Extreme weather events are wreaking havoc on our ability to grow enough food globally to ensure stable food supply particularly in poor countries and are leading to renewed concerns about a new food crisis.
The Food and Agriculture Organization (FAO) yesterday hit the panic button on wheat production in China. A drought there threatens to seriously disrupt the winter wheat crop. Chinese officials are holding out dim hope that the crop can still be saved if the weather cooperates this month and next. No small player in the market, China accounts for approximately 20 percent of global wheat production, so this news has raised serious concern not just for Chinese consumers, but for other countries, which will have to bear higher import bills if low production in 2011 drives up global prices.
Meanwhile, China is preparing to provide some $15 billion to farmers to help them cope. Unlike many developing countries, they actually have the resources to support their farmers.
The alert on Chinese production follows on from drought-induced poor harvests in Russia last summer, and, more recently flooding in Australia. These combined events have led to a surge in wheat prices. News of this impending shortfall in Chinese production predictably roiled commodities markets where wheat futures are pushing yet higher.
And of course the latest alarms on China are leading to a new round of concerns about when higher food prices will morph into a new food crisis. On the basis of the FAO price index alone, we are clearly heading toward a repeat of 2008. Unlike a few years ago though, the rapid rise in food prices is not necessarily the result of a perfect storm, the confluence of high energy prices, increased demand, biofuel production, etc. Instead, it looks like the factors driving food prices at the moment are mostly being driven by weather.
The lessons are perhaps two fold: 1) global carry-over stocks for major grains are not at historic lows, but they appear to be inadequate to calm markets when minor production hiccups occur in major producing countries; 2) even for climate skeptics, there is plenty of evidence that extreme weather events (the kind we assume will become more common as a result of a warming planet) are wreaking havoc on our ability to grow enough food globally to ensure stable food supply particularly in poor countries.
This time around it probably won’t take a perfect storm to drive global hunger up, but what will it take for us to actually do something about it?