Skip to main content

Food: Grain Stocks

Volume 700: debated on Tuesday 25 March 2008

asked Her Majesty’s Government:

What assessment they have made of world stocks of grain and their implication for the United Kingdom.

My Lords, I thank the noble Earl for this Question, which I think is the first time that this matter has been raised in either House at Question Time.

The current situation is that world grain stocks are forecast to decrease to 247 million tonnes this year, as a result of two successive lower wheat harvests and the increased demand for cereals from the food, feed and fuel sectors. The main impact on the United Kingdom and globally has been sharply higher prices, which, combined with policy changes such as the removal of the set-aside requirement for the 2008 harvest, will undoubtedly stimulate grain production in the UK and, we hope, elsewhere.

My Lords, I thank the Minister for his reply. Does he agree that, while the situation is serious, the origin is not national? Is there a blueprint for managing this situation or will there just be a scramble for this vital commodity?

My Lords, it is not national as the noble Earl accepts. As I have said, removing set-aside, for starters, should stimulate grain production and we hope help to contain prices. The EU has taken other measures, including the temporary suspension of import duties on feed grains until the end of this growing season in June and the reselling of all the remaining intervention public stocks of grain. In the longer term, we expect set-aside to be abolished. As far as the UK is concerned, the Home Grown Cereals Authority—one of the levy boards—has been conducting, with the Cereals Industry Forum funded by Defra, risk-management training, so that all parts of the food chain can understand their particular role in that part of a very volatile situation, and one which we expect to remain volatile for some years to come.

My Lords, what impact has the move to bioethanol in the United States had on the availability of grain? Has the subsidy by the US Government had a major impact on the amount of grain going out of food production and into bioethanol?

My Lords, there is no doubt, that there have been some issues, particularly the effect on the harvest in the European Union and Australia. So far as the use of grains for biofuels are concerned—although the question relates to America—the EU has not been affected; some 2 per cent of production has been used for biofuels. The American situation is slightly different in the sense that in 2007-08 it used 80 millions tonnes of maize for biofuel and that is projected to rise to 110 million tonnes in 2008-09. There is some doubt as to whether that is sustainable, but it is not being done just to create fuel; there are other reasons. The subsidy, of course, is quite unacceptable.

My Lords, to what extent do the Government see pressure on grain supplies as a permanent shift? There is increased demand for livestock products worldwide, a drive to biofuels, and a refinery to be opened in the north-east of England shortly that will take over 5 per cent of our wheat crop in 2009. Does that mean that grain production will be at a premium in future? Other than the set-aside proposals, what policy changes do the Government have in mind to deal with that?

My Lords, the noble Lord is right in terms of policy changes. The basic reason has been the last two harvests. Three years ago the grain stocks were 330 million tonnes, so 80 million tonnes have gone in three years, generally speaking as a result of those two poor harvests. That caused the Ukraine and Russia to stick on export controls, which had an adverse effect as well. There will be volatility regarding animal feed stocks for some time. Relatively speaking, all livestock producers will be similarly affected, although pigs and poultry are obviously more dependent on the crops than cattle and sheep. The difficulties will all be treated the same, because this is a world commodity with world prices.

My Lords, does the Minister agree that, although there is no need to panic, we need a thorough examination by government and officials of the consequences of the extremely high world prices for wheat and, even more significantly, world record prices for rice, the principal food of the human race? Does he also agree that some countries have imposed export bans or intervened in the market already, and others plan to set up emergency stockpiles, so clearly the issue goes wider now than UK food prices and supply and is likely to affect food hunger, food aid and possibly political stability in some countries?

Yes, my Lords, to a greater or lesser extent, all the factors that the noble Lord mentioned will be relevant. There is no question about that, but there is no easy answer. The countries that have imposed export restrictions, including some in South America as well as the Ukraine and Russia, have done that for domestic purposes, trying to keep inflation down in their own countries. That has had added effect because of the adverse weather conditions; we have volatile weather conditions, as everybody knows. However, the actions taken will probably bring more land into production. So far as the EU is concerned, I mentioned set-aside. There will be a need to look at using land for biofuels. An inquiry was announced during the passage of the Climate Change Bill, in which the chairman of the Renewable Fuels Agency will have a look at the environmental impact and the impact on food prices of using food crops for biofuel. That is important, no doubt. Also, diets are changing round the world, especially in Asia and India, requiring more of the crops. Therefore, there will be more pressure on prices if we do not supply more crops. Clearly, no one Government can deal with that matter, but it is being looked at in the EU and on a world basis.

My Lords, has any estimate been made as to what contribution set-aside can make to resolving the problem?

My Lords, I do not know the full figures at present. It was a late decision last year; by and large, farmers had set their cropping plans for this year before the EU announced zero set-aside for one year. Long term, our aim is to abolish set-aside. It was 10 per cent, but not all of it will go back into production. The estimate is that about half of it has gone back into production this year. Do not hold me to the last 10th of a per cent, but about 5 per cent extra land will be for crops. We want to take account of that, but not to lose all the environmental benefits that came from set-aside. However, one has to remember that set-aside was not an environmental measure in the first place, but a production measure. Now that we need more production, it makes sense to question why set-aside is there.

My Lords, is it not worth considering the following calculation? If every Chinaman eats one more chicken a year and it takes something like 10 pounds of grain to produce one chicken, that 10 pounds multiplied by 1.3 billion people is an awful lot of grain. Does that very simply not show why there is a terrible pressure on the grain market?

My Lords, yes, and indeed those calculations have been done. If you then combine them with two bad harvests in both Europe and Australia, you get the doubling of prices which we have seen in the past year. Those have not all come through in food prices at the retail end of the market; there are still quite a few more. At present, the world stocks of wheat are at less than 70 days of consumption and the world stocks of maize are at less than 50 days of consumption. A lot of people around the world are looking at these figures in order to form a plan to deal with the issue.