Is Another Food Crisis Coming?

Over the past month, global grain exports have been hit by two calamities that have been exacerbated by worries over global warming, particularly affecting the world's rice crop. For the better part of a decade, the world's food scientists have been warning against what they have called an Event – a confluence of natural calamities that drive the price of staples – particularly grains – past the point where hundreds of millions of poor will no longer be able to eat.

The question isn't whether there are enough grains but whether governments will panic again as they did during the 2007-2008 rice crisis. (As Asia Sentinel reported here, in May 2008). Governments across the planet from Vietnam to Egypt banned exports, driving rice prices from US$300 per metric ton to more than US$1,100 and causing shortages and food riots in several countries and resulting in the fall of the Haitian government. Russia has ordered an export ban until the end of the year and Ukraine is said to be considering one as well.

Two reports, one by the International Food Policy Research Institute on the devastation to wheat stocks in Russia and the Ukraine from drought and fires, and a second on climate change and rice, by the International Rice Research Institute, paint a rather grim picture that has been complicated by some of the worst flooding in history in Pakistan, China and the Indian province of Ladakh.

"It is early days and we are monitoring the situation closely," said Marcus Prior, senior spokesman for Asia for the World Food Programme, by email from Pakistan. "WFP is concerned at rising wheat prices - any significant price hikes and volatility on food markets may impact poor and hungry people. No one wants a repeat of the food price crisis that caused so much suffering in 2007- 2008. What we are seeing now is price rises triggered by situations specific to the wheat producing areas, such as droughts and fires."

The World Food Programme bought the bulk of its wheat, which constitutes 23 percent of all WFP food purchases, from the Black Sea region of Russia, Ukraine and Kazakhstan last year, Prior said. So far in 2010, the WFP has purchased 550,000 metric tons of wheat – much of it in June, when prices were lower because of expectations of good harvests. It's unsure how volatile they will be.

The IFPRI report, titled "Fires in Russia, Wheat Production, and Volatile Markets: Reasons to Panic?" estimates that in Russia, one of the worst droughts in decades has destroyed 20 percent of the country's wheat crop, and there are fears that more fields will be lost due to recent wildfires in the western part of the country.

"Considering that Russia accounts for roughly 8 percent of the world's wheat production, the current loss is equivalent to a 1.6-percent decrease in the global wheat supply," the report continues. Russia's wheat exports were already expected to fall 30 to 40 percent over 2009 because of the drought. It isn't clear how much the fires will cut additionally into exports. But given current expectations, Russia's exports are expected to fall by 6 to 8 million metric tons.

On August 2, 2010, Chicago Board of Trade (CBOT) wheat contracts rose for the fifth straight trading session—by 5.6 percent; on August 4, they rose by 6.6 percent, which is the highest increase since September 2008, according to the report. Current futures prices are above US$7 per bushel, also for the first time since September 2008.

Almost unnoticed because of the wheat crisis, barley, an important feed grain for the European livestock industry, has been affected as well, more than doubling in six weeks, according to an Aug. 8 story in the Financial Times. That is raising the possibility that the price of meat and poultry in the Eurozone will go up as well – not to mention the price of beer, of which barley is an important ingredient.

Fortunately, according to Samarendu Mohanty, head and Senior Economist for the Social Sciences Division of the International Rice Research Institute in the Philippines, the world had been expecting the largest wheat crop ever. The fires and drought in Russia, the Ukraine and Kazakhstan "may bring it down a bit because the Russian situation is quite bad," Mohanty said. "But stocks should be such to keep the price relatively settled."

In addition, rice stocks, after the disastrous run-up of prices in 2007 and 2008, have risen to the point where levels are comfortable, Mohanty said, with about 90 million metric tons of reserves on hand – 40 million tons in China, 20 million in India and other countries making up the rest. Even the Philippines, which has long been the world's biggest rice importer, has 2.5 million tons in stock, he said.

Nonetheless, extensive flood damage in Pakistan is expected to cut exports considerably from the 4 million tons last year, primarily from the provinces of Sindh and Punjab, both of which have been devastated by the floods. In addition, Mohanty said, storage in private warehouses has been hit hard, along with seed laid aside for next year, meaning Pakistan's

2011 crop may be endangered as well.

But while rice stocks are healthy at the moment, the IRRI's newest report, issued Aug. 9, titled "Rice and Climate Change," paints a pessimistic long-term picture, suggesting that "as a consequence of melting polar ice shields and glaciers and rising temperatures, seawater levels may rise on average by about 1 meter by the end of the 21st century."

Rice is grown in vast low-lying deltas and coastal areas in Asia, meaning it is one of the crops most vulnerable to climate change. "For example, in Vietnam, more than 50 percent of rice production is grown in the Mekong River delta – all of which would be affected by sea-level rises," the report states.

It is difficult to predict the precise effect, the report says. However, flooding caused by rising sea levels puts as much as 20 million hectares of rice-growing area at risk of being submerged. That means problems with salinity as sea water flows inland, as it did in Bangladesh and Burma following the disastrous tropical storms Nargis and Sidr in 2007, destroying vast rice acreages. In addition, increases in carbon dioxide levels and temperature can decrease rice yields because they make rice flowers sterile. And, while higher daytime temperatures may increase growth, night-time temperature rises of 1 degree Celsius may reduce rice yields by as much as 10 percent.

Water scarcity can be expected to be a problem in upland rice growing areas, the report continues. Average yield reduction in rain-fed, drought-prone areas ranges from 17 to 40 percent in severe drought years. Water scarcity already affects more than 23 million hectares of rain-fed rice production areas in South and Southeast Asia, not to mention 80 percent of the potential 20 million hectares of rain-fed lowland rice in Africa.

Drought also affects rice production in Australia, China, USA, and other countries, the report continues. Pests, diseases and weeds are also expected to increase, including brown spot and blast. Rodent pests, weed infestation and rice-weed competition are predicted to increase and will represent a major challenge for sustainable rice production. Also, extreme weather events have recently led to dramatic rodent population outbreaks in Asia due to unseasonal and asynchronous cropping.

"The World Food Programme is always concerned about price rises and volatility on commodities as these can sometimes lead to speculation and hoarding," Marcus Prior said. The question is whether, despite the healthy stocks cited by the IRRI's Mohanty, they will be available to the market when there is a need. That could cause problems. The United Nations Food and Agriculture Organization, in its latest report on food scarcity, estimated that 1.02 billion people are malnourished worldwide, the highest number since 1970 and making it extremely unlikely that the World Food Summit target of halving the number of undernourished by 2015 will be reached.