Saturday, April 12, 2008

Corn Shortage Spreads to Rice, Wheat

A year ago, there were riots in Mexico City to protest the high price of corn. I was surprised then to learn that Mexico, historically a major corn-producing country, now imports most of its corn from the United States, where the corn ethanol initiative had led to a shortage of corn. This year the corn riots have moved to Haiti, and the United States may be producing a third less corn. According to the USDA, U.S. farmers are planting 30 percent fewer acres of corn so they can grow crops that they expect to be in even higher demand, particularly soybeans. At the same time, the grain shortage is affecting the other major grains of the world, rice and wheat.

The world’s total production of rice and wheat have fallen only modestly. Rice production is apparently about 4 percent below the peak levels of two years ago, and wheat crops are also close to their historic peaks. Yet with the demand for grains growing year over year, even this slight decline has led already to spot shortages in which poor people around the world are forced to wait for a week or two with little or nothing to eat.

Fearing disaster in their own cities, India, Egypt, and other large rice-producing countries have suspended rice exports. Bangladesh, still reeling from recent floods, has nothing to export this year, and Pakistan is seeing all of its surplus disappear over the border into Afghanistan, a country again reeling from food shortages resulting from the Taliban Army’s religious opposition to agriculture. Before this is all over, the price of rice is likely to be double what it was a year ago — and there are reasons to think the price will never go back down.

Wheat would be the obvious substitute for rice, but wheat too is under pressure. Russia has suspended wheat exports to ensure that Russians will have bread, and it is thought that Kazakhstan, normally a wheat exporter, may not have any wheat to sell either.

Many are blaming biofuel initiatives for the sudden shortage of grains, and given the current crisis, it probably would be a good idea for the United States and other countries to stop all subsidies for diverting crops to fuel production. However, that will do only a little to address the crisis. There are larger forces affecting the demand for grain and seemingly intractable problems that may affect the supply for years to come.

A bigger issue than the biofuel craze is the growing popularity of meat as a food. It takes about 10 kilograms of grain to produce one kilogram of meat, and with a rapidly growing middle class in China and other countries, more and more grain is being used to feed animals. There are more livestock than people in the world, so even a small shift of food toward animals leaves noticeably less for people.

There are also serious problems affecting the supply of food. As always, there are the political problems. In troubled countries like Afghanistan and Somalia, the threat of violence may literally prevent farmers from growing food crops. But as serious as these problems are locally, they are minor compared to the trends affecting food production worldwide. Most ominously, the world is running out of water. About an eighth of the cities in the world depend on fossil water — underground and glacial water supplies that will be largely depleted in the next 40 years. Already, the declines in water are leading to what appear to be permanent declines in food production across east Africa and central Asia.

The water problem could be solved if we had enough energy to take the salt out of sea water. Yet energy prices are already squeezing food production. Oil prices that have doubled since the U.S. invasion of Iraq are going up again. It takes enormous amounts of energy to harvest, process, and transport most food, and at this point, farmers depend on petroleum fuels to operate their equipment. With higher oil prices, farmers have no choice but to charge more for the food they grow.

The World Food Programme warned last fall of the troubles high energy prices were causing in its mission to deliver food to the poorest areas of the world. Now high food prices and spot shortages threaten to spread the hunger problem to a billion people who in normal times would be able to buy food. So far, the main thing we have seen of the problem in the U.S. news media is the price increase at Starbucks; the protests, strikes, and riots in cities around the world mostly have not been reported. But if the United States delivers one third less corn to the world market five months from now, the current unrest could turn to disaster. We can face this looming disaster more effectively if we start now than if we wait until it is forced upon us.