
%
3
2012
2/2013
5
%
3
6
6.
0
%
3
6.
8
%
3
6.
1
%
3
4
4.
6
%
3
3.
1
%
3
2.
3
World
Major
j exporters
p
Source: USDA
2012/2013
200
09/2010
200
06/2007
200
03/2004
200
00/2001
199
97/1998
199
94/1995
199
91/1992
198
88/1989
198
85/1986
198
82/1983
197
79/1980
120
197
76/1977
Mil tonnes
140
197
73/1974
197
70/1971
Gl b l corn stocks
Global
k
Build up of
public stocks in
US
100
80
60
40
China
Major exporters
Oth
Other
20
0
.8
%
33
.5
33
.7
%
34
.5
%
36
.0
%
36
.8
%
36
.1
%
34
.6
%
33
.1
%
32
3.
7
%
3
4.
5
%
3
6.
0
%
3
6
6.
8
%
3
6.
1
%
3
4.
6
%
3
3.
3.
7
%
3
4.
5
%
3
6.
0
%
3
6.
8
%
3
6.
1
%
3
4.
6
%
3
3.
1
2012
2/2013
2009
9/2010
2006
6/2007
2003
3/2004
2000
0/2001
1997
7/1998
1994
4/1995
1970
0/1971
0%
1991
1/1992
10%
1988
8/1989
20%
1985
5/1986
30%
1982
2/1983
40%
1979
9/1980
50%
1976
6/1977
60%
1973
3/1974
C
Corn
stocks
k as percent off use
World
Major
j exporters
p
Source: USDA
2012/2013
2009/2010
2006/2007
2003/2004
2000/2001
1997/1998
1994
4/1995
1991/1992
1988/1989
1985/1986
1982/1983
1979/1980
1976/1977
1973/1974
1970/1971
Gl b l soybean
Global
b
stocks
k
Mil tonnes
70
60
50
40
30
20
China
Major exporters
Oth
Other
10
0
.8
%
33
.5
33
.7
%
34
.5
%
36
.0
%
36
.8
%
36
.1
%
34
.6
%
33
.1
%
32
%
3
4.
5
%
3
6.
0
%
3
6.
8
%
3
6.
1
%
3
4.
6
%
3
3
3.
1
%
3
31.
8%
33.
5%
%
33.
7%
34
34.
5%
36.
0%
36.
8%
36
36.
1%
34.
6%
33.
1%
32.
3%
32.
2%
31.
9%
33.
World
Major
j exporters
p
2012
2/2013
2009
9/2010
2006
6/2007
2003
3/2004
2000
0/2001
1997
7/1998
1994
4/1995
0%
1991
1/1992
5%
1988
8/1989
10%
1985
5/1986
15%
1982
2/1983
20%
1979
9/1980
25%
1976
6/1977
30%
1973
3/1974
35%
1970
0/1971
S b
Soybean
stocks
k as percent off use
G
Government
intervention
i
i policies
li i
• International Commodity Agreements (Gilbert)
• Regional reserves (Larson et al.; Miranda)
• National policies in developed countries
• US
• EU
• Intervention policies in developing countries
• China
• India (Basu, Ganesh-Kumar et al.)
US public
bli iintervention
i policies
li i
• Federal Farm Board (1929-1933)
• Nonrecourse loans (1933-current)
• Farmer Owned Reserve: (1977-1990)
• Payment in kind program
• PIK (1983): Producers took land out of production and were
compensated in in-kind payments
• Generic PIK certificates (1986-1990)
(1986 1990)
• Marketing assistance loans (1991-current): producers
have option
p
to repay
p y loans at world p
price
• prices well above support levels since 2005
• Humanitarian food reserve
F d lF
Federal
Farm B
Board
d (1929
(1929-33)
33)
• Goal: “to moderate or eliminate
•
•
•
•
•
undue and excessive
fluctuations in prices”
Grain Stabilization Corp
established positions in futures
and cash markets.
Declining world prices—GSC
owned 1/3 US wheat crop by
1932
Accounted for 2/3 of open
p
interest in Chicago, KC and
Minneapolis mrkts
Futures activity did not evade
necessity
it off buying
b i wheat
h t tto
support prices
Disbanded with New Deal farm
legislation
Commodity Credit Corporation
Nonrecourse loans (1933-present)
• 9-month loans collateralized by production
• Producer repays loans or forfeits collateral to Govt
• Specific rules for Govt resale (e.g., percent of loan
+ storage costs)
• Government-acquired stocks dumped on world
markets via concessional sales or paid to
producers in in-kind payments
• Since 1996, most producers have opted to repay
loans under marketing assistance loan provisions
• CCC stocks have been negligible since mid 1990s
F
Farmer
Owned
O
d Reserve
R
(1977-1995)
(19 199 )
• Loans extended to 3-4 years after which producers could
forfeit or repay loan
• Storage
St
payments
t subsidized
b idi d b
by govtt
• Operates as quasi-buffer stock
• If prices e
exceed
ceed 140% of support
s pport price—storage
price storage ssubsidy
bsid remo
removed
ed
• If prices exceed 160% of support price—producer must repay loan
• Large stockpiles prompt changes in 1985 to limit size of
reserve (30 percent of total use)
• FOR stocks negligible after 1988-89
1988 89 drought
1955/56
6
1957/58
8
1959/60
0
1961/62
2
1963/64
4
1965/66
6
1967/68
8
1969/70
0
1971/72
2
1973/74
4
1975/76
6
1977/78
8
1979/80
0
1981/82
2
1983/84
4
1985/86
6
1987/88
8
1989/90
0
1991/92
1993/94
1995/96
1997/98
0
1999/00
2001/02
2
2003/04
4
2005/06
6
Wh
Wheat
Price
Pi S
Support
$/tonne
180
Mil tonne
40
160
35
140
30
120
25
100
80
20
60
15
40
10
20
5
0
0
Govt stocks
Source: USDA
Price
Support
Release
1955/56
1957/58
1959/60
1961/62
1963/64
1965/66
1967/68
1969/70
1971/72
1973/74
1976/77
1978/79
1980/81
1982/83
1984/85
1986/87
1988/89
1
1990/91
1
1992/93
1
1994/95
1
1996/97
1
1998/99
1
2000/01
2
2002/03
2
2004/05
2
G
Government
held
h ld wheat
h
stocks
k iin US
Percent of total use
120%
100%
80%
60%
40%
20%
0%
Lessons
• Despite name, programs were more about enhancing
price rather than stabilizing price
• Experience
E
i
suggests
t narrow price
i b
bands
d ttend
d tto d
do good
d
job maintaining floor, but probability of stockouts high
unless floor is well above market clearing levels
levels.
• Public stocks tend to crowd out private inventories.
• But,
But wider bands while more effective
effective, more costly and
can lead to unsustainable accumulation of stocks
((Miranda and Helmberger
g 1988; Williams and Wright
g
1991; Gouel 2011)
C
Conclusions
l i
• Tight
Ti ht grain
i and
d oilseed
il
d stocks
t k h
have resulted
lt d iin hi
high
h and
d
•
•
•
•
volatile prices since 2005.
Some hope for moderation with return to trend yields and
slowing of biofuel demand, at least in short term.
Stock rebuilding
g will likely
y lead to substantially
y lower
commodity prices barring unforeseen weather
disturbances.
Productivity growth will be important factor in determining
long-run price movements.
US experience with stock intervention programs suggest it
is far easier to defend price floors than operate buffer
stock schemes, but acquisition and storage costs are
high.
high