Update 3: November 23, 2001-3
Copyright © 2001 Earth Policy Institute
World Grain Harvest Falling Short by 54 Million
Tons
Water Shortages Contributing to Shortfall
As
Americans prepare to celebrate Thanksgiving and another bountiful harvest,
there are signs that the world harvest is falling short as water shortages
translate into food shortages. In its November world crop survey, the
U.S. Department of Agriculture reports that this year's estimated world
grain harvest of 1,841 million tons will fall 54 million tons short of
projected consumption of 1,895 million tons. This comes on the heels of
a poor crop last year, when world output fell short of use by 34 million
tons.
These two consecutive disappointing harvests have reduced next year's
projected world carryover stocks of grain, the amount in the bin when
the new harvest begins, to 22 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 short harvest 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. The lowest grain prices
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 third of China's grain
harvest. The Punjab, a highly productive piece of agricultural real estate,
is India's breadbasket. And the southern Great Plains help 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 import grain.
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.
It is often said that future wars in this region are more likely to be
fought over water than oil. This may be, but it is hard to win a water
war. The competition for water is more likely to take place in world grain
markets.
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 67-billion-ton 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 40 percent of the world's grain harvest
produced on irrigated land, anything that reduces the irrigation water
supply reduces the food supply.
The wildcard in the world grain market is China. It accounted for 45 million
tons of this year's grain harvest shortfall of 54 million tons. Last year,
China's harvest fell short of consumption by 33 million tons. 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. (See Eco-Economy
Update "Worsening Water Shortages Threaten China's
Food Security".
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 lowered, dropping
close to world market levels. As grain prices have fallen over the last
three years, the area planted to grain has shrunk by 10 percent.
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.
China, with a population equal to that of India and the United States
combined, has a strong economy and a trade surplus with the United States
of over $80 billion. It would take only $35 billion of that trade surplus
to buy the entire U.S. grain harvest. China can compete not only with
the 100 or so countries that import U.S. grain but with U.S. consumers
if it needs to.
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 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.
As water deficits expand in water-scarce countries, so too will grain
deficits. 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 being added to world population each year are
being added in countries that are already experiencing water shortages.
Restoring a balance between water supply and needs worldwide may now depend
on stabilizing population in water-deficit countries.
Copyright © 2001 Earth Policy
Institute
FOR ADDITIONAL INFORMATION
From Earth Policy Institute
Lester R. Brown, Eco-Economy:
Building an Economy for the Earth (New York: W.W. Norton & Company,
2001).
Lester R. Brown, "Worsening Water Shortages Threaten
China's Food Security," Earth Policy Alert, 29 August 2001.
LINKS:
International Water Management Institute http://www.cgiar.org/iwmi
United Nations Food and
Agriculture Organization http://www.fao.org
United States Department of Agriculture (USDA) http://www.usda.gov