According to an article in yesterday’s Independent, the weather in Britain, especially England, has been so lousy that the UK is set to go from a wheat exporter to a wheat importer for the first time in a decade. The culprit here, if there is only one, appears to be the long spell of cold temperatures we’ve had this winter, on top of what can only be called a terrible year of weather. First we had a severe drought in the spring, and then the rains came thundering down, so then we had a lot of flooding, pretty much all over the country. Then this ridiculously cold and long winter. So grain harvests have been ruined. Actually, not just grain harvests—the folks at Riverford Farms out in Devon, who supply us with our vegetables, have had a pretty bad winter for vegetables, on top of a pretty bad year last year. Of course, this is nothing compared with the wheat problem that Egypt faces. But still, it’s indicative of a pretty unfavorable trend.
And it’s put even more pressure on farmers, who have recently also seen near-record livestock losses due to unusually cold and stormy winter weather, and the continual squeeze from the supermarkets that respective Labour and coalition governments appear unwilling to address. To make matters worse, spring plantings are going to be late, and small. We’ve just had the coldest March in 50 years, after the coldest February ever recorded. As The Independent states:
The poor harvest represents the lowest wheat crop since 1985 and means the country will be a net importer of the grain this crop year for the first time since 2001. The NFU predicts next crop year – July 2013 to June 2014 – will be another year of net wheat imports, the first time this has happened in consecutive years since the start of the 1980s.
But while farmers will lose hundreds of millions of pounds and the fragile economy will suffer, British consumers are only like to see a small increase, if any, in the price of a loaf.
“Wheat only represents about a tenth of the cost of a loaf and energy costs and packaging probably have as large an impact on price,” says NFU chief economist Phil Bicknell. “But the wheat price is determined by global supply, rather than UK supply, and the price has actually dipped in the last few days.”
For sure, it’s been a very bad couple of years for British farming. As The Independent, which has been doing good reporting work in this area for some time, reminds us:
Britain’s farmers are facing the third poor harvest on the run as the coldest March in 50 years plays havoc with crop planting–already significantly down because of last year’s wet weather.
With the cold snap set to continue through April, farmers say crops such as potatoes, peas, tomatoes and ornamental flowers have either not been planted, are not growing or are being stunted by the lack of light.
This follows low winter planting levels of cereal crops–a fifth down on last year because of the wet weather. A shortage of spring seed is adding to the problems.
Lower UK crop yields will make UK consumers more reliant on imports and the vagaries of the international markets, which could push up prices. Livestock farmers have been struggling to cope for some time with feed shortages due to poor grass growth in the summer, and continuing snow hampering deliveries.
But wait—how can prices be going down? Aren’t global wheat stocks declining? Well, yes, but it depends on how you look at the world. Stocks are declining on a per capita basis, especially in the developing world where grains count for a lot. But global wheat production actually wasn’t too bad in 2012, in spite of severe drought conditions in a number of wheat-producing areas, because of the increase in planted acreage in other regions. In the US, for example, Minnesota and North Dakota had record wheat harvests. And wheat prices, like those of many commodities, are global—hence the recent weakening. The UN FAO report last month actually forecasts an uptick in wheat production in 2013, in part because of an increase in planting in Europe. However, this forecast was made a month ago, before Britain and Northern Europe had a month of such bad weather. It snowed in both London and Berlin last week. The next FAO forecast comes out on 11 April—it’s entirely possible there will be some negative revisions to 2013 estimates.
Moreover, consumption trends continue to outpace production trends for grain in general, although global consumption did fall in 2012. So what happens if the significant droughts that have been afflicting the United States, Kazakhstan, Ukraine and Australia continue—as it appears they will? Fortunately, there has been no real drought in China, which had a record grain harvest in 2012 (but was still among the top ten grain importers globally). Meanwhile, the trend towards great consumption looks set to continue—simple demographics, after all. This means that global grain stocks will continue to be stressed. Grain stocks worldwide currently stand at 423 million tons—which covers 68 days of consumption. This isn’t a record low level—but it’s close, being just six days longer than the record low that preceded the 2007-2008 grain crisis.
So much turns on the current global droughts, and whether they look likely to persist. In the US, things look a bit better than they did last summer, but not at all great—half the country is still affected by significant aridity. Here’s the most recent US drought monitor, and it sure doesn’t look a whole lot better than it did a year ago in that Midwestern region that supplies so much grain. Texas is a basket case, of course, but jeez, look at Nebraska. Globally, while the Ukraine looks better, Russia and Kazakhstan sure do not. And Australia? Don’t ask. Rainfall deficiencies (as they’re called) have been declining, which is the positive news, one supposes. But really, it’s no change of any substance after the hottest summer on record. Wheat production declined 27% from 2011/2012, and there’s no reason to expect any near-term improvement, even though the USDA, strangely enough, is calling for just that.
We continue to balance precariously. We saw what happened in 2008 when that balance was distorted. It’s only a matter of time before the balance gets distorted again, and there’s not much that Monsanto is going to be able to do about it. Meanwhile, I’m just going to hope that things dry out here a bit so that a reasonably normal spring planting season can still take place. But I’m not getting my hopes up.