International Food Prices Rise to Six-Year High, Presenting an Opportunity for Australian Exporters

10 February 2021 Mervyn Piesse, Research Manager, Global Food and Water Crises Research Programme
Higher Chinese demand for feed grains and the imposition of Russian wheat export duties is pushing global food prices higher. Higher prices will benefit food exporters, including Australia, but will increase living costs for populations in poorer, import-reliant countries.


China purchased millions of tonnes of feed grain over the past four months. At the same time Russia, which is the world’s largest wheat producer, imposed export duties on wheat in December 2020 and plans to double those duties in March.

Those two developments have contributed to an increase in international food prices. The Food and Agriculture Organization’s Food Price Index, which tracks food commodities against their 2014-16 prices, rose to the highest level since July 2014. Sharp increases in global food prices in 2007-08 and 2010-12 contributed to political unrest in some lower income countries, particularly in the Middle East and Northern Africa.


China has historically imported three to five million tonnes of corn each year. In 2020, however, it imported a record 11 million tonnes, with almost seven million tonnes purchased from the United States. In a single week in February 2021 China purchased 5.8 million tonnes of the grain from the US, almost equal to the record amount that it purchased over the preceding year.

Grain market analysts claim that the last time there were such high purchase levels in such a short time period was during the so-called Great Grain Robbery in 1972, when the Soviet Union bought large amounts of US corn and wheat after suffering widespread crop failures. Grain prices rose by at least 30 per cent as grain stockpiles dwindled. It is too early to determine if a similar scenario could play out now.

It is  not known how much corn was produced in China in 2020, but it had an estimated supply deficit of 17 million tonnes in 2019. That deficit was projected to increase to up to 25 million tonnes this year. It is possible that the deficit is even larger than those estimates. The main corn-growing regions in the north-eastern provinces suffered from three typhoons in two weeks during the 2020 summer, which destroyed a large portion of the crop.

China is not just buying large volumes of corn. In the last few months it has purchased large amounts of canola from Canada, so much so that it has almost depleted that country’s reserves six months ahead of the next harvest. It is also purchasing large volumes of barley from France.

There are many possible reasons why China is purchasing large amounts of grain at this time. Chinese grain production is probably considerably lower than expected (and reported) in 2020, mainly due to severe weather events. China is also in the process of rebuilding its pig herd after the vast majority of it was culled due to an outbreak of African Swine Fever. Beijing is also still committed to the Phase One US-China Trade Deal, despite failing to reach any of the 2020 import targets.

The southern provinces of China experienced some of the most severe floods in at least thirty years in 2020. The state-owned Global Times reported that the region experienced 21 large scale floods, more than any other year on record, and national average rainfall was the second-highest since 1961.

Rising Chinese demand for grain is occurring at the same time that the world’s largest wheat producer is constraining supply. Russia imposed a $40 per tonne wheat export duty in December 2020 to reduce domestic food prices. As Russian food prices continue to rise, however, it plans to double that duty in March. As a result, international wheat prices are likely to rise.

Rising international food prices will benefit food-exporting countries, including Australia. Even though it has lost access to most of the Chinese food import market, Australian exporters have quickly identified new markets for most of its agricultural goods. Most of the Australian barley crop, for example, is now sold to Saudi Arabia, which is an established market for the grain. A new barley market has been established in Mexico, with 35,000 tonnes of malting barley exported from Western Australia in January 2021. The Russian wheat export duties will also push up prices for Black Sea grain in the Middle East and South-East Asia, markets in which Australian wheat exporters have historically performed well.

Poorer, import-reliant countries will experience the greatest hardship from rising international food prices. Australia is in a position to benefit from higher international prices and re-establish itself in markets in which it has historically performed well. It is also possible that new market opportunities will open outside of traditional regions.

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

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