Update 39: April 28, 2004-8
Copyright © 2004 Earth Policy Institute
WORLD FOOD PRICES RISING:
Decades of Environmental Neglect Shrinking Harvests in Key Countries
When this year's grain harvest begins in May,
world grain stocks will be down to 59 days of consumption—the
lowest level in 30 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 U.S. retail
prices of 16 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 15-year highs and wheat and corn 7-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 70 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 million tons in 1994.
Unfortunately the aquifer could not sustain large-scale pumping and by
2003 the wheat harvest had fallen to 2.2 million 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 90 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 U.S. 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 U.S. 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.
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 U.S. 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
U.S. 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
