Global food situation: A wake-up call
Wednesday, 4 May 2011
Dr B K Mukhopadhyay
Currently the world has 6 billion people of which India has 1.18 billion and Australia just over 21 million. The world is expected to have 9.5 billion people by 2050. India's population by then would rise to at least 1.5 billion and that of Australia to 36 million. The biggest question- who and where will this food production going to come from? It remains a stern reality that few countries seem to produce food in sufficient quantities for them and export it to others. Examples are not far to seek. Last year Russia banned the export of food grains due to fire devastation of crop lands. India has banned the export of onions. Australia [a food self sufficient country] may end up having to import vegetables due to floods. Actually speaking: there is no consistency of supply of food, which, in turn, has led to volatility in the markets where food grain is a commodity once again to be treated as a tool for consumption rather than as an essential ingredient [water] without which the entire society would reduce to a naught! It is by now crystal clear that distortion of markets prevents farmers from getting the right price in the markets thereby turning them off farming out of despair or debts. Time is ripe to pay all out attention if the plate is expected to be full ensuring a square meal. At the very outset let us have a close look at what the latest FAO [Food and Agriculture Organization] statistics indicates so far as the forecast for global food situation is concerned. As assessed by the FAO, world production of cereals fell in 2010, while total cereal utilisation is expected to reach a record in 2010-11, resulting in falling stocks. Although the 2010-11 world trade forecast has been raised by 1.2mt to 274mt, it remains 2mt lower than in 2009-10. The forecast for world cereal utilisation in 2010-11 has been lowered a bit, but the same is still up 2 percent from 2009-10. Forecast trade in coarse grains is raised by 1.0mt, to 119mt, reflecting larger than anticipated imports by China, Egypt, and the EU, which is more than offset downward revisions for Canada and the Republic of Korea. Forecast trade in wheat is raised slightly, with imports by Islamic Republic of Iran, South Africa and Mexico raised forecast trade in rice in 2011 remains largely unchanged from February. Though it is a fact that till now high international prices have had little impact on the overall world demand for food, feed or bio-fuels, yet change in situation simply cannot be ruled out. Low stock levels, the implications on oil prices of events in the Middle East and North Africa and the effects of the destruction in Japan all make for continuing uncertainty and price volatility over the coming months. Crude oil prices rose to USD 123 a barrel already [due to speculation and political uncertainty in North Africa]. As the situation stands now, following a 1 percent (25mt) decline in cereal production in 2010, some recovery is expected in 2011, supported by strong prices. Increased cereal production is expected in 2011, but the same may not be sufficient to replenish inventories, in which case prices could remain firm also in 2011-12. What is more: world cereal stocks for crop seasons ending in 2011 are forecast to shrink by 9 percent (47mt), bringing the stocks-to-use ratio down to a three-year low. Side by side: coarse grain inventories (maize in particular) are forecast to drop most, with major exporters' stock-to-disappearance ratio plunging to a 30-year low of only 8 percent. Wheat production is tentatively put at 676mt, up 3.4 percent from 2010 [assuming yield recoveries and increases in plantings]. Coarse grain and rice outputs are also anticipated to grow, but with the bulk of plantings beginning in the coming months, it is too early to make production forecasts, as rightly opined by this leading able organization. It may be highlighted here that this organization [of the United Nations - serving both developed and developing countries] leads international efforts to defeat hunger. FAO - undoubtedly acts as a neutral forum where all nations meet as equals to negotiate agreements and debate policy helping developing countries and countries in transition to modernise and improve agriculture, forestry and fisheries practices targeting to ensure good nutrition for all. Founded in 1945, special attention has been paid on developing rural areas where around 70 percent of the world's poor and hungry people live. Ongoing trends in global food prices front clearly shows and indicate that there are reasons to be very cautious. Global food prices rose 28 percent in the past 12 months and reached a record in January, 2011. This has partially fuelled the riots across North Africa and the Middle East that have already toppled leaders in Tunisia and Egypt. More than 60 food riots occurred worldwide from 2007 to 2009, according to the U.S. State Department. Ivory Coast's political crisis may lead to food shortages in the country and neighboring states as imports of staples including rice have been cut off and movement of food is hampered by the recent conflict. Though food prices were not the cause of the crises in the Middle East and North Africa, but they are an aggravating factor. There is double-digit food price inflation in Egypt and Syria. It shows that commodity price spikes particularly poor countries. The FAO itself admitted that though global food prices are comparatively down, but situation still remains uncertain. Global food prices fell for the first time after eighth consecutive