The 2013 Global Food Outlook

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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