World Grain - August 2015 - 8

FROM THE EDITOR-IN-CHIEF

Global trajectory
lower on prices

aking long-range forecasts about
grain prices as well as prospects
for food demand in the two largest nations, China and India, requires a
good amount of bravado. Doing that also
requires a strong base, and none is better
equipped for that than Carl Zulauf, a professor in the Department of Agricultural,
Environmental and Development Economics at Ohio State University. Writing for the
farmdoc daily of the University of Illinois,
Zulauf authored two pieces that may be
interpreted as predicting a less than bullish trend for corn, soybeans and wheat.
As might be expected of someone making
such projections, the professor includes
the caveat that his analysis is not a view of
short-term prospects, but should be seen as
"a forecast of the longer-term currents buffeting price determination."
As a long-time member of the Ohio State
staff, Zulauf has enjoyed a successful career
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received for his teaching and research in agricultural economics.
In addressing "long-term perspectives"
for corn, soybeans and wheat, he sets the
century between 1913 and 2014 as his base.
+HXVHV³UHDOSULFHV´ZKLFKDUHUHÀHFWHGLQ
indexes based on 2014 averages of $3.65 per
bushel for corn, $10.05 for soybeans and $6
for wheat. This results in 1913 "real prices"
for the three at $15.76, $42.80 and $18.87.
³7KH ORQJWHUP GHFOLQH UHÀHFWV D VLPSOH
story: Supply expands faster than demand,"
Zulauf observes. Acknowledging that it is
GLI¿FXOW WR LPDJLQH WKLV ORQJUDQJH ZHDNness in view of what happened in the immediate past, he acknowledges the sharp price
variations in periods of prosperity. Most
striking, he notes, is the price steadiness beWZHHQDQGDVJHQHUDOSULFHLQÀDtion offset declines. The power of the corn
biofuel program stood out in the sharp price
rise between 2005 and 2012. That period
shows how exceptional strength stems from
dual forces instead of single food demand.

The latter, he says, "has not been enough to
offset the supply increase."
In his separate study of trends in grain demand in China and India, Zulauf does not reODWHWKHVH¿QGLQJVWRWKHGHFOLQLQJORQJWHUP
trend in prices, although his demand forecast
for these two nations is not bullish. He focuses on the importance of per capita income as
DVLQJOHLQÀXHQFHRQIRRGGHPDQGZLWKWKDW
measure for China soaring recently and India
also rising, but less so. His numbers graphically underscore this difference. Between
1980 and 2013, per capita calorie intake increased by 23% in India and by 44% in China.
By 2013, per capita calorie intake in China
was 26% higher than in India. Underscoring
the inversion in income ratios between the
two countries, he notes that in 1980 per capita
income in China was 47% lower than in India,
but by 2013, China's per capita income was
118% above India's. As if those trends are not
impressive enough, Zulauf points to China's
relatively dramatic gains in animal protein
consumption, which is credited to both income gains as well as dietary preferences in
India that account for a large share of that
country's population eating vegetarian diets.
He also compares consumption levels in the
two countries to that of the 10 countries with
the highest per capita incomes. In calories
consumed per day, China has risen from 70%
of the top 10 in 1980 to 91% in 2011, whereas
India has risen from 65% to 72%.
While the annual rate of gain in per capita
calorie intake has not started to slow in either nation, Zulauf points to a likely slowing
in China's food demand in the next decade.
He acknowledges global food demand may
continue to grow in "the next few years,"
but anything approaching the last 20 years is
unlikely. This bolsters his long-term projection: "The question is not if but when will
corn crop year average prices be below $3
and pushing toward $2."
Morton I. Sosland
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World Grain - August 2015

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