months of price spikes in March, 2011 in the wake of a decline in international prices of oil, sugar and cereals. The FAO's food price index [a measure of the monthly change in international prices of a basket of food commodities] averaged 230 points in March, 2011, down 2.9 per cent from its peak in February, 2011, but still 37 per cent above its reading in March last year. Sugar prices declined, prompted by prospects of increased market availability, notably from India. The March, 2011, slide primarily reflects a recovery in global supply prospects for palm oil. Dairy prices were high on the back of firm import demand together with lower than expected production in Southern hemisphere supplying countries, where the milking season is coming to a close, it said. Meat prices rose due to trade disruptions in several key markets, particularly North Africa and Japan. Global food prices averaged 236 points in February 2011, up 2.2 per cent from January, the highest record in real and nominal terms, accordingly. While international prices of oils and sugar dropped the most, followed by cereals, in contrast, dairy and meat prices were up, although only marginally in the case of meat. The Cereal Price Index in March, 2011, though down 2.6 per cent from February, 2011, is still 60 per cent higher compared to the corresponding period of 2010. Whatever is, there is some soothing observation, however, from very recent OECD [Organization for Economic Cooperation and Development] assessment - global food crisis on the scale of what happened three years ago isn't recurring because an increase in the cost of rice, a staple for half the world, has lagged behind a jump for other grains..The scale of the problem is not as bad for large parts of the world as it was in 2008. With two-thirds of the world's hungry largely reliant on rice as a staple, rice prices have not increased and supplies are relatively strong. Accordingly, though rice prices almost tripled in the 20 months to April 2008, contributing to a worsening in world hunger that meant a record 1.02 billion people to be undernourished in 2009, yet that figure fell to 925 million people last year, the first decline in 15 years, as food costs dropped and economic growth lifted incomes. World prices for rice "are well below what they were back then. ..In developing countries the impact should not be as negative. That's not to say there's no problem.' No doubt there has been some silver lining - good seasons in parts of Africa and Asia have helped build up grain supplies there to levels above those of 2007-08, reducing the impact of rising world prices. Local grain supplies in parts of Africa and Asia are very good. The Writer, a noted Management Economist, is attached to the Department of Business Administration, Gauhati University, Assam: Email: m.bibhas@gmail.com
Currently the world has 6 billion people of which India has 1.18 billion and Australia just over 21 million. The world is expected to have 9.5 billion people by 2050. India's population by then would rise to at least 1.5 billion and that of Australia to 36 million. The biggest question- who and where will this food production going to come from? It remains a stern reality that few countries seem to produce food in sufficient quantities for them and export it to others. Examples are not far to seek. Last year Russia banned the export of food grains due to fire devastation of crop lands. India has banned the export of onions. Australia [a food self sufficient country] may end up having to import vegetables due to floods. Actually speaking: there is no consistency of supply of food, which, in turn, has led to volatility in the markets where food grain is a commodity once again to be treated as a tool for consumption rather than as an essential ingredient [water] without which the entire society would reduce to a naught! It is by now crystal clear that distortion of markets prevents farmers from getting the right price in the markets thereby turning them off farming out of despair or debts. Time is ripe to pay all out attention if the plate is expected to be full ensuring a square meal. At the very outset let us have a close look at what the latest FAO [Food and Agriculture Organization] statistics indicates so far as the forecast for global food situation is concerned. As assessed by the FAO, world production of cereals fell in 2010, while total cereal utilisation is expected to reach a record in 2010-11, resulting in falling stocks. Although the 2010-11 world trade forecast has been raised by 1.2mt to 274mt, it remains 2mt lower than in 2009-10. The forecast for world cereal utilisation in 2010-11 has been lowered a bit, but the same is still up 2 percent from 2009-10. Forecast trade in coarse grains is raised by 1.0mt, to 119mt, reflecting larger than anticipated imports by China, Egypt, and the EU, which is more than offset downward revisions for Canada and the Republic of Korea. Forecast trade in wheat is raised slightly, with imports by Islamic Republic of Iran, South Africa and Mexico raised forecast trade in rice in 2011 remains largely unchanged from February. Though it is a fact that till now high international prices have had little impact on the overall world demand for food, feed or bio-fuels, yet change in situation simply cannot be ruled out. Low stock levels, the implications on oil prices of events in the Middle East and North Africa and the effects of the destruction in Japan all make for continuing uncertainty and price volatility over the coming months. Crude oil prices rose to USD 123 a barrel already [due to speculation and political uncertainty in North Africa]. As the situation stands now, following a 1 percent (25mt) decline in cereal production in 2010, some recovery is expected in 2011, supported by strong prices. Increased cereal production is expected in 2011, but the same may not be sufficient to replenish inventories, in which case prices could remain firm also in 2011-12. What is more: world cereal stocks for crop seasons ending in 2011 are forecast to shrink by 9 percent (47mt), bringing the stocks-to-use ratio down to a three-year low. Side by side: coarse grain inventories (maize in particular) are forecast to drop most, with major exporters' stock-to-disappearance ratio plunging to a 30-year low of only 8 percent. Wheat production is tentatively put at 676mt, up 3.4 percent from 2010 [assuming yield recoveries and increases in plantings]. Coarse grain and rice outputs are also anticipated to grow, but with the bulk of plantings beginning in the coming months, it is too early to make production forecasts, as rightly opined by this leading able organization. It may be highlighted here that this organization [of the United Nations - serving both developed and developing countries] leads international efforts to defeat hunger. FAO - undoubtedly acts as a neutral forum where all nations meet as equals to negotiate agreements and debate policy helping developing countries and countries in transition to modernise and improve agriculture, forestry and fisheries practices targeting to ensure good nutrition for all. Founded in 1945, special attention has been paid on developing rural areas where around 70 percent of the world's poor and hungry people live. Ongoing trends in global food prices front clearly shows and indicate that there are reasons to be very cautious. Global food prices rose 28 percent in the past 12 months and reached a record in January, 2011. This has partially fuelled the riots across North Africa and the Middle East that have already toppled leaders in Tunisia and Egypt. More than 60 food riots occurred worldwide from 2007 to 2009, according to the U.S. State Department. Ivory Coast's political crisis may lead to food shortages in the country and neighboring states as imports of staples including rice have been cut off and movement of food is hampered by the recent conflict. Though food prices were not the cause of the crises in the Middle East and North Africa, but they are an aggravating factor. There is double-digit food price inflation in Egypt and Syria. It shows that commodity price spikes particularly poor countries. The FAO itself admitted that though global food prices are comparatively down, but situation still remains uncertain. Global food prices fell for the first time after eighth consecutive months of price spikes in March, 2011 in the wake of a decline in international prices of oil, sugar and cereals. The FAO's food price index [a measure of the monthly change in international prices of a basket of food commodities] averaged 230 points in March, 2011, down 2.9 per cent from its peak in February, 2011, but still 37 per cent above its reading in March last year. Sugar prices declined, prompted by prospects of increased market availability, notably from India. The March, 2011, slide primarily reflects a recovery in global supply prospects for palm oil. Dairy prices were high on the back of firm import demand together with lower than expected production in Southern hemisphere supplying countries, where the milking season is coming to a close, it said. Meat prices rose due to trade disruptions in several key markets, particularly North Africa and Japan. Global food prices averaged 236 points in February 2011, up 2.2 per cent from January, the highest record in real and nominal terms, accordingly. While international prices of oils and sugar dropped the most, followed by cereals, in contrast, dairy and meat prices were up, although only marginally in the case of meat. The Cereal Price Index in March, 2011, though down 2.6 per cent from February, 2011, is still 60 per cent higher compared to the corresponding period of 2010. Whatever is, there is some soothing observation, however, from very recent OECD [Organization for Economic Cooperation and Development] assessment - global food crisis on the scale of what happened three years ago isn't recurring because an increase in the cost of rice, a staple for half the world, has lagged behind a jump for other grains..The scale of the problem is not as bad for large parts of the world as it was in 2008. With two-thirds of the world's hungry largely reliant on rice as a staple, rice prices have not increased and supplies are relatively strong. Accordingly, though rice prices almost tripled in the 20 months to April 2008, contributing to a worsening in world hunger that meant a record 1.02 billion people to be undernourished in 2009, yet that figure fell to 925 million people last year, the first decline in 15 years, as food costs dropped and economic growth lifted incomes. World prices for rice "are well below what they were back then. ..In developing countries the impact should not be as negative. That's not to say there's no problem.' No doubt there has been some silver lining - good seasons in parts of Africa and Asia have helped build up grain supplies there to levels above those of 2007-08, reducing the impact of rising world prices. Local grain supplies in parts of Africa and Asia are very good. The Writer, a noted Management Economist, is attached to the Department of Business Administration, Gauhati University, Assam: Email: m.bibhas@gmail.com