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April 28, 2004-8
Copyright © 2004 Earth Policy Institute
WORLD FOOD PRICES RISING:
Environmental Neglect Shrinking Harvests in Key Countries
Lester R. Brown
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.)
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
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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
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