Blog about the upcoming food shortage crisis

Everybody throws stones at the prophet, but when the crisis comes they yell: “Why nobody warned us?”

Food crunch

World food reserves are at their lowest in 25 years and the prices of most food crops are at a record high. Global cereal prices are expected to remain high in 2008 mainly because of drought-like conditions in major cereal exporting countries and low world stocks, warns the latest Food Outlook report of FAO.

The Food Outlook report of the Food and Agriculture Organisation (FAO) predicts that foodgrain prices will rise for another 10 years. For most cereals supplies are much tighter than in recent years, while demand is rising for food as well as feed and industrial use. Stocks, which were already low at the start of the season, are likely to remain equally low because global cereal production may only be sufficient to meet expected world utilization. Although the world cereal production in 2007-08 is estimated to have gone up by 5 per cent, most of it is attributed to a sharp increase in maize, the main foodgrain used for biofuel.

Wheat Closing stock (2007-08): 142.6 mln tonnes; slightly down from last year; Current price (Feb): US $449/tonne; 115% up In February 2008, wheat prices rose by 15 per cent due to record low stocks and poor winter-wheat crop prospects in southwest US and northern China. Between December 2005 and December 2007, wheat prices jumped from US $167 per tonne to US $381 per tonne. The current global wheat stocks are estimated the lowest since 1982-it is expected to fall to 110.4 million tones by May 31, according to the US Department of Agriculture. According to FAO ‘s latest forecast, world wheat production in 2007-08 stands at 602 million tonnes, significantly below expectations and just 1 per cent more than the previous year. For 2008-09, the US Department of Agriculture forecasts world wheat production to increase by 4 per cent to a near-record 617 million tonnes. But higher production will be partly offset by already low stocks.

The main reason for the rise in price was the drought in Australia, the second largest supplier of wheat. Australia harvests nearly 25 million tonnes of wheat in a good year but in 2006 the production was only 9.8 million tonnes. Exports from other wheat suppliers like Canada, EU, Turkey and Syria also saw a dip due to unfavourable climatic conditions. High demand for wheat for biofuel and feed further depleted the global supply.

As a result of this shortage India bought wheat for the second consecutive year. In 2007-08, India imported 0.68 million tonnes of wheat; in 2006-07 it had imported 5.8 million tonnes. Estimates suggest imports will not be required for 2008-09, says T Haque, chairperson of the Commission for Agriculture Costs and Prices. However, there are speculations that India may have to import 3 million tonnes of wheat to shore up its stocks. FAO forecast slightly higher imports of wheat for China, where government procurement under the minimum purchase programme this year is down by 30 per cent from the previous season.

Rice Closing stock: 107.6 million tonnes; slightly up; Current price: US $500 per tonne; nearly twofold The price of rice crossed the US $500-atonne mark in the beginning of March 2008, reaching the highest in the past 20 years. According to FAO, demand for during 2007-08 is likely to be 429.2 million tonnes against a production of 429.3 million tonnes. Ending stocks are projected to be 107.6 million tonnes, up 0.7 per cent over the previous season. Rice production in 2007-08 is estimated increase by a mere 0.6 million tonnes.

Heavy demand from the Philippines, the largest importer of rice and African countries has pushed the prices of rice. Supply shortage in Pakistan, where electricity crunch has hampered mills from functioning at full capacity and a ban on export by India and China have also added to it. In March 2008, India banned export of the non-basmati variety at less than US $650 per tonne. The move was to compensate for wheat shortage in procurement for the public distribution system.

However, India partially relaxed the ban for Madagascar, Mauritius, Comoros Island and cyclone-hit Bangladesh. China banned exports to ensure domestic availability.

Across the world, Vietnam sold broken rice to the Philippines at a record US $750 per tonne. In Thailand, rice and wheat prices went up by 30-40 per cent in the past three months. Exporters in the country are hoarding rice and wheat in anticipation of a further rise in prices. Pakistan saw a 60 per cent jump in price in the past few months.

Maize

Closing stock: 133 million tonnes, 14% up; Current price: US $220 per tonne, up by 24%

Between December 2005 and December 2007, the price increased from US $103 a tonne to US $180 a tonne. Despite a record 9 per cent production growth in coarse grain-the bulk of which came from maize-in 2007-08, the maize price peaked at a 10-year high of US $220 per tonne in February 2007. It has now breached the US $230 per tonne mark.

Strong demand for biofuels coupled with a steady growth in demand for animal feed, particularly in Europe, has lead to an increase in the prices of maize. The US supplies more than 60 per cent of world maize exports. But in 2007-08, a quarter of the US maize-that is 11 per cent of the global maize crop-went into biofuel production. US, the largest market for ethanol, used almost 54 million tonnes of maize for biofuel in 2006-07 and is estimated to have used 81.3 million tonnes in 2007-08, according to FAO.

Oilseeds

The past one-and-a-half years, soya bean and palm oil rates have seen a sharp increase. In fact, the rise in the prices of edible oils was the sharpest among all food items, and is likely to continue. The price of palm oil rose from US $350 per tonne to US $1,250 per tonne in the past one year. Soya bean price has increased to US $499.43 per tonne in a year.

According to FAO, increase in oilseed production in 2007-08 is less than 2 per over the previous year. Palm, palm kernel, copra, rapeseed and groundnut oil production is likely to see a sizeable increase, while a fall is anticipated for soya bean and sunflower seed oil.

Biofuel accounted for almost half the increase in the worldwide demand for vegetable oils last year, according to Oil World, a forecasting service in Hamburg, Germany. Rising consumer demand in China and India has also pushed the demand of oil. Floods in Malaysia, one of the big producers of palm oil, led to a shortfall in production. Palm oil is being accepted as a healthier option to trans fats and hence there is an increased demand in Europe.

Across the world, there was stampede in Chongqing, China, when a store announced a cooking oil promotion in November 2007. The stampede in the store left three dead and 31 injured. Last year, China was the world’s biggest palm oil importer. In Malaysia tropical forests were cleared to make way for palm plantation to meet the demands of the European nations for biofuel.

Savvy Soumya Mishra, Down to earth feature

source.

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April 15, 2008 - Posted by | Uncategorized

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