Wednesday, September 5, 2012

Drought and Other Extreme Weather Events Trigger Another Global Food Crisis?

The impact of the 2012 drought on U.S. crops and livestock has been in the headlines for weeks now. Last month, the United Nations Food and Agriculture Organization (FAO) released itsmonthly food price index, showing a sharp increase of 6 percent in July, which raises serious concerns that we might be on the brink of a global food crisis.
In an era of globalized commodity markets, the devastation of the U.S. corn crop translates into a global grain shortage. But, equally important, the U.S. drought is just one of many extreme weather events around the world this year and their combined “domino” effect could put many at risk of higher food prices, if not a full-on food crisis.
A global grain shortage
We are just at the front end of feeling the impacts of the drought. The harvest season has yet to unfold across much of the U.S., the final tally of lost crops is not yet in, and drought conditions persist in much of the country. The most recent USDA weekly crop progress report is not promising: 50 percent of the corn crop and 39 percent of soybean is in poor or very poor shape. The sorghum crop has also been hit hard with 45 percent in poor or very poor shape.
The U.S. is one of the largest producers and exporters of corn (also called maize), contributing 38 percent to world output and responsible for nearly half of global corn exports. Simultaneous with corn losses, global wheat output has been affected by drought and dry, hot conditions in Australia and Russia, both major wheat producers and exporters. The price of wheat (and some other grains) has also gone up because people are looking for ways to substitute away from corn.
The effects on corn, soybean, and wheat prices has been clear. According to the latest data from the Chicago Board of Trade, corn has risen 61 percent since June to $8.2675 per bushel, soybeans rose 20 percent to $16.2675 a bushel, and wheat prices rose to $9.2725 a bushel which is a more than 40 percent increase this year.
Livestock and dairy production lowered
Higher corn prices are also negatively affecting the livestock industry since corn is major source of feed. The price of hay has also doubled in some areas. Additionally, the drought has left 59 percent of pasture and rangeland land in poor or very poor condition. Many cattle farmers are culling their herds. This short-term response may lead to a temporary glut in the meat market but that will taper off within months. Over the longer term, into next year, we can expect rising meat and poultry prices, reflecting the increased cost of feed and smaller herds.
The extreme heat that has baked much of the country this summer has also led to lower milk production and lower weight gain among animals. According to a recent news article quoting Jim Fraley of the Illinois Milk Producers Association, in Illinois cows normally give 90 pounds of milk per cow per day but now production is down to around 60 pounds. read

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