Can the world get through a year without a major disaster?
Does the world face another food
crisis in 2013? Rising production of major commodities including rice and other
staples has kept the crisis at bay during recent months as farmers, reacting to
record high prices, increased their plantings to record levels.
However, the United Nations Food
and Agriculture Organization warned in October that world grain reserves are so
low that severe weather in the United States or other food-exporting countries
could trigger a major hunger crisis.
The US, which experienced record
heat waves and droughts in 2012, now holds in reserve a historically low 6.5
percent of corn (maize) stocks, the FAO warned, with prices rising to record
levels during the crop failure. The US is the world's largest exporter.
Overall, food consumption has
exceeded the amounts grown during six of the past 11 years, officials say, as
the world has teetered on the edge of crisis only to recover somewhat.
Countries have run down reserves from an average of 107 days of consumption in
2002 years ago to under 74 days recently.
While analysts don't believe
rising prices will trigger the kind of crises seen in 2008 and 2011, when the
world faced structural deficits in wheat and rice, they are concerned that high
prices are driving the world's poorest people out of their ability to feed
themselves.
The NGO World Hunger estimates
that 925 million of the world's population are unable to feed themselves, with
Asia and the Pacific accounting for 578 million of that total. Cereal prices
have declined by a modest 2.4 percent, largely the result of lower demand as
economies have stagnated in the global financial crisis that began in 2007, the
FAO reported in early January although the world is in an era of stubbornly
high prices. Wheat prices were up annually by more than 20 percent in October
2012.
Thus far in 2013, drought has
persisted in almost 19 percent of the US. Poor rains over the autumn/winter
period in big farming states like Kansas and Oklahoma are affecting wheat,
which is a winter crop. Even so, some experts say it is too early to forecast
how this will affect global food security.
"Any new failure of a maize
harvest could see prices doubling quickly. It may take another couple of years
of regular harvests before those stocks rise to levels that give sufficient
insurance against occasional shocks."
Abdolreza Abbassian, secretary of
the Intergovernmental Group on Grains at FAO, said he doesn't expect the US
drought to have a huge impact on global supplies of wheat yet, "but should
we record another climatic shock in Russia, then we could be in trouble."
He said a clearer picture will emerge in February during the Northern
Hemisphere spring, when details of how much grain each of the major producers
will be selling becomes available.
But other experts see things
differently. Steve Wiggins, development and agriculture expert at the Overseas
Development Institute (ODI), a UK-based think tank, said in an email:
"Do we not have a food price
crisis? Prices are high. Prices of maize and wheat leapt up in mid-2012 when it
was clear just how bad the US maize harvest might be, adding US$50 a ton or
more to the prices... Prices are 50 percent or more higher than they used to
be."
Even so, he said, "we expect
farmers to be planting large areas and piling on fertilizer and other inputs to
get big harvests... If there are no major harvest failures, then by this time
next year, maize and wheat prices may have fallen back by US$50 a tonne or
more; perhaps even rice prices may fall somewhat... But if we do have problems,
and especially for maize, there's not much slack in the system."
The USDA has pointed out that
heavy rains in Argentina and Russia have affected wheat crops, and production
estimates have been revised downwards.
And maize stocks remain low, with
a major portion of the US crop being diverted to biofuels production. "Any
new failure of a maize harvest could see prices doubling quickly. It may take
another couple of years of regular harvests before those stocks rise to levels
that give sufficient insurance against occasional shocks," Wiggins said.
He reckoned the impact of
2007-2008 food price shock has not "fully unwound. I expect prices to fall
back somewhat over the next two or three years, for the simple reason that the
many farmers in the world who have any spare capacity have to be motivated by
current price levels to go for bumper harvests. It's not that hard to raise
production by another 5 percent to 10 percent if the price is attractive
enough. Right now, maize and wheat prices look very rewarding. "
Was there a crisis in 2012?
The experts agree that a global
food price shock was averted in 2012. Lower demands for grains helped push down
global prices, preventing them from spiraling out of control.
The world avoided a repeat of the
crises of 2008 and 2011 because the ratio of grain stocks against demand was
not as high as in those earlier years, Christopher Barrett, a professor of
applied economics at Cornell University in the US, told IRIN via email.
Existing stocks of cereals across the world were able to absorb the US
drought-induced shock and other disruptions, he added.
"But also maize - the grain
that led the price rise of 2012 - is quite different from rice and wheat -
which led the 2008 and 2011 spikes, respectively," he said, explaining
that a great deal of maize is used industrially, such as for livestock feed,
ethanol and corn syrup, and companies are better equipped to find substitutes
than are consumers.
Barrett added that major
maize-trading countries' governments "are less likely to enact policies
like the rice exports bans of 2007-2008 or the wheat export bans of 2010-2011,
or the Philippines' procurement contract of 2008," moves that exacerbated
those earlier crises.
ODI's Wiggins reasoned that
"things didn't get worse in 2012 because, fortunately, the US maize crop failure
was pretty much the only major shock of the year, while farmers the world over
have been planning for bumper harvests, so production has been quite high, even
allowing for the US maize harvest".
Cheaper maize offered by
competitors - mostly from the Ukraine - has made its way to traditional US
markets like South Korea and Japan, USDA officials pointed out.
"High food prices may no
longer have the shock impact that they had back in 2008. Adjustments have taken
place," said Wiggins. "In some fast-growing countries, wages are
higher than they were, for example. Other adjustments may have taken
place," he said, citing as examples "people switching to lower-cost
staples, wasting less food, [and] finding ways to adjust household budgets so that
staple food consumption holds up".
"Yet in other cases,"
he continued, "one fears that hardship is being borne in silence. Price
shocks are no longer that newsworthy, and we collectively slump towards the
sense of ‘that's just the way things are'."
(With reporting from IRIN, a
service of the UN Office for the Coordination of Humanitarian Affairs)
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