Comments on: Worldwide wheat crisis?

Question: Worldwide wheat crisis?

Optamystic — Sat, 22 Sep 2007 19:38:12 -0800

Is there a wordwide wheat crisis?

I was just told that worldwide wheat production was down by a third. Could this possibly be correct? A bit of googling suggests that it may be so.
If so, why isn't it on the front page of every newspaper in the world?

By: winston

winston — Sat, 22 Sep 2007 19:48:51 -0800

Do you have any more details? (e.g. it makes a big difference whether it's dropped by a third over 6 months or 20 years). Even if it's true that it's dropped, it's not necessarily a crisis -- perhaps it's dropped because demand for wheat has dropped.

By: hattifattener

hattifattener — Sat, 22 Sep 2007 19:51:26 -0800

Crop yield varies significantly from year to year.

This is, AIUI, one of the reasons the government subsidizes excess production of food, because it's not actually economically optimal for farmers to plant enough to prevent the occasional famine. It's cheaper to plant a bit less and have occasional bouts of mass starvation. OTOH, the subsidy system is pretty screwed up (everything I know about that comes from The Omnivore's Dilemma though).

I know nothing about this year's crop in particular. I would expect global climate change to reduce the yields of pretty much all crops, since they'd be being planted in the wrong places.

By: hattifattener

hattifattener — Sat, 22 Sep 2007 19:53:49 -0800

(er, The Omnivore's Dilemma. Powell's link; it's been discussed on MeFi before though in a different context.)

By: Alvy Ampersand

Alvy Ampersand — Sat, 22 Sep 2007 20:24:27 -0800

Yes, yes there is.

I'm not sure why you're not hearing about it, though. Maybe it's because I have a rural background, live on the praries, or listen to too much CBC, but I assumed it was a fairly well-known phenomenon.

Then again, "Some farmers making money, bread prices rise, 3rd world screwed over even more than usual" is a fairly hard story to sell to a largely urbanized population, and on the surface is small beer when compared to Iraq, Britney, and killer Chinese toys.

By: Effigy2000

Effigy2000 — Sat, 22 Sep 2007 20:48:25 -0800

This handy table shows that all but a few countries that grow wheat have dropped their productions. Doesn't really say why though.

By: k8t

k8t — Sat, 22 Sep 2007 21:01:31 -0800

It has been on NPR every morning for at least a week. I saw it in Business Week two weeks ago as well.

By: thrako

thrako — Sat, 22 Sep 2007 21:06:38 -0800

The eighth page of this PDF has the USDA estimates and forecasts for global wheat production. It looks like production is forecast to be only a few down a few percent, but ending stocks are projected to be down by about a third from 2005/2006.

By: Pinback

Pinback — Sat, 22 Sep 2007 21:12:55 -0800

Well, Australia's wheat forecast for this year has just been cut by a third from the previous (already low) forecast.

This was on the nightly TV news here a couple of days ago, on at least 2 networks, so it's not exactly being hidden.

By: ssg

ssg — Sat, 22 Sep 2007 21:20:29 -0800

As Alvy notes above, it certainly has been news on the CBC here in Canada. That might be largely because it is good news for wheat growers (and Canada is a major wheat exporter).

As to why it isn't bigger news: for most people in North America, this means higher prices for wheat, but that doesn't mean much to the average consumer. If the wheat in your hamburger bun costs 50% more than it used to, you aren't going to notice the difference.

By: Abiezer

Abiezer — Sat, 22 Sep 2007 23:04:44 -0800

There was a one-day pasta boycott proposed in Italy recently because of the sharp price rises associated with a hike in the cost of durum wheat.
China's grain imports are down some this year, but overall the rise in consumption here over the past decade or two has been a significant factor in world prices.

By: DarlingBri

DarlingBri — Sat, 22 Sep 2007 23:13:50 -0800

Isn't there some correlation between the recent demand for biofuels causing prices hikes for grains also used by farmers to feed livestock, and a resulting price increase for consumers for food?

Or does wheat not factor into that?

By: Reggie Digest

Reggie Digest — Sat, 22 Sep 2007 23:58:39 -0800

I haven't noticed it on the CBC, but I'm one of the last guys still down east so I probably just tuned out the (oh so exciting) crop forecasts.

Say, there wouldn't happen to be some sort of migration to the prairies going on that might be causing property values to skyrocket, or farmland to be bulldozed for cul-de-sacs, would there? (/snark)

Or maybe growing the same Monsanto superwheat year after year does something to the soil? (/slander)

By: dhartung

dhartung — Sun, 23 Sep 2007 00:36:43 -0800

I was just told that worldwide wheat production was down by a third.

Impossible. (Well, just very unlikely.)

Could this possibly be correct?

No.

The most recent statistics from the USDA indicate that global wheat production is off by about a million bushels, or roughly 3.5%, from a peak of 23 million bushels in 2004.

The statistic you heard was most likely the recent announcement by Australia that its wheat production would be a third or more below forecast due to the ongoing severe drought. Australia being the second largest exporter of wheat after the USA, this dealt a severe blow to wheat futures and will drive up prices for the next year or so. (This will stimulate other nations -- those with the capacity -- to move production to wheat, so by a year from now some of that shortfall will be made up for.)

Australia's production will fall from around 850M bushels to 550M bushels or less. This is a 300M shortfall, almost all of which will come from the export supply. But it's only about 1.5% of the global supply.

(If you read Jared Diamond's Collapse, you will realize the utter absurdity of choosing one of the most arid and ecologically fragile continents on the planet on which to found an export agricultural market. But here we are.)

Global wheat yield being off by a third ... well, I don't want to imagine it, really. It wouldn't be buried beneath the headlines, that's for sure. You'd be having starvation and wars some places. Import-dependent countries would have riots and coups and be begging for IMF loans to buy wheat for bread. Etc.

A loss of 1.5% of the world's wheat supply isn't enough to cause starvation, but it's certainly enough to cause stochastic price fluctuations (see: Enron).

By: dhartung

dhartung — Sun, 23 Sep 2007 00:40:28 -0800

off by about a million bushels, or roughly 3.5%, from a peak of 23 million bushels in 2004

Of course, that should be trillion. US exports are at the 900M bushel level, a tiny fraction of US production, but larger than Australia's entire crop.

By: MattD

MattD — Sun, 23 Sep 2007 04:53:54 -0800

Many growers, particularly large and sophisticated operators, can switch their sowings among wheat, corn, or soy depending upon what they see in the market. Corn sowings are up huge as growers hope for big ethanol demand, which will impede wheat supply.

By: Thorzdad

Thorzdad — Sun, 23 Sep 2007 07:33:04 -0800

I believe I have read articles concerning growers transitioning from wheat to corn, due to corn's becoming much more valuable, thanks to its use in feed, HFCS, and the rapidly-blossoming ethanol industry.

So, while the drop may be relatively small at the moment, you might expect to see the drop increase in the next several years.

By: 8k

8k — Sun, 23 Sep 2007 09:04:39 -0800

This is a very complicated issue and it isn't just about wheat - prices of many 'soft commodities' (mostly food crops) have been rising faster than usual recently.

My understanding is there are several factors driving this -- shortage of supply in some exporters (eg wheat in Australia); growing demand in countries like India and China (as their populations become bigger and wealthier); increasing amounts of land being dedicated to crops for biofuels; and trade barriers such as agricultural subsidies and quotas.

There is a very comprehensive look at the issue here. For example, food price inflation has traditionally been about 1.5% a year and is now at about 2% a year and projected to rise to 2.6% a year within a decade.

The second part of your question is about why this has received relatively little news coverage. Part of the reason is that food makes up a relatively small part of average household expenditure -- in developed countries at least. Of course if the actual rate of food inflation continues to increase, we will begin to hear about it a lot more. It is already looking like bad news for poorer countries (again, there's more in the link above).