World Still Facing