September 13, 2010 / 12:58 PM / 7 years ago

Wheat price gains seen unlikely to fuel food crisis

* Wheat stocks bigger than in 2007/08 food price spike

* Production of maize, rice, other grains expected to rise

By Laura MacInnis

GENEVA, Sept 13 (Reuters) - Wheat price volatility linked to drought and fires in Russia is unlikely to strain global food supplies, despite growing fears of food inflation, an agricultural expert said on Monday.

Maximo Torero, director of trade and markets at the International Food Policy Research Institute (IFPRI), said the jump in prices following a ban on grain exports from Russia was isolated, temporary and not indicative of a broader crisis.

"Volatility is not the same thing as inflation," Torero said in a research note, suggesting the market surges related to the Black Sea drought would not be sustained enough to drive up bread and other food prices long term.

"Recent spikes notwithstanding, the prevailing trend is flat or slightly downward. In consequence, there should be no knock-on effects," he said of the spot prices for wheat, which rose by nearly one-quarter in July.

A United Nations investigator warned last week that riots in Mozambique over high bread prices could spread across other poor countries dependent on imported food, also pointing to protests in Egypt and strains on farmers in Syria. [ID:nLDE6861G5]

But Torero said it was wrong to link the Mozambique unrest to the global market price for wheat, saying the higher bread costs in the country followed a weakening of its currency, the metical MZN=, against the South African rand.

Mozambique depends heavily on food imports from South Africa. [ID:nLDE6861RP]

While the Black Sea drought has clearly dented wheat production this year, the IFPRI said robust harvests in the United States, Argentina, Australia and India were helping to keep global supplies firm.

Global wheat stocks are at 175 million metric tonnes, nearly 50 million metric tonnes more than in 2007/08, when grain stocks fell to record lows and staple food prices soared, said the Washington-based IFPRI's Torero.

"The situation today also differs with respect to other key commodities," he added.

The Food and Agriculture Organisation, a U.N. agency, expects 2010/11 maize production to exceed the 2007/08 total by 5 percent, with rice production up 3 percent and coarse grains such as rye, barley and sorghum up 4 percent, the IFPRI said.

Torero attributed much of the 5 percent rise in the FAO food price index in August to increased prices for oils, fats and sugar, with far less impact from wheat than widely thought.

The U.S. Department of Agriculture said last week the world wheat crop would be the smallest in three years but cut its supply forecasts by less than expected, allaying fears the world was headed for a repeat of the 2007/08 crisis. [ID:nN10250776]

Canada announced its wheat stockpiles at the end of the 2009/10 crop year rose 19 percent, surprising traders who had expected thinner inventories at a time of global supply anxiety. [ID:nN0882892]

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