Last month the Financial Times had an important article on a disastrous Department of Agriculture report in early October on the state of US crop expectations. Specifically, the Department’s downward revision of this year’s corn and wheat crops in the United States. These downward revisions were something of a shock, because up to then the US corn and wheat crops were expected to be close to record levels, or at least pretty healthy. The turnaround came from a combination of bad weather in the US and Canada, specifically an exceptionally hot summer in US crop-growing regions. As a result, the DOA predicted that corn stocks would be at their lowest levels in 14 years. Since corn is the foundation for modern American agribusiness, the implications, not least for food inflation next year are pretty worrying. Sarah Palin withstanding, food inflation has been pretty mild in the US this past year–at 1.4%, it’s among the lowest levels recorded. But of course, that’s not necessarily true of the rest of the world. Food inflation is 8% year over year in China. But the US government’s (denied) policy of continued weakening of the US dollar isn’t helping either—as the dollar continues to weaken against other currencies, the prices of dollar-based commodities (and that includes oil and most agricultural commodities) will continue to rise. Check out the price of oil recently?
Since then, the news has only gotten worse, with a further surge in corn and wheat prices over the past month as the DOA has continued to cut crop estimates. This is good news for farmers, of course. Not just corn and wheat, either. Cotton prices are shooting up too, and sugar was at record highs for a while. In fact, there aren’t many agricultural commodities that aren’t at or near record prices. This has led to concerns over not only food security, but the potential for even worse—tortilla riots like what we saw in Mexico in 2006, the food riots in Mozambique this past September when the price of wheat started to skyrocket, and of course the global riots around the cost of food we saw in many countries in 2008. The odds of yet another global food crisis seem pretty good. Food relief agencies are scrambling.
This should not have come as a complete surprise. Last August, Russia shocked everyone who follows this stuff by announcing that because of an extended drought, it would be banning wheat exports for the year. As a result, grain stocks have continued to decline, although the Department of Agriculture at that point said not to worry—there would be plenty of grain. Well, they were wrong. Last month, the UN called a special meeting to deal with the possibility of another food crisis.
Well, get used to it. Global food stocks are actually on pretty thin margins on a per capita basis, and have been for some time. And, of course, it will be the poor who bear the brunt of food shortages, if they emerge. As Raj Patel has reminded us, for the poor, 2008 never really ended. But even if the shortages don’t emerge, prices are going up. It’s likely that we’re going to see more years like this, with the increasing weather instability that may accompany global warming as it starts to accelerate. (Hey, another side effect that’s relevant here—the increased amount of fresh water that’s flowing into the oceans.) (And don’t even get me started on the accelerating loss of topsoil.)
So, what is to be done? Well, there isn’t all that much land that can be brought into production. And in spite of the enthusiastic claims regarding GMOs, there hasn’t exactly been a noticeable increase in yields. And while claims that beef farming is inefficient continue to proliferate, it’s still not clear that this is as big a problem as its proponents claim. Yes, it’s a problem, but there are larger ones, frankly. And biofuels? Well, that’s a funny thing. That seems to be largely a US problem, since the US mostly subsidizes corn for ethanol—and corn isn’t a particularly good source of ethanol. Sugar cane is much more efficient, as it turns out. It would be better for the US to import ethanol from Brazil (and Cuba) than to rely on ethanol derived from corn. But those subsidies…. The Financial Times does its best to stay on top of all this, but they keep running into the same mindset problems that commodities traders run into—an inability to actually envision the longer term. It had a whole supplement devoted to World Food 2010 last month, but the batch of articles provided offer no evidence of much long-term thinking—yes, we know production must increase, but there’s not much on how. And lots of semi-pointless articles, like the one on how useful mobile phones are to farmers in Africa.
Part of the problem here is mindset. Those of us who live in rich countries (and that’s all the readers of this blog, presumably), whatever our economic circumstances, just can’t imagine there being no food. We might be broke, as most of us have been at one point or another, but there’s been food out there to buy. So the prospect of there just not being any isn’t in our belief system. We haven’t been poor in Haiti, or in Mozambique. So the prospect of shops not having food isn’t something that actually scans—it’s like discussing ghosts, or something. But for much of the world, this is the daily reality, and it will be a reality that increasingly encompasses a larger part of the global population as time goes by.
So when I read the commentary from the commodities guy at my bank about how wheat and corn supplies will be tight this year, but return to normal next year, I imagine that he and most of his readers believe that that’s the normal course of events. It’s the weird weather this year that was the aberration. But suppose the weird weather is now becoming the new normal? We had a twelve year drought in Australia. The drought in Russia is relatively new, but it’s the worst in 50 years. The drought in the Ukraine (“the breadbasket of Europe”—remember that?) that started last year shows no signs of ending. And these things can run and run—the drought in the southwestern US has now gone on for more than a decade—and yet people keep moving there, as if the water won’t eventually run out and the place won’t be uninhabitable in another decade or two. (Personally, I could never figure out why people would want to live in a place where you (a) have to drive, and (b) have to have air conditioning—especially one where global warming will undoubtedly make the situation worse. But that’s just me.)
Actually, ameliorating the current situation could be done, at least to some extent, but it would involve reversing two ongoing trends, one recent on relatively longstanding. The first has been the enthusiasm with which countries with cash (think China here, but it’s hardly restricted to China) have been buying up agricultural land around the world in order to ensure the ability to import food supplies, land particularly in Africa. The UN Food and Agricultural Organization deplores this trend, but it’s not clear what can be done to change it short of passing legislation in the target countries to prevent it. And it’s not clear that any such legislation would get passed anyway—in many cases, these are poor countries, and they need the money. There is an argument to be made for the notion of food reserves, as a food security measure, and this could properly include sufficient land for domestic production of basic foodstuffs. The Institute for Agriculture and Trade Policy, a think tank that, well, thinks about these things, has some pretty good discussion papers on the subject. Libertarians will likely blanch, but I suspect it’s a discussion that countries will be having more frequently in the future. Wait until the Chinese start buying up tracts of land in Iowa.
The second is a longer standing trend, one fostered for decades by development agencies (and still being pushed by some), and one that has had devastating effects on may local economies in Africa, for example. And that is the replacement of local, indigenous agriculture by monocultures grown solely for export—be it grain, or flowers, or string beans, or whatever. The next time you’re in the supermarket, look at where your vegetables come from. The most recent scam is biofuels. The logic here is the classical one of comparative advantage—but in this case it just hasn’t worked out very well, or certainly well enough. Paul Roberts, in The End of Food, does an admirable job of deconstructing the arguments for this practice, which, for its occasional successes, has had devastating effects on much of the developing world. Gary Nabhan has written eloquently on this as well, as has, of course, Wendell Berry. But there’s no money in local indigenous agriculture, and up until recently it hasn’t fit the paradigm of the development agencies. It’s not clear how broadly this trend can be reversed—and by whom, exactly.
I have no idea how this is going to play out, but I bet it won’t be good. It’s yet another depressing trend of modern life, as is the knowledge that many of us will be moving north over the next several decades—those of us who can. Well, I’m already north, so it’s easy for me to talk. But if we think we have a refugee and illegal immigration problem now in Europe and the US, just wait a decade or two. In the meantime, we now have a whole batch of Republicans in power who now want to hold hearings on “the fraud of global warming,” and while the leadership may be cool to the idea (heh—Greg Sargent’s phrase, not mine), you can’t keep a good client-change-denier down, I suppose. Can’t wait to see how these turn out.