World Food Prices Set To Rise
By Jim Lobe
07 May , 2004 by
OneWorld.netWASHINGTON - U.S. and global consumers, already hit hard by sustained high oil prices, may be looking at increases in food prices as well over the coming year, according to an independent Washington-based research group, the Earth Policy Institute (EPI).
According to the group's calculations, four successive shortfalls in annual grain harvests have reduced the world's carry-over stocks to their lowest level in 30 years, amounting to only 59 days of consumption.
That is 11 days short of the 70-day level that is traditionally considered the minimum needed for food security.
The relative shortage in stocks is partly reflected in the fact that global rice prices are at a five-year high, while wheat and corn are fetching the highest prices on the global market since 1997.
The last time global stocks were so low in the early 1970s, wheat and rice prices doubled with disastrous consequences for millions of the world's poor.
A similar pattern may be asserting itself now, according to Lester Brown, EPI's founder and president, as basic food and feed commodities are on the rise.
Wheat futures for May 2004 that traded as low as US$2.90 a bushel within just the last year on the Chicago Board of Trade recently exceeded $4 a bushel, a 38 percent rise. Similarly, the price of corn is up by 36 percent, the price of rice by 39 percent, and the price of soybeans -- a major source of animal feed -- have doubled to over $10 a bushel.
Brown says that the challenge of rebuilding the stocks to the 70-day consumption level will be very difficult to overcome, particularly if early indications for the winter wheat crop, which was planted last fall, are not hopeful.
Last year's global grain shortfall of 105 million tons was the largest on record, amounting to five percent of annual consumption of 1,930 million tons.
So, to increase stocks to even 65 days of consumption, Brown says world grain output must not only eliminate last year's shortfall, but increase by another 15 million tons just to feed the 74 million people who will have been added to the global population this year. On top of that amount, another 30 million tons of grain will have to be added to get to the 65-day goal -- for a total of 150 million tons.
Based on early indications, Brown thinks it may be possible to increase the total harvest by about 60 million tons over last year's harvest, but that would result in a further -- and increasingly dangerous -- reduction of global stocks.
"If the estimated 2004 shortfall of 60 million tons materializes, it will take the world into uncharted territory," notes Brown. "Either grain stocks will drop by 12 days of consumption, falling to an all-time falling to an all-time low of 47 days, or food prices will rise and force a reduction in consumption-something that will be particularly difficult for the 3 billion people who live on less than $2 a day. Some combination of declining stocks and prices increases is the most likely scenario", he says.
In any event, the result is not pleasant to contemplate: the re-emergence of a ''politics of scarcity'' that took place in the early 1970s when exporting countries restricted grain exports in order to curb the rise in domestic food prices.
"There are already early signs of this," says Brown, who points to the temporary limits on grain exports imposed by Canada, Australia, the European Union, and Russia at various times over the past 20 months.
The failure of recent harvests to keep pace with consumption has been due primarily to environmental and weather-related factors, according to Brown, who stresses that falling water tables, spreading deserts, and rising temperatures have made it very difficult for farmers to increase production.
In 2003, record temperatures in Europe resulted in major losses in grain production, while U.S. and Indian harvests were damaged by higher-than-usual temperatures the previous year.
In addition, the diversion of water in many countries from irrigation for farming to support rapidly growing urban populations, particularly in developing countries, is also making it more difficult for farmers to increase yields. In addition, important aquifers are being depleted by increased pumping.
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