Another Food Crisis?

Aug 24, 2012 Editorial

There have been reports in the local press of the International Poultry Council (IPC) warning that rising prices of chicken feedstock have led to skyrocketing prices for chicken. Local housewives were ahead of the IPC on this bit of bad news; having suffered through first a chicken shortage and then the high prices. But the rise in prices of chicken feed is but one indicator of a worldwide rise in the price of food that experts believe might lead to another food crisis.
Chicken itself has become the most widely used source of protein in the world and the latest price hike which is sure to escalate will have wide repercussions. The current world grain shortage has been triggered by prolonged drought in the soybean and corn producing regions in the United States, coupled with excessive rains in Northern Europe. Global commercial poultry production depends on feeds produced from corn, soy and other grains, all of which are important inputs. Because of the U.S. drought, global corn and soybean supplies are insufficient. Poultry production consumes 44 per cent of the world’s supply of animal feed. As usual, financial speculation has worsened the situation, sending corn and soy prices to record levels, as well as driving up the price of alternative feed crops, such as wheat.
This is the third time in the past five years that the world is facing a food crisis. The last two crises, in 2007-08 and 2011, led to food riots in many countries. So it is not just high food prices, increased hunger, localised famines and widespread increase in deprivation that are possibilities.
The US drought, their worst, in almost half a century will evidently not end anytime soon. July was the hottest single month in the country on record, and the first seven months of 2012 were on average the warmest since records began to be kept in 1895.
Between July and August, the U.S. Department of Agriculture (USDA) slashed its estimate of production from the standing corn crop by 2.2 billion bushels to 10.8 billion bushels. Half of the corn crop is assessed as being in “poor” or “very poor” condition, which is the worst assessment since 1988. The output of soya is also expected to be the lowest in five years.
These production shortfalls are significant for three reasons. To start with, the U.S. is the largest producer and exporter of corn. It accounts for nearly half of the world’s exports of corn and about one-third of the exports of soya. This implies that the effects of the shortfall on supply and prices will be transmitted quickly to global markets for this important grain.
Second, corn has alternative uses besides directly entering the food chain. It is estimated that 40 per cent of the crop is absorbed by the ethanol companies and about a third is used as feed by the meat and poultry business. So, when output falls, demands from competing sources tend to drive prices up further. Finally, even if the worst production shortfalls are in corn and soya, other commodities, such as wheat, will also be affected since they can substitute for expensive corn.
Thus, there are fears that wheat production will be diverted for feed production, affecting supplies available for direct human consumption. Drought conditions have affected wheat production in the Black Sea region (Russia, Ukraine and Kazakhstan), which accounts for a quarter of global exports. Adverse weather is also expected to lower production in Australia, Argentina and China. All of this will exacerbate the price rises.
The Food and Agriculture Organisation’s (FAO) Food Price Index rose 6 per cent in July, driven by grain and sugar prices. Cereal prices rose 17 per cent in June relative to the previous month, maize prices by close to 23 per cent and wheat prices by around 19 per cent.
In Guyana, we have not moved since 2007 to develop the potential of our intermediate savannahs to produce soya and corn. And we will have to face the consequences.

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