Expect food security to become a major topic in coming months.
It is beginning to look like production from 2021 might not be enough to rebuild comfort in global grain stocks.
In the context of a world slowly recovering from the miseries of COVID-19, now coupled with price inflation in everything from lumber to vegetable oil to computer chips, any rise in food costs will become headline news.
You might remember all the talk of world food crises during the commodity price spike of 2008 and again in 2011 and 2012 when short crops pushed food prices to new heights.
Costs have again climbed to those levels, according to the Food and Agriculture Organization’s Food Price Index in May. Indeed, the increase in that month was the fastest in more than 10 years.
Any crisis causes well-intentioned people in positions of authority to look for solutions.
I don’t mean to belittle this concern. Billions of people live on a knife edge about whether they have enough food for their families.
Fast rising food costs can spark civil unrest as it did in 2011 when food inflation was one trigger of the Arab Spring uprisings.
A crisis gets all sorts of people talking, including those outside of agriculture, such as politicians, bureaucrats, professors, environmentalists, billionaires and even newspaper columnists.
And soon they will have ideas about what people inside of agriculture, farmers, should do.
That often irritates those who actually till the soil and tend the herds.
I’ll return to this topic but let’s look at developments in the last couple weeks that started grain markets boiling again.
Severe drought in Brazil and worrisome weather in North America pushed new crop Chicago futures last week back to the contract highs set in early May.
Spring rains have been inadequate for the Canadian Prairies, northern United States Plains and parts of the Midwest, particularly when temperatures soared early this month.
Meanwhile, the drought hurting Brazil’s second corn crop is relentless. The worst dry spell in 91 years has private forecasters cutting production estimates almost weekly.
Only last month the U.S. Department of Agriculture estimated total Brazilian corn production at 102 million tonnes, but that is now wildly out of date.
On June 1, Arlan Suderman, chief commodities economist for StoneX Group, lowered his Brazil corn estimate to 89.7 million tonnes, or 12.3 million less than the May USDA estimate. Other private forecasts are similar.
In Russia, SovEcon’s forecast for wheat production is 80.9 million tonnes, down from 85.3 million last year.
Much can change before the coming harvests, but for now hopes for bumper crops to refill stocks are fading, keeping the focus on food availability and affordability.
Some governments will try to limit cost increases by controlling the price paid to farmers. Others will restrict food exports to maintain supply at home.
Some will subsidize food to the poor.
Those who think far too much land is devoted to producing feed for livestock will have their views amplified along with the associated argument that we should reduce or eliminate meat consumption.
The investors behind plant-based meat and milk alternatives will have their say too.
The debates over organic versus conventional, the safety of crop genetic modification and the environmental consequences of modern farming will all be rehashed with a greater sense of urgency.
And another issue — the use of crops to make biofuel — could become a flash point.
That is of particular interest to western Canadian agriculture, which has just seen huge investments into canola crushing plants and a renewable diesel refinery.
These projects, and similar ones in the U.S., are driven in part by Canada’s new Clean Fuel Standard as well as similar regulations in California, Oregon and Washington.
These require gas and diesel suppliers to reduce the carbon intensity of their fuels. Low carbon fuels such as renewable diesel are a transition measure until battery electric and hydrogen technology becomes better and more widely available.
But this effort to address climate change could come under fire if the food crisis lingers.
A decade or so ago, the fast-growing U.S. ethanol sector faced complaints about diverting grain from food to fuel. But with bigger crops a few years later, and a better understanding of how feeding dried distillers grain fills in for corn feed, the controversy faded.
My own take on this is that in years of crop production surpluses, it is great for biofuel makers to take the excess to stabilize grain prices. They can lessen reliance on risky export markets and create local jobs.
But when biofuels grow too large, they encourage grain production in places where crops should not be grown, shrinking pastureland and forests and stressing wildlife.
In partly solving one set of problems, they can create another list of woes.