[A-List] World Food Prices Rising

[Bill Totten]

Environmental Neglect Shrinking Harvests in Key Countries

by Lester R Brown

Earth Policy Institute (April 28 2004)

When this year's grain harvest begins in May, world grain stocks will 
be down to 59 days of consumption - the lowest level in thirty years.
The last time stocks were this low, in 1972-74, wheat and rice prices
doubled. A politics of scarcity emerged with exporting countries, such
as the United States, restricting exports and using food for political
leverage. Hundreds of thousands of people in food-short countries,
including Ethiopia and Bangladesh, died of hunger.

Now, a generation later, a similar scenario is unfolding, but for
different reasons. After nearly tripling from 1950 to 1996, growth in
the world grain harvest came to a halt. In each of the last four years
world grain production has fallen short of consumption, forcing a
drawdown of stocks. During this period, expanding deserts, falling water
tables, crop-withering temperatures, and other environmental trends have
largely offset the positive contributions of advancing technology and
additional investment in agriculture.

Prices of basic food and feed commodities are climbing. Wheat futures
for May 2004 that traded as low as $2.90 a bushel within the last year
on the Chicago Board of Trade have recently topped $4 a bushel, a climb
of 38 percent. A similar calculation shows the price of corn up by 36
percent, rice up 39 percent, and soybeans doubling from just over $5 per
bushel to over $10 a bushel. Rises in the price of wheat and rice (the
world's two basic food staples) and corn and soybeans (the principal
feedstuffs) are contributing to higher food prices worldwide, including
in China and the United States, the largest food producers.

In China, where grain prices are 30 percent above those of a year ago,
the National Bureau of Statistics reports that retail food prices in
March were 7.9 percent higher than in March 2003. The price of vegetable
oil is up by 26 percent, meat by 15 percent, and eggs by 19 percent.

All countries are affected by the rising world price of basic food
commodities. The American Farm Bureau marketbasket survey, which
monitors US retail prices of sixteen basic food products in 32 states,
shows a 10.5 percent rise in food prices during the first quarter of
2004 over the like period in 2003.

Price rises range from a 2 percent rise in the price of milk to a
29-percent rise for eggs. The price of vegetable oil, up 23 percent, 
is beginning to reflect the doubling of soybean prices. Meat prices are
up across the board. A pound of ground chuck climbed from $2.10 a year
ago to $2.48, up 18 percent. Whole fryers were also up 18 percent. Pork
chops were up 10 percent. Bread and potatoes were up 4 and 3 percent,
respectively.

(See data at www.earth-policy.org/Updates/Update39_data.htm.)

Still higher food prices are likely in the second quarter as soybeans
have recently hit fifteen- year highs and wheat and corn seven- year
highs. Prices of livestock products that require large amounts of grain
are particularly sensitive to higher grain prices. By contrast, bread
prices do not usually rise much because wheat typically accounts for
less than one-tenth the cost of a loaf of bread. Even a doubling of
wheat prices would not greatly increase bread prices.

Food prices are rising almost everywhere. In Russia, bread shortages
pushed the price of bread in February up 38 percent compared with
February 2003. This so alarmed the government that it restricted 
wheat exports by imposing an export tax of 35 euros per ton.

In South Africa, corn futures prices have climbed in early 2004. 
The price of white maize, the principal food staple, rose by more than
half between December 2003 and January 2004. Yellow maize, used mostly
for livestock feed, climbed by 30 percent during the same period.

Higher prices reflect sagging production in the face of soaring demand
as the world continues to add more than seventy million people a year
and as incomes rise, enabling more of the world's people to consume
grain-based livestock and poultry products.

Growth in world grain production is lagging behind the growth in demand
largely because environmental trends, such as spreading deserts, falling
water tables, and rising temperatures, are shrinking harvests in many
countries. Consider, for example, Kazakhstan, the former Soviet Republic
that was the site of the Virgin Lands Project launched in the 1950s. To
expand grain production, the Soviets plowed an area of virgin grasslands
that exceeded the wheat area of Australia and Canada combined. It
dramatically boosted production, but by 1980 soil erosion was
undermining productivity. During the 24 years since then, half 
the country's grainland area has been abandoned.

During the late 1980s, Saudi Arabia launched an ambitious plan to become
self-sufficient in wheat. By tapping a deep underground aquifer, the
Saudi's raised grain output from 300,000 tons in 1980 to 5,000,000 tons
in 1994. Unfortunately the aquifer could not sustain large-scale pumping
and by 2003 the wheat harvest had fallen to 2,200,000 tons. Nearby
Israel, faced with dwindling water supplies, is no longer irrigating its
small remaining area of wheat, which means that dependence on imported
grain, already over ninety percent, will climb still higher.

China is the first major food producer to face reduced harvests partly
because of expanding deserts and aquifer depletion. Some 24,000 Chinese
villages have either been abandoned or have had their farm economies
seriously impaired by invading deserts. In the arid northern half of the
country where most of the wheat is grown, tens of thousands of wells go
dry each year. These environmental trends, combined with weak grain
prices that lower planting incentives, shrank the harvest from its peak
of 123 million tons in 1997 to 86 million tons in 2003, a drop of 30
percent.

Perhaps the most pervasive environmental trend that is shrinking 
grain harvests today is rising temperature. When the US Department of
Agriculture released its September 2003 monthly world crop estimates, 
it reduced the projected world grain harvest by 35 million tons from 
its August estimate. This drop, equal to half the US wheat harvest, 
was due almost entirely to the intense August heat wave in Europe, 
where crop-withering temperatures shrank harvests from France in the
west through the Ukraine in the east.

In 2002 record heat and drought combined to shrink harvests in both
India and the United States. Record and near-record temperatures in key
food-producing countries accounted for a large share of the record world
grain shortfalls of 91 million tons in 2002 and 105 million tons in 2003.

The question now is whether farmers can expand the grain harvest this
year enough to eliminate the huge deficit of last year. Unfortunately
there are no efforts underway that are sufficient to reverse the
expansion of deserts, the fall in water tables, or the rise in
temperatures that are shrinking harvests in key countries. In the
absence of such an effort, food prices are likely to continue rising.

http://www.earth-policy.org/Updates/Update39.htm

Copyright 2004 Earth Policy Institute

FOR ADDITIONAL INFORMATION

From Earth Policy Institute

Lester R Brown, Plan B: Rescuing a Planet Under Stress and a
Civilization in Trouble (New York: W W Norton & Company, 2003).

Lester R Brown, Janet Larsen, and Bernie Fischlowitz-Roberts, 
The Earth Policy Reader (New York: W W Norton & Company, 2002).

Lester R Brown, Eco-Economy: Building an Economy for the Earth 
(New York: W W Norton & Company, 2001).

Lester R Brown, "Saudis Have US Over a Barrel: The Shifting Terms of
Trade Between Grain and Oil", Eco-Economy Update, 14 April 2004.

Lester R Brown, "China's Shrinking Grain Harvest", 
Eco-Economy Update, 10 March 2004.

Lester R Brown, "Wakeup Call on the Food Front", 
Eco-Economy Update, 16 December 2003.

Lester R Brown, "World Facing Fourth Consecutive Grain Harvest Shortfall",
Eco-Economy Update, 17 September 2003.

Lester R Brown, "China Loosing War With Advancing Deserts", 
Eco-Economy Update, 5 August 2003.

From Other Sources

US Department of Agriculture, World Agricultural Supply and Demand
Estimates, http://www.usda.gov/oce/waob/wasde/latest.pdf

LINKS
American Farm Bureau
http://www.fb.com

Intergovernmental Panel on Climate Change
http://www.ipcc.ch

United Nations Food and Agriculture Organization
http://www.fao.org

United States Department of Agriculture
http://www.usda.gov

PLEASE ALSO SEE:-

"Subway: Junk Food, Junk Economy" 
by Russell Mokhiber and Robert Weissman, 
CommonDreams.org  (July 14 2004)
http://www.commondreams.org/views04/0714-02.htm

"Subway gets super-sized headache" 
by Bill Berkowitz, WorkingForChange (August 02 2004)
http://www.workingforchange.com/article.cfm?itemid=17397

Bill Totten     http://www.ashisuto.co.jp/english/