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Global cereal crops plateauing, Olam divests Lansing stake, EU grains to fall in ‘14

By Maggie Hennessy

- Last updated on GMT

Almost one-third of global cereal crops are set to have reached maximum yields, raising concerns on food production to meet growing population
Almost one-third of global cereal crops are set to have reached maximum yields, raising concerns on food production to meet growing population

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About 30% of the major global cereal crops may have reached their maximum yields, Olam International is dumping its 50% stake in Lansing Olam Canada to focus on the rest of its grain business, and despite notable gains in wheat production, the EU grain harvest is projected to fall in the coming year.

Nearly a third of global cereal crops at max yield?

About 30% of the major global cereal crops—including rice, wheat and corn—may have reached their maximum possible yields in farmers' fields, raising concerns about efforts to increase food production to meet growing global populations, according to research from the University of Nebraska. 

Yields of these crops have recently decreased or plateaued, the researchers found. Future projections that would ensure global food security are typically based on a constant increase in yield; a trend that this research suggests may not be possible. 

Estimates of future global food production and its ability to meet the dietary needs of a population expected to grow from 7 billion to 9 billion by 2050 have been based largely on projections of historical trends. Past trends have, however, been dominated by the rapid adoption of new technologies (some of which were one-off innovations) that allowed for an increase in crop production. As a result, projections of future yields have perhaps been too optimistic, based on the findings of UNL scientists Kenneth Cassman and Patricio Grassini, of the agronomy and horticulture department, and Kent Eskridge of the statistics department. 

They studied past yield trends in countries with greatest cereal production and provide evidence against a projected scenario of continued linear crop yield increase. The rate of yield gain has recently decreased or stopped for one or more of the major cereals in many of the most intensively cropped areas of the world, including eastern Asia, Europe and the US, according to their research. 

Olam divests Lansing Canada

Olam International Ltd., supply chain manager and processor of agricultural products and food ingredients, has disposed its entire 50% stake in Lansing Olam Canada by way of a $5.4 million share repurchase arrangement. Following the divestment, Lansing Olam Canada will no longer be a jointly controlled entity of Olam.

The transaction is not expected to have a material financial impact on Olam for the financial year ending June 30, 2014. The other 50% of Lansing Olam Canada is controlled by its joint venture partner Lansing Trade Group LLC.

KC Suresh, president and global head of Olam’s grains business explained that the exit from Canada will “allow us to concentrate our resources on the rest of our grains businesses in line with the company’s refreshed strategy”.

EU grain harvest projected to fall in ‘14

The European Union (EU) grains harvest will fall next year despite the third biggest rise in wheat production, according to Strategie Grains. The consultancy, in its first forecast for EU production next year, pegged the soft wheat harvest at a five-year high of 138 million tons, up 2.4% year on year.

Output next year is expected to drop by a combined 2.4 million tons in France and Germany, the top two producing countries; in Spain, which had unusually benign weather this year; and in the Czech Republic and Poland.

These losses were more than offset by an extra 5.8m tons of combined production from Sweden, Denmark and the UK, where 2013 output was dented at the latest harvest by poor autumn planting conditions last year, to a 12-year low of 11.9m tons.

The Strategie Grains forecast factored in a rise of 3.8% to 24.1m hectares in soft wheat area, partly offset by a fall in yield of 0.1 tons per hectare.
At 5.7 tons per hectare, the 2014 yield is still forecast at a historically high level. The overall grains harvest will drop by 4.4m tons if, at 297.0m tons, still representing a historically high level.

Extra wheat sowing will come at the expense of other grains including barley, corn and rye. Overall grain area is expected to fall 400,000 hectares to 57.2m hectares. Barley production will fall by 9% to 54.5m tons, with particular declines in Germany, Romania and Spain, and in the UK where output was spurred this year by a leap in spring plantings on ground left vacant by the dismal autumn sowing period. 

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