World GRAIN Stocks FALL to 57 Days of CONSUMPTION: SHORT by 61 Million Tons -

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2002 Grain Indicator

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WORLD GRAIN STOCKS FALL TO 57 DAYS OF CONSUMPTION:

 

Grain Prices Starting to Rise

Lester R. Brown

 

This year’s world grain harvest is projected

to fall short of consumption by 61 Million Tons,

marking the sixth time in the last seven years

that production has failed to satisfy demand.

 

As a result of these shortfalls,

world carryover stocks at the end of this crop year

are projected to drop to 57 days of consumption,

the shortest buffer since the 56-day-low in 1972

that triggered a doubling of grain prices.

 

World carryover stocks of grain, the amount in the bin when

the next harvest begins, are the most basic measure of food security.

 

Whenever stocks drop Below 60 days of consumption,

prices begin to rise.

 

It thus came as no surprise when the U.S. Department of Agriculture

(USDA) projected in its June 9 world crop report that this year’s wheat

prices

will be up by 14 percent and corn prices up by 22 percent over last year’s.

 

This price projection assumes normal weather during the summer

growing season. If the weather this year is unusually good,

then the price rises may be less than those projected,

but if this year’s harvest is sharply reduced by heat or drought,

they could far exceed the projected rises.

 

With carryover stocks of grain at the lowest level in 34 years,

the world may soon be facing high grain and oil prices

at the same time (See Figure). For the scores of low-income countries

that import both oil and grain, this prospect is a sobering one.

 

The 2006 world grain harvest of 1,984 million tons,

estimated by the USDA in its June crop report,

is down 24 million tons from last year, or roughly 1%.

It is down 3% from the historical high of 2,044 million tons

produced in 2004.

 

World grain consumption has risen in each of the last 45 years

except for three - 1974, 1988, and 1995 - when tight supplies

and sharp price hikes lowered consumption (See Figure).

Growth in world grain demand, traditionally driven by population growth

and rising incomes, is also now being driven

by the fast growing demand for grain-based fuel ethanol for cars.

 

Roughly 60% of the world grain harvest

is consumed as food,

36 percent as feed, and 3% as fuel.

While the use of grain for food and feed grows by roughly 1% per year,

that used for fuel is growing by over 20% per year.

 

Although the rate of world population growth is projected to slow further,

the number of people to be added is expected to remain

above 70 million a year until 2020. Each year the world’s farmers

must try to feed an additional 70 million people, good weather or bad.

 

This growth is concentrated in the Indian subcontinent and sub-Saharan

Africa, which is where most of the world’s hungry people live.

 

When incomes begin to rise, low-income consumers diversify their diets,

shifting from a diet dominated by starchy foods, such as rice, corn, wheat,

and cassava, to a more diverse diet, one that incorporates

grain-intensive products such as meat, milk, and eggs.

 

In high-income countries like the United States and Canada,

grain consumed indirectly in the form of livestock products

far exceeds that consumed directly as food.

 

Rising incomes worldwide are enabling some 3 or 4 billion

low-income consumers to move up the food chain,

consuming more poultry, pork, beef, milk, eggs, and farmed fish.

 

World meat production, which climbed from 44 million tons in 1950

to 265 million tons in 2005, moves higher each year.

During this 55-year span, production per person more than doubled,

going from 17 kilograms to 41 kilograms.

 

The newest, potentially huge claimant on world grain supplies,

the use of grain to produce fuel ethanol, is concentrated

in the United States where a projected 55 million tons,

or one fifth of the projected 268-million-ton corn harvest for 2006,

will be used for this purpose.

 

This year the climbing use of corn to produce automotive fuel

will catch up with the U.S. export of corn, which is

also estimated at 55 million tons (See Figure).

For perspective, although 55 million tons is only 16 percent

of the U.S. grain harvest, it exceeds the total grain harvest of Canada.

 

Farmers are facing a record growth in the demand for grain at a time

when the backlog of technology to raise grain yields is shrinking,

when underground water reserves are being depleted,

and when rising temperatures threaten to shrink future harvests.

 

Water tables are now falling and wells are going dry

in countries that contain half the world’s people, including

the big three grain producers - China, India, and the United States.

 

In China, water shortages have helped lower the wheat harvest from its

peak of 123 million tons in 1997 to below 100 million tons in recent years.

Water shortages are also making it more difficult for farmers in India

to expand their grain harvest. In parts of the United States,

such as the Texas panhandle and in western Oklahoma and Kansas,

depletion of the Ogallala aquifer has forced farmers

to return to lower-yield dryland farming.

 

The world’s farmers are also losing water to cities.

In the United States, for example, hardly a day goes by

without another sale of irrigation water to small towns or large cities

such as Los Angeles, San Diego, Las Vegas, and Denver.

 

Some of these water sales are by individual farmers selling water rights

to a local town. Others represent sales of water rights

by entire irrigation districts, as in parts of California.

 

The widespread overpumping of aquifers for irrigation means

we are feeding ourselves with water that belongs to the next generation.

While it is widely recognized that the world is facing

a future of water shortages, not everyone has connected the dots

to see that this likely also means a future of food shortages.

 

Perhaps the most dangerous threat

to future food security is the rise in temperature.

Among crop ecologists there is now a consensus

- that for each temperature rise of 1° Celsius

above the historical average during the growing season,

- we can expect a 10% Decline in Grain Yields.

 

When describing weather-reduced harvests, crop analysts

often refer to the crop prospect when weather returns to normal.

They fail to realize that with the earth’s climate now in flux,

there is no longer a norm to return to.

 

More and more in recent years, crop-withering heat waves

have led to major crop losses. For a recent example,

the early estimate of India’s wheat harvest this year

- of 73 Million tons dropped to 68 Million tons

as high temperatures during the crop’s critical growth stage

in January and February shrank the harvest.

 

The troubling constraints on grain production growth,

- such as spreading water shortages and rising temperatures,

are making it difficult for farmers to keep up

with the record growth in demand.

 

As a result the world grain market may become a seller’s market,

one where higher grain prices, like high oil prices,

are an integral part of the economic landscape.

 

All Below Links at:

http://www.earth-policy.org/Indicators/Grain/2006.htm

ADDITIONAL DATA

Figure 1: World Grain Production, 1950-2006 (figure and table)

Figure 2: World Grain Production Per Person, 1950-2006

(figure and table)

Figure 3: World Grain Production and Consumption, 1960-2006

(figure and table)

Figure 4: World Grain Stocks, 1960-2006 (figure and table)

Figure 5: World Grain Stocks as Days of Consumption, 1960-2006

(figure and table)

Figure 6: Corn Production and Use for Fuel Ethanol and for Export,

1980-2006, with Projection to 2007 (figure and table)

 

2002 Grain Indicator

http://www.earth-policy.org/Indicators/indicator6.htm

To return to the Index of Eco-Economy Indicators,

<> http://www.earth-policy.org/Indicators/index.htm

For more information related to FOOD and AGRICULTURE

from Earth Policy Institute,

http://www.earth-policy.org/Indicators/Grain/index.htm

 

 

Copyright © 2006 Earth Policy Institute

 

Earth Policy Institute

Email: epi

 

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