Global Food Crisis Clouds
With geopolitical conflicts and logistics bottlenecks brought about by the new crown epidemic, as well as the recent frequent occurrence of extreme high temperature weather, the production is expected to decline, and the global food crisis may become more severe next year. And soaring inflation and fertilizer prices are undoubtedly making things worse.
Recently, Thailand and Vietnam, the main rice producing areas, have decided to join hands to raise the price of rice, and the timing of the price increase has not yet been decided; India, the world's largest rice exporter, is discussing imposing restrictions on the export of broken rice; while in developed countries in Europe and the United States, high inflation and expected production A decline will further push up its food prices.
The Food and Agriculture Organization of the United Nations estimates that global food prices could rise another 8.5 percent by 2027.
Food security affected
As the world's largest rice exporter, India's rice accounts for 40% of the global market share. Due to tight domestic supplies, India is exploring restrictions on broken rice exports. Broken rice is a staple in some poor African countries and accounts for 20 percent of India's rice exports.
India is also a major producer of wheat. The persistent heat since March this year has affected India's wheat harvest, and India's national wheat stockpile has fallen to the lowest level in the past 14 years in August, according to data from the Indian Foods Corporation.
Indian government departments expect the 2021-2022 wheat harvest to be around 107 million tonnes, down from February's estimate of 111 million tonnes. Despite the downward revision, the data still appears overly optimistic: the market expects that India's actual wheat harvest this year may only be 98 million-102 million tons.
Not only India, but the global food supply is getting tight.
As a major grain exporter in the world, Ukraine's corn and wheat exports account for more than 10% of the global market. In July, Ukrainian President Volodymyr Zelensky warned on Twitter that Ukraine's agricultural harvest could be halved this year because of the conflict.
Consulting firm McKinsey forecast in its mid-August report that the next Ukrainian wheat harvest could drop sharply by 35%-45%, and the total grain harvest could be 30-44 million tons lower than normal.
In addition, Europe is experiencing extreme high temperature weather "baking" experience. In its report, the Global Drought Observatory noted that severe drought is expected to lower yields of cereals corn, soybeans and sunflower by 16%, 15% and 12%, respectively, from the previous five-year average.
On the other side of the ocean, in the United States, the corn harvest may hit the lowest level in three years due to the lower-than-expected spring planting. The latest forecast from Pro Farmer, an agricultural consultancy owned by Farm Journal, shows that U.S. corn production will reach 13.759 billion bushels this year, 4.2% lower than the USDA's previous forecast.
There are various signs that the global food supply crisis is still under the cloud.
The Food and Agriculture Organization of the United Nations sharply lowered its latest cereal production forecast for 2022 in its cereal supply and demand briefing released on September 2. FAO's 2022 global cereal production forecast is now at 2.774 billion tonnes, down 17.2 million tonnes from the July forecast and forecast to be down 1.4 percent (38.9 million tonnes) year-on-year.
According to data from the United Nations World Food Program, as of June 2022, the number of people in severe food insecurity in 82 countries has increased to 345 million, and food and clothing have become a problem. The group also warned that severe food insecurity in 20 countries or territories could worsen between June and September 2022.
High prices will continue
Since Ukraine was allowed to export grain from the Black Sea, the United Nations Food and Agriculture Organization (FAO) food price index, which tracks changes in a basket of food prices, has continued to decline, and futures prices such as wheat, soybeans, and corn have gradually fallen from their highs.
Still, global concerns about food supplies have not been entirely put to rest. Some analysts say that the food crisis is not only not over, but may continue to worsen next year, and next year's food crisis will be different from this year's.
In the first half of this year, due to the logistics bottleneck caused by the conflict between Russia and Ukraine and the new crown pneumonia epidemic, poor food import and export and transportation were the main reasons for the soaring food prices. From the second half of this year to next year, the expected grain harvest is generally lower, and the food supply itself has become a problem, which means that the food security situation next year may become worse.
According to the latest data released by the Food and Agriculture Organization of the United Nations on September 2, the global food price index in August 2022 averaged 138.0 points, the fifth consecutive month of decline, but still 10.1 points (7.9%) higher than the same period last year.
Specifically, the cereal price index was 14.8 points higher (11.4%) year-on-year. Among them, the price of wheat increased by 10.6% over the same period last year, the price of coarse grains increased by 12.4% year-on-year, the price of corn rose slightly by 1.5%, and the price of rice continued to remain stable.
And with the supply tightening, food prices may remain high for some time.
Higher food prices affect people in low- and middle-income countries more because they spend a larger share of their income on food than people in high-income countries. But in a high inflation environment, this pressure will only be transmitted indiscriminately to each country.
According to a report released by the World Bank on August 15, from April to July 2022, almost all low- and middle-income countries experienced high inflation; Inflation in the income countries is above 5%, with many in the double digits. The proportion of high-income countries with high inflation also increased significantly, with about 83.3% experiencing high food price inflation.
At the same time, the price of fertilizers is also rising, further passing on the cost of food to consumers.
Russia's fertilizer exports account for about 14% of the world's. Fertilizer prices have risen following export restrictions, further denting crop yields.
This situation, combined with high energy prices and supply chain disruptions, all of these uncertainties could keep prices well beyond 2024, said Mari Pangestu, executive director of the World Bank's Development Policy and Partnerships Department. stay high.
The price of urea, a common material for nitrogen fertilizers, has more than doubled from last year, market data shows. The shortage of natural gas has caused European fertilizer plants to announce production cuts or shutdowns, which has also led to fewer and fewer fertilizers available to farmers around the world, which may further push up food prices.
McKinsey believes that this will hit countries such as Brazil that are heavily dependent on fertilizer imports and will further reduce food production. McKinsey has warned that next year's food crisis will be even worse.
Arif Husain, chief economist of the United Nations World Food Program, also pointed out that if the current shortage of fertilizers is not resolved, it may turn into a food supply crisis.
According to Singapore's "Lianhe Zaobao" report, Thailand and Vietnam, the main rice producing areas, have recently decided to join hands to raise rice prices.
Thailand and Vietnam are the second and third largest rice exporters in the world. According to the US Department of Agriculture, Thailand and Vietnam account for about 10% of the world's crude rice production, and about 26% of the world's total exports come from Thailand and Vietnam.
The price of rice has remained stable for a long time because of sufficient production and stocks. And at a time when global food prices are soaring, rising rice prices are undoubtedly bad news for buyers and consumers.