April 28, 2004: World Food Prices Rising: Environmental Neglect Shrinking Harvests in Key Countries

When this year's grain harvest begins in May, world grain stocks will be down to 59 days of consumption—the lowest level in 30 years. ...

Prices of basic food and feed commodities are climbing. Wheat futures for May 2004 that traded as low as $2.90 a bushel within the last year on the Chicago Board of Trade have recently topped $4 a bushel, a climb of 38 percent. A similar calculation shows the price of corn up by 36 percent, rice up 39 percent, and soybeans doubling from just over $5 per bushel to over $10 a bushel. Rises in the price of wheat and rice (the world's two basic food staples) and corn and soybeans (the principal feedstuffs) are contributing to higher food prices worldwide, including in China and the United States, the largest food producers.

In China, where grain prices are 30 percent above those of a year ago, the National Bureau of Statistics reports that retail food prices in March were 7.9 percent higher than in March 2003. The price of vegetable oil is up by 26 percent, meat by 15 percent, and eggs by 19 percent. ...

Growth in world grain production is lagging behind the growth in demand largely because environmental trends, such as spreading deserts, falling water tables, and rising temperatures, are shrinking harvests in many countries. Consider, for example, Kazakhstan, the former Soviet Republic that was the site of the Virgin Lands Project launched in the 1950s. To expand grain production, the Soviets plowed an area of virgin grasslands that exceeded the wheat area of Australia and Canada combined. It dramatically boosted production, but by 1980 soil erosion was undermining productivity. During the 24 years since then, half the country's grainland area has been abandoned.

During the late 1980s, Saudi Arabia launched an ambitious plan to become self-sufficient in wheat. By tapping a deep underground aquifer, the Saudi's raised grain output from 300,000 tons in 1980 to 5 million tons in 1994. Unfortunately the aquifer could not sustain large-scale pumping and by 2003 the wheat harvest had fallen to 2.2 million tons. Nearby Israel, faced with dwindling water supplies, is no longer irrigating its small remaining area of wheat, which means that dependence on imported grain, already over 90 percent, will climb still higher.

China is the first major food producer to face reduced harvests partly because of expanding deserts and aquifer depletion. Some 24,000 Chinese villages have either been abandoned or have had their farm economies seriously impaired by invading deserts. In the arid northern half of the country where most of the wheat is grown, tens of thousands of wells go dry each year. These environmental trends, combined with weak grain prices that lower planting incentives, shrank the harvest from its peak of 123 million tons in 1997 to 86 million tons in 2003, a drop of 30 percent.

Perhaps the most pervasive environmental trend that is shrinking grain harvests today is rising temperature. When the U.S. Department of Agriculture released its September 2003 monthly world crop estimates, it reduced the projected world grain harvest by 35 million tons from its August estimate. This drop, equal to half the U.S. wheat harvest, was due almost entirely to the intense August heat wave in Europe, where crop-withering temperatures shrank harvests from France in the west through the Ukraine in the east.