Copyright © 2002 Earth Policy Institute
Grain Harvest Growth Slowing
The 2001 world grain harvest of 1,853 million tons was up 1 percent from the 2000 harvest, but below the all-time high of 1,880 million tons in 1997. (See Figure.) The U.S. Department of Agriculture reports that the harvest in 2001 fell 40 million tons short of estimated consumption. This comes on the heels of a poor crop in 2000, when output was 36 million tons short.
These two consecutive disappointing harvests have reduced
this year's projected world carryover stocks of grain, the amount in the
bin when the new harvest begins, to 24 percent of annual consumption,
the lowest level in 20 years. With stocks at such a low level, all eyes
will be on the harvest in 2002. Another shortfall could lead to rising
grain prices and higher prices for bread, meat, milk, eggs, and other
products derived directly or indirectly from grain.
The poor harvests of the last two years were largely due to weak grain
prices, drought, and spreading water shortages. Grain prices among the
lowest in two decades have discouraged farmers from investing in production-boosting
measures.
Prices that are too low to stimulate adequate production can be quickly
remedied as the market responds to tighter supplies. But dealing with
the water shortages that result from drought, aquifer depletion, and the
diversion of scarce water to cities is much more difficult.
Water tables are now falling in key food-producing regions—the
North China Plain, the Punjab in India, and the southern Great Plains
of the United States. The North China Plain accounts for a quarter of
China's grain harvest. The Punjab, a highly productive piece of agricultural
real estate, is India's breadbasket. And the southern Great Plains helps
make the United States the world's leading wheat exporter.
In an increasingly integrated world economy, water shortages are crossing
national boundaries via the international grain trade. Since it takes
1,000 tons of water to produce 1 ton of grain, the most efficient way
for water-deficit countries to import water is to buy grain from elsewhere.
The fastest-growing grain import market in the world today is North Africa
and the Middle East, the region with the most serious water shortages.
Virtually every country in this region—stretching
from Morocco across the northern tier of Africa and the Middle East through
Iran—is facing water shortages. With
supplies limited, countries satisfy the growing demand for water in cities
and industry by taking it from agriculture. Then they import grain to
offset the loss of production capacity.
In recent years, grain imports into Iran, a water-short, grain-deficit
country, have eclipsed those of Japan, long the world's leading wheat
importer. Last year, Egypt also moved ahead of Japan. Both Iran and Egypt
now import over 40 percent of the grain they consume. The populations
of both countries are continuing to grow, but their water supplies are
not.
Grain exporters are, in effect, water exporters. Canada, where water exports
are a politically sensitive issue, is one of the world's leading exporters
of water in the form of grain. The 18 million tons of grain, mostly wheat,
that it ships abroad each year embody 18 billion tons of water. Similarly,
U.S. annual grain exports of 90 million tons of grain represent 90 billion
tons of water, an amount that exceeds the annual flow of the Missouri
River.
The adequacy of food and water supplies are closely linked. Some 70 percent
of all water that is pumped from underground or diverted from rivers is
used to produce food, while 20 percent is used by industry and 10 percent
goes to residential uses. With 60 percent of the world's grain harvest
produced on irrigated land, anything that reduces the irrigation water
supply reduces the food supply.
The wild card in the world grain market is China. It accounted for virtually
all of the world grain harvest shortfalls in 2000 and 2001. Indeed, in
two years, it has reduced grain stocks by nearly 80 million tons.
Among the forces shrinking China's grain harvest are severe drought in
northern China during the last two years, spreading irrigation-water shortages
as aquifers are depleted and as water is diverted to cities, and a lowering
of support prices. The drought will eventually end, but water shortages
will not. In a country dependent on irrigated land for 70 percent of its
grain, water shortages are fast becoming a security issue.
In 1994, in an ambitious and successful effort to be self-sufficient,
China raised grain support prices by 40 percent. Unfortunately the drain
on the treasury was too great, so the support prices were eventually lowered,
dropping close to world market levels.
China has absorbed the harvest shortfall of the last two years by drawing
down stocks, but there are signs that supplies are now tightening. If
this huge nation has another large harvest shortfall, it will likely have
to import substantial quantities of grain to maintain food price stability.
If the 2002 world grain harvest falls short of consumption when stocks
are at a near-record low, prices will rise. Higher prices will curb demand,
particularly the feeding of grain to livestock, and will encourage production.
Supply and demand will again be in balance, but at a higher price.
If world grain demand continues to grow during this coming year at the
16-million-ton-per-year pace of the last decade, then the 2002 harvest
will have to jump by 70 million tons to avoid a further drawdown in stocks.
Whether this can occur, in the face of spreading water shortages, remains
to be seen. The new reality is that if the world is facing water shortages,
it is also facing food shortages.
A review of the demographic map reveals another troubling reality. Most
of the 80 million people added to world population each year live in countries
that already have water shortages. Restoring a balance between water supply
and needs worldwide may now depend on stabilizing population in water-deficit
countries.
Copyright
© 2002 Earth Policy Institute
OTHER INFORMATION FROM THE EARTH POLICY INSTITUTE
Rising Temperatures and Falling Water Tables Raising Grain Prices
World Grain Harvest Falling Short by 54 Million Tons: Water Shortages Contributing to Shortfall
Worsening Water Shortages Threaten China's Food Security
Lester R. Brown, Janet Larsen, and Bernie Fischlowitz-Roberts, The Earth Policy Reader (New York: W.W. Norton & Company, 2002).
Lester R. Brown, Chapter 7: "Feeding Everyone Well," in Eco-Economy: Building an Economy for the Earth (W.W. Norton & Company, 2001).
LINKS
United Nations Food and Agriculture Organization (FAO)
http://www.fao.org
United States Department of Agriculture (USDA)
http://www.usda.gov