G20 ministers of agriculture agreed on the measures necessary to increase the global food production and supply in order to stabilize food prices. The agreement is believed to be a major step towards reaching the goal. However, some experts disagree, saying that the changes are not enough, especially when it comes to the production of bio fuel.
experts name the following first steps:
· A list of foodstuffs for Food and Agriculture Organization of the UN headquartered in Rome, Italy.
· A Joint international research program on wheat
· Financing rice cultivation projects
· An emergency council to combat food crises
As the result of Wednesday’s talks they also abolished the restrictions on the export of humanitarian aid.
Tips for investors: what steps will be taken?
The world’s high-ranking politicians commented on the stabilization of food prices in the following way:
· According Bruno Le Maire, French Minister of Agriculture, more transparent food markets will reduce the price fluctuations.
· Robert Zoellick, President of the World Bank, called those steps moderate. But anyway, he is glad that G20 have finally paid attention to the global agricultural problems. He says that the poor supplies of food stuffs around the world, especially in poor countries, are the main reason for the continuous crisis.
Taking into account the growing demand for fodder in China and India (and other emerging economies with considerable meat consumption) the reserves of wheat and corn are definitely insufficient.
What are the results of the G20 meeting?
The meeting of G20 ministers of agriculture ended up with a 24-page declaration. In particular China and India provided their data on their food reserves in a very reluctant manner despite the fact that this information is fairly significant.
It was the first meeting of that kind and was initiated by France after the global prices on foodstuffs reached record-high levels.
The current highs are the result of last year’s ban on exports by Russia, draught in Western Europe and unfavorable weather conditions in Canada. This couldn’t but affect the situation in the Arab World.
Over the last few weeks there’s been a slight price decline. However, the cost of major wheat futures in Chicago was 50% higher. Against the background of the recent events some analysts anticipate a considerable decline in food prices in July.
The participants of the G20 meeting failed to reach an agreement over the reduction or cancelation of subsidies to bio-fuel producers. The declaration says the ministers will only continue discussing the issue.
Numerous international agencies share the opinion that bio fuel is the major factor that has been making foodstuffs grow in price over the last 4 years. In the USA more than 37% of the harvest was spent on ethanol production. Yet the figure doesn’t seem to be reduced this year.
Wheat prices: investment perspectives
Egypt bought French wheat. It turned out to be the market driver only for the August futures contracts. This year’s export potential of Russia may reach 17M tons, the one of Ukraine - 11M tons. The EU’s domestic market keeps seeing a long-term downtrend. The price may decline down to 175 € per ton. August’s wheat futures in MATIF gained €1,50 rallying up to €196,00 per ton. November’s contracts (new harvest) declined by €1,50 down to €195,25. July’s futures in LIFFE lost £3,50 declining down to £162,50/ per ton while November’s contracts (new harvest) declined by £0.1 down to £164,10 per ton.
The experts of the Department of Masterforex-V trading system note that wheat keeps being traded in the bearish wave C of Weekly. By now the price has stopped around the 61,8% Fibo level of the latest bearish wave of Monthly. The future succession of events will be determined by the mentioned level: either the price breaks and consolidates below it and moves further down to 535,86 or it breaks above the MF pivot and sloping channel, terminating the current wave and initiating a new bullish wave of the senior wave level.
