Wednesday, August 1, 2012

Iteration, reiteration, again: Food running short

The current U.S. drought has brought back the issue or world starvation. The high price of food staples of the poor caused rioting in numerous locations in 2008, and is thought to be one of the contributing factors to the recent “Arab Spring” revolutions, a revolution that is still ongoing in Syria.

In good years supply is sufficient to meet the needs of the 7-billion world population. But any hiccup brings us right back to crises mode. Although not often noted, one of the main reasons that people still sell their “stuff” to the United States is that we are still the bread (and corn) basket to the world. Roughly one-third of the exchange traded supply of grain comes from the United States. As the financial times article quoted below notes, Corn and wheat for December delivery are up almost 50%, and Soybeans 17%. That is a huge budget hit for people that spend half there money on food.

Jack Farchy, Financial Times, 13 July 2012 (hat tip: NC)

Is the world on the brink of another food crisis?

It has become a distressingly familiar question. With the price of agricultural staples such as corn, soybeans and wheat soaring for the third summer in five years, the prospect of another price shock is once again becoming a prominent concern for investors and politicians alike.

The debate marks a dramatic shift from just a few weeks ago, when traders were expecting bumper crops and policy makers were comforting themselves that – if nothing else – falling commodity prices would offer some relief to the troubled global economy.

But since then, scorching heat and a paucity of rain across the US has withered the country’s corn and soybean crops, with the US Department of Agriculture this week making the largest downward revision to its estimate for a corn crop in a quarter of a century...

Moreover, the low level of global inventories for some grains means that any further disruption to supplies could be devastating.

Global corn stocks are forecast by the USDA to fall to just 15 per cent of annual demand, close to a record low.

We likely would be having problems feeding the worlds growing population going forward in any case. The worrisome problems of financial market collapse, global warming, peak oil, ozone pollution, et cetera, are not going to make it any easier.

Note that the Financial Times story very much is interalated with the following story:

Jack Healy, New York Times, 16 July 2012 (hat tip: NC)

Ranchers say they are reducing their herds and selling their cattle months ahead of schedule to avoid the mounting losses of a drought that now stretches across a record-breaking 1,016 American counties…

"If we're running out of grass and we're not growing enough feed crops to feed them the other six months of the year, what do you do?" asked R. Scott Barrows, director of Kansas State University's Golden Prairie District extension office. "You liquidate."…

In its latest forecasts, the Agriculture Department expects overall American beef production to fall by about one billion pounds, to 25.1 billion pounds in 2012 from 26.2 billion a year earlier, and forecasts yet another fall in 2013.

"Our cattle inventories are the lowest they've been in several decades," said Ken Mathews, a cattle analyst at the Agriculture Department. "A lot of these producers, large and small, were thinking of expanding their herds. Things looked good. When the drought resurrected itself, that blew those plans apart."

Experts and ranchers say the hammering heat and near-total absence of rainfall play havoc on nearly every corner of their business. Parched corn glutted with nitrogen from the soil becomes toxic to cows. Slimes of algae bloom on irrigation ponds. Wells run dry, and ranchers spend their days hauling water to accommodate a cow's 35-gallon daily thirst. Fewer cows get pregnant, and mothers' milk can run dry.

Since we presumably have enough sense – o.k. maybe we don’t – to protect our own food supply, we in the United States won’t be facing starvation. But with hamburgers, and the buns we put them on, are two of our primary staple foods, the budget is going to be tighter.


James M Dakin said...

I don't think it is just going to be a price issue. I think the demand for food,any food, will see that in our country there will be food shortages. We won't starve, but a lot of basics will see rolling outages on shelves. Think 2008 rice. Both out of stock for weeks, then rationing. Wouldn't you rather be just a smidge paranoid when it comes to your eating?

russell1200 said...

JMD: You describe pretty well your run of the mill temporary outages. And of course, it is always a price issue for some. The rich can always find alternative sources: thus Maria Antionette and here mystified comment when she heard that they were rioting over bread shortages "Let them eat cake".

We are a wealthy enough country that we will eat cake. Even if a lot of us pay for it with what ever we are calling food stamps these days.

I prefer the term cautious to paranoa. LOL

Much of what I say here, is trying to give put out enough information so that people understand that it is caution, and not paranoa, and to try and determine where that line really is.

I have always thought that the Morman one year rule was very reasonable.

On the other hand, when your efforts start hurting your ungoing economic future, you need to be a litte more careful. Of course in your case we know the big A is going to happen any moment given your new economic freedom. I just hope your little butterfly of freedom doesn't bring on doom to all the rest of us. LOL