Creation of 'Grain OPEC' under consideration

Rising global grain prices have led to calls for the creation of a grain cartel, which could operate along the lines of OPEC.

With global grain prices reaching levels not seen in a generation, the idea of uniting all grain producers within an international organization, which many call 'the Grain OPEC', has arisen again. The industry is examining how such an organisation could work at an international grain conference in Moscow.

Proponents say this could overcome supply and demand fluctuations, which can be affected by issues as diverse as droughts in Australia or North America, transportation issues in Europe, changing food demand in emerging economies and increased use of grain as a means of creating fuel.

Russian Grain Union President Arkady Zlochevsky says that although OPEC is the first frame of reference, it is not necessarily how a grain organisation would work.

“OPEC regulates world oil prices from the viewpoint of the producers' gains and interests, while the grain organisation should watch over the interests of not producers but consumers,” proposed Arkady Zlochevsky.

Rising grain prices in Russia have seen some state actions which have led to sudden price drops for producers, which in turn inhibit their ability to plan for future production.  When prices get too high consumers are affected, as they have been in Russia recently with the cost of bread jumping significantly – and this leads to inflationary pressure.

The effect could be passed on to many household food items with grain being a staple feed item for livestock. Zlochevsky says it is possible to stabilize the balance, but only at a global level. Although many Russian commentators an organization will be founded sooner or later, foreign analysts are more sceptical.

“Grain OPEC – that's difficult. It's already difficult in the sphere of oil and there you have a limited number of producers. In grain it's a different picture – you have many producers. It's difficult to get them into one boat,” warned Stefan Uhlenbrock, grain analyst at F.O.Licht.

Russia is currently one of the world’s largest grain producers, along with the European Union, the United States, Canada and Australia.  There are different factors affecting demand and production in all of these places, and reconciling their interests may be difficult.  But a grain organisation which enables localised supply and demand issues to be addressed at an international level may garner support in the face of a changing global consumption environment.