Copyright © 2002 Earth Policy Institute
Grain Harvest Growth Slowing
Lester Brown
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 regionsthe
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 regionstretching
from Morocco across the northern tier of Africa and the Middle East
through Iranis 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
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OTHER INFORMATION FROM THE EARTH POLICY
INSTITUTE
ECO-ECONOMY
UPDATES:
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
BOOKS
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
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