The worlds grain harvest is expected to be 61 million tons short of consumption, according to Lester Brown of the Earth Policy Institute. Production has failed to meet demand in six of the last seven years. It means the worlds grain stocks will be enough for about 57 days, the shortest buffer amount since the 56-day bottom in 1972 that doubled grain prices.
Carryover stocks of grainthe amount in the bins when the next harvest beginsare the basic measurement of food security. If stocks plunge lower than 60 days supply, prices begin to climb. That fact was reflected in the U.S. Department of Agricultures June 9 world crop report projection that wheat prices this year will be up 14 percent, and corn prices will rise by 22 percent from last year.
The forecast is based on normal weather during the summer. If the weather is unusually good this year, prices might not be as high as expected, but if the harvest is cut by heat or drought, increases could be well above the projections.
With carryover stocks at the lowest level in 34 years, the world could soon be facing both high grain and high oil prices at the same time. For countries that import both commodities, that is a grim prospect.
The USDA estimates this years global grain harvest at 1,984 million tons, down 24 million tons from last yearabout 1 percent. It is 3 percent below the historic high of 2,044 million tons harvested in 2004.
World grain consumption has risen every year in the last 45 years, except for 1974, 1988 and 1995, when sharp price hikes and tight supplies pushed consumption down. Demand for grain generally is driven by population growth and rising income. Now it also is being pushed upward by the rapidly growing demand for grain-based ethanol for cars and trucks. That is the developing conflict that pits food against fuel.
Some 60 percent of the global grain harvest is used as food, 36 percent as feed, and only 3 percent as fuel. The latter consumption, however, is growing by more than 20 percent each year.
Brown reports that while the rate of population growth is expected to slow an additional amount, the annual amount of increase is projected to be above 70 million individuals until 2020. The worlds farmers must try to feed another 70 million people each year, regardless of weather. Population growth is centered on the Indian subcontinent and sub-Saharan Africa, where most of the worlds hungry live.
In low-income countries, the population mostly eats starchy food, such as rice, corn, wheat and cassava. In more affluent countries, like the U.S., people eat more grain-intensive foods such as meat, milk and eggs. Improving incomes globally are allowing some 3 to 4 billion consumers to eat more poultry, pork, beef, milk, eggs and farmed fish. Global meat production leaped from 44 million tons in 1950 to 265 million tons in 2005 and keeps climbing.
The U.S. is expected to use 55 million tonsone-fifth of the projected harvest of 268 million tons this yearto produce corn ethanol. This year, that consumption will match our export and will exceed Canadas total harvest.
The picture is not a bright one. Farmers are facing record growth in demand for grain at a time when technology to boost grain yields is lagging, aquifers are being depleted and rising temperatures threaten to reduce future harvests. Water tables are falling, and wells are going dry in countries where half the worlds people live. That includes China, India and the U.S.
Brown said the widespread overpumping of aquifers for irrigation means we are feeding ourselves with water that belongs to the next generation.
And, while farmers battle water shortages and global warming, those are not the only problems they face. It has not been widely reported, but globally farms are being affected by weakening fuel security. Skyrocketing diesel fuel prices are having an impact, but so are thieves.
Diesel and gasoline thefts are increasing. They have been reported in rural sections of Britain, New Zealand, Australia and New York and in Merced County, Calif., where copper wire was stolen from Hunter Farms.
Farm owner Scott Hunter said he has seen agricultural crimes on his farm over the years, but now, as the cost of diesel and copper wire has risen sharply, these thefts have increased. Copper and diesel are the biggest issues in ag crime, said Scott Dover of the Merced County Sheriffs Department.
In rural areas, bulk fuel often is stored in unsecured buildings. Farmers are advised to remove keys from vehicles, lock up their buildings when away and let friends or neighbors know when you will be away for longer periods and ask them to keep watch on your property. Fuel theft is not restricted to the countryside, it is on the increase everywhere.
Farmers usually buy fuel in bulk, and, with higher summer prices, they often buy in the spring, but prices spiked in March this year just as farmers were getting ready for planting. One fuel supplier recommends: Buy when you need it. You only buy as much as you need. Dont buy for the whole year, not when its this high. Its too late to buy for the whole year, said Mike Howard of Lakeview Petroleum in Yuba County, Ca.
Rising diesel prices are hard on farmers but are a nightmare for truckers who are a vital link in the food supply chain. They must buy at the pump and pay the price, which is much above the bulk rate.
In addition to high fuel prices, the rising cost of pesticides and fertilizers is also up. To adapt to these higher costs, farmers are making some adjustments. Farmer John Voelpel said: We are making some adjustments like the guys dont idle the tractors too long. If they stop in the field, they shut them off, or turn off the air conditioning that cools the cab.
The Web site From the Wilderness reported that farmers today are putting much more reliance on jobs away from the land in nearby towns and cities just to survive. The economics of modern agriculture, the Web site stated, necessitates taxpayer subsidies to offset the sizeable losses farmers constantly suffer as their incomes continue to drop markedly. Net farm income in this country is expected to be down 22.3 percent from last year.
The most important question of our lifetimes may become How do we eat? There is another question equally important, and that is how much risk will we take to keep thieves from stealing our fuel before peak oil does so?
From the July 5-11, 2006, issue