STRUCTURAL FEATURES AND DYNAMICS OF THE WORLD GRAIN MARKET
STRUCTURAL FEATURES AND DYNAMICS OF THE WORLD GRAIN MARKET
Olesya Drebezova
post-graduate student of the Department of International Trade and Customs, Rostov State University of Economics (RINH),
Russia, Rostov-on-Don
ABSTRACT
The article discusses the structure and dynamics of the world grain market, defines the main features of the functioning of the world grain markets, and also examines the main factors and conditions of the world grain market, which allows us to understand the main determinants of the development of the world grain market at the present stage.
Keywords: world grain market, grain exporters, dynamics of grain production and consumption in the world
The world market of grain is the most capacious market of agro-food products. The situation there has the greatest impact on the state of the world food problem. It largely determines the development of other important food markets, especially meat and dairy products.
Grain and derived products constitute a significant part of raw materials for food and processing industries. Thus, the products of the grain complex largely form the sectoral proportions not only in agro-industrial production, but also in the entire economy of the country. [1 ]
Compared to most industrial and food products, cereals are unique in that they are indispensable commodities that meet human needs for food and are part of the food security of the country. Because of the action of climatic and geographical conditions that affect the level of grain crops, the number of grain exporting countries in the world market is much less than grain importing countries. [ 2 ]
From this point of view, grain export has not only economic but also social effect, since it is associated with food security. In addition, it is the export of grain crops that is influenced by political factors, as well as export-import policy instruments in the trade of grains through the mechanisms of state regulation in this segment of the world market. [ 3 ]
An important feature of grain as a special strategic product on the world market is that the profitability of grain sales is ensured only with large consignments. Further, it should be noted that grain is not directly suitable for food, but requires several stages of processing to obtain bakery products. In addition, storage, transportation of grain requires special containers for transportation by automobile, sea and railway transport. The quality of transport infrastructure for grain transportation essentially affects consumer properties of grain crops and is reflected in the market price of grain on world markets.
Such countries as the USA, Brazil, EU and Argentina and others are the main exporters on the world grain market. In recent years, Russia, Ukraine and Kazakhstan have also become a major supplier- Figure 1.
Figure 1. World grain market: exporting countries 21/22 [ 4 ]
Russia and Ukraine account for 30% (Russia -20%, Ukraine -10%) world wheat trade, about a fifth of corn and 12% of all calories traded in the world. The U.S. has a 21% share of the world grain market, the EU- 11%, Argentina -12%, Brazil-9%.
Global food prices jumped up dramatically well before February 2022. Immediately after the coronavirus pandemic hit global supply chains, they crept upward in virtually every product category. By the end of 2021, it was hard to find any food item that didn't go up in price by at least 70%. Some things were becoming three or more times more expensive than before the crisis. Wheat specifically was $5 a bushel in mid-2020, rising to $8 by November 2021. Forecasts generally said that the increase would continue, due to the dynamics of the world grain market, where demand for wheat exceeds supply -Figure 2.
Figure2. World wheat market 2013/14- 2022/23 [ 4 ]
Prolonged drought in northern hemisphere countries led to a significant reduction in the latest FAO grain production forecast for 2022. Global cereal production in 2022 is down 17.2 million tons from the previous report published in July and is now expected to decline by 1.4 percent (38.9 million tons) year over year. [ 4 ] Since grain is a strategic commodity, often the export motivation of its suppliers (unlike, say, oil) may not fully coincide with the interests of the respective states, both for political reasons and in case of crop failures.
Since grain is a strategic commodity, both for political reasons and in the event of a crop failure, the export motives of its suppliers (unlike, for example, oil) may not be fully consistent with the interests of each country. Most grain is supplied under direct contracts on the world market grains.
In recent years, tenders have been announced in many importing countries for the purchase of certain types of grain necessary for sustainable socio-economic development.
An important feature of the international grain trade is its susceptibility to weather and climatic factors and their seasonal nature. Global demand for cereals is also driven by a growing world population and improved quality of life. This will lead to increased consumption of meat and dairy products and a corresponding increase in demand for wheat. In recent years, these factors have become most prominent in countries such as China and India. Rapid economic growth and rising living standards increase life expectancy and widen the gap between supply and demand in the world grain market - Figure 3.
Figure 2. Dynamics of demand exceeding grain production 2013/14- 2022/23 [4 ]
From 2013/14 to 2022/23 demand over supply (production) of grain in the world wheat market increases from 185.1 million tons to 297.1 million tons, which is the "gap" for the period under review 112.1 million tons. This dynamics shows the growth of demand over production of grain as a sustainable trend of the world grain market.
However, the average data masks very serious differences between individual countries. For example, the ratio of wheat stocks to consumption in the U.S. in recent years has exceeded 70%, while in the least developed countries it is below a critical level.The development of the international grain market is mainly influenced by the further growth of the world population in importing countries. At the same time, the role of wheat as a food crop is increasing in many developing countries. Countries where rice is the traditional crop (mainly China) are experiencing an increase in wheat consumption due to rising incomes and improving nutritional status of the population.
Among the most needy countries, where the average per capita food consumption in terms of energy value is less than 2000 kcal per day, are mainly tropical African countries (Burundi, Democratic Republic of Congo, Liberia, Sierra Leone, Tanzania, Central African Republic, Eritrea, Ethiopia, Zambia).[ 5].
The size and level of development of agriculture in countries that are major grain exporters depend mainly on the level of grain yields, the organizational form of agriculture, the efficient use of production and transport resources, a developed material and technical base, as well as favorable natural and climatic conditions and accessibility. The most important factor for wheat exporters is state regulation of wheat exporters. Thus, these conditions contribute to the effective development of the world market for wheat and grain production, to ensure food security, the population of the country needs the effective functioning of the grain market, which is a complex system that operates under the condition of a balance between supply and demand, market prices, the development of grain storage and transportation infrastructure, as well as government mechanisms for regulating grain exporters.
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