Tag: wheat

Not to say I told you so . . .

but I told you so.  Remember this post?  Well, the New York Times has finally caught up to the story, and its not good news. The UN is finally starting to make official their concerns for global food prices.  Now, you can argue that it is in the UN’s interest to raise this issue and make it a big deal, as the organization’s funding relies on donor countries who often are reticent to contribute except in times of crisis.  However, the main person downplaying this potential crisis in the NYT story is Food and Agriculture Organization of the UN (FAO) economist Abdolreza Abbassian:

“If you look at the numbers globally, the Americans, the Europeans and the Australians can make up the supply,” Mr. Abbassian said of the wheat harvest, playing down the chances of repeating the 2008 crisis. “There is no reason for this hype, but once the psychological thing sets in it is hard to change that perception, especially if Russia keeps sending bad news.”

There are a few important things to note here.  First, while Abbassian downplays the idea of real shortages driving market prices, he is acknowledging that the uncertainty in the market is likely to drive price instability – the end result being unpredictable, and likely rising, food prices.  Second, Abbassian must not be looking at the data that is trickling in from around the world.  For example, I have firsthand information from Southern Malawi about the failure of the maize crop there – not as bad as a few years ago, but bad enough that it might compromise Malawi’s status as a maize exporter.  Without wheat, people will start to press other grains, which are now themselves starting to get tight.
This is problematic globally, but I am very, very concerned for the situation in Southern Africa.  Mozambique is already starting to see significant civil unrest related, at least in part, to rising food prices.  Basically, this seems to have been the match that finally set off significant civil discontent with a problematic government.  The last time Mozambique fell apart, refugees flooded places like southern Malawi, stressing land availability and people’s livelihoods – sort of exporting the problems to surrounding countries.  The convergence of climatic variability and a highly interlinked global food market could be setting this region up for a really serious disaster in the immediate future . . . and we will feel the disaster here at the supermarket.  Not good.  Not good at all.

Posted on by Ed 0

Here comes trouble

Nobody is reporting this very heavily, but the drought and subsequent really enormous fires in Russia are having an impact way beyond Russia’s borders.  Specifically, a lot of arable land, used to raise wheat, suffered through a serious drought, and then burned, taking with it a big chunk of Russia’s, and indeed the world’s, wheat production.  We are being set up for another serious spike in wheat prices, and therefore food prices, worldwide.
NPR’s reporting on this issue is very optimistic. But the problem here is that the optimism is very, very selective.  When the chief executive of the International Food & Agricultural Trade Policy Council, says “U.S. producers will be able to step up to the plate and meet global demand that’s not presently being met by Russian wheat producers,” she is correct . . . assuming that nothing else will go wrong this year that might compromise wheat production elsewhere.  In 2008, the wheat price spike was driven by the convergence of a rise in biofuels production, a drought in Australia, and some fairly shadowy financial instruments that may have generated a commodity bubble around wheat.  In other words, a lot of stuff went wrong at once.  Given the uncertainty we see in the global economy, and the rising climate variability in wheat production centers like Southern Africa, arguing that nothing else will go wrong strikes me as a really weak bet.
Yes, US farmers will profit mightily from an increased demand for their wheat – but if demand outstrips supply, which seems increasingly likely as we move into the fall, everyone from the global poor to the average US consumer is going to feel the impact of rising food prices again.  Right now, nobody is doing anything to address this likelihood, and a reactive approach to food price spikes never solves the problem in time to matter for those most affected . . . anyone want to get proactive about this, please?

Posted on by Ed 3