Problems with the food supply

Just in case you need something else to worry about, global food prices are skyrocketing (here not so much–yet), due to increased demand and shorter supplies:

Since last summer, several events — floods in Australia, blistering drought in Russia, the threat of a poor winter wheat crop in China — have compounded concerns about the food supply and pushed world prices to the highest levels measured since the U.N. Food and Agricultural Organization began calculating its index in 1990.

For decades, the world was often swimming in surplus food because farmers were so productive. But rising demand has caught up, and reserves have become so tight that global food markets are vulnerable to even minor shocks. Many analysts say that higher, more volatile prices may be here to stay.

The new dynamic reflects in part the rising demand for meat in developing countries such as China, which has almost single-handedly driven up prices for the soybeans it imports for animal meal, as well as the increasing use of corn for ethanol. Today, at least a third of the U.S. crop goes for making fuel. In addition, there is spreading concern that climate change may make weather less settled and more disruptive to growers.

“For the last 60 years, the simple story was agricultural productivity — great productivity gains, unabated,” said Joseph Glauber, chief economist at the U.S. Department of Agriculture. “But in the last five years, prices have lifted, and you see this real strong demand.”

Since last summer, the market price for corn to be delivered in May nearly doubled from $3.67 to $7.23 as of late last month, according to data compiled by Dan O’Brien, an agricultural economist at Kansas State University.

Grain reserves have dwindled. The latest USDA estimates, released Thursday, show U.S. reserves of corn and soybeans at historic lows, less than 5 percent of projected demand for the coming year. Typical reserves have been three or more times that amount, a chief reason why it does not take much to send prices skyrocketing.

via Higher food prices may be here to stay – The Washington Post.


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