:. Food Industry News


Proposal to Curtail Exports Jars US Wheat Industry

Source: Reuters
07/03/2008

Washington, March 6 - The U.S. wheat industry is hoping to smother a proposal by the baking sector to curtail exports in a bid to ease surging wheat and flour prices, a move some see as a dangerous turn toward the past.

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The American Bakers Association will lobby the Bush administration and members of Congress next week to help ease "critically low reserves" of wheat, suggesting the Agriculture Department should stockpile wheat and free conservation land.

"This is raising such serious domestic food security issues that ABA is requesting that USDA curtail wheat exports until bakers and other domestic users are guaranteed the supplies they need," the ABA said in a recent statement.

The proposal comes as the world struggles to adjust to spiraling commodity prices, driven by poor harvests, tight stocks, rising incomes and growing biofuel production.

Cereal prices, for instance, jumped 41 percent from December 2006 to December 2007, according to an index from the United Nations' Food and Agriculture Organization. And many believe that high prices are here to stay.

More and more countries, like China and India, have seized on export bans, taxes or other limits in an effort to ease rising food prices that are fueling unrest among the poor.

In the United States, wheat growers, millers and exporters are lining up against any such moves, arguing that history has proven they are ineffective -- pointing to a 1980 embargo that actually preceded a decline in grain production area.

The wheat industry argues that farmers will ease high prices by increasing production. "Markets adjust themselves," said Rebecca Bratter, a trade analyst at U.S. Wheat Associates, which promotes exports.

Such a move is also seen as a dangerous precedent that could put off customers abroad and threaten overall farm exports that are predicted to top $100 billion this year.

"We criticize China, we criticize Argentina, then we do it?" Bratter asked.

It certainly doesn't hurt that the prices are a windfall for wheat producers.

Gary Blumenthal, an analyst at World Perspectives consultancy, called the idea a "policy faux pas" that in the past had helped spur soybean production in South America, now a leading competitor to U.S. farmers.

While it is unclear whether the idea would get any support in Congress, more and more lawmakers are voicing concern over the mounting cost of food.

As of late February, overall U.S. food prices were predicted to increase 3 percent to 4 percent in 2008, in the same ballpark as past years.

But cereals and bakery products appeared set up for an unusually large increase of up to 6.5 percent.



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