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Food importers

face months of grain

prices anxiety

PARIS: The world's poorest nations face months of anxiety over grain prices -- now at record highs and threatening their weak economies, analysts and traders said on Sunday.

Lack of rain is drying out the U.S. wheat belt and threatens to postpone for another year a much-needed recovery in global grain reserves from 20-year lows.

Doomsday predictions by Thomas Malthus, the 18th-century British cleric who predicted rising populations would run out of food, are far from being proved right.

But the margin for failure is uncomfortably slim in a year when Western farmers are struggling to make up for several annual production shortfalls which have eaten into stocks.

"I think we can get through this year on the back of stocks, but if there is a bad crop in 1996 then we could be in a more serious position," said Bill de Maria, assistant executive director at the International Grains Council.

Fears of damage in the United States, the world's largest grain exporter, started a stampede on frantic Midwest futures exchanges last week. Wheat and corn prices soared with a bushel of Kansas wheat touching an all-time high near $6.40.

Dealers said wheat in several important areas had been starved of moisture and appeared to be deteriorating rapidly.

Storms moving now into the Midwest could spark a sell-off if they bring enough rain. But with no let-up in demand, wheat importers face months of agonising volatility, traders said.

"The heat will not be out of this market until the end of July," said a senior U.S. trader in Geneva, the capital for grain deals between Western exporters and the Third World.

In a sign of alarm on Friday, Morocco, a key importer whose economy has already been hit hard by high prices, cancelled its second attempt in a week to buy 60,000 tonnes of foreign wheat.

Such a purchase would cost some $15 million today, whereas two years ago -- with exporter subsidies that have since been axed due to high prices -- it would have cost a third as much.

Consumption is rising steadily as more people in developing countries move to cities and grow accustomed to Western diets that eventually require grain -- bread, meat and dairy goods.

To prevent unrest, many countries which encouraged the trend are unwilling to halt the flow of wheat, meaning funds must be diverted from elsewhere in their economies, experts say.

"The have-nots are slowly creeping up on the haves. A higher proportion of a larger population is beginning to get a better diet," said another European trader. "The question is where does the money come from."

Adding to importers' unease, markets are obsessed by weather this year but they cannot fully erase the memory of Soviet raids on U.S. markets which caused the last price boom 20 years ago.

Russia has tightened food purchases despite its worst wheat harvest in a generation in 1995. But with elections looming in June, some Western traders still do not rule out a snap purchase that many say would be the last straw for tight wheat markets.

Concern over future food needs dominate the agenda for a 60-nation farm forum in Versailles, near Paris, from Monday.

The International Federation of Agricultural Producers heard during initial talks last week that food output would have to double in 20 years to feed an extra three billion people.

But the United States and most allies are confident new farm technology and freer trade will again head off a Malthusian disaster.-Reuter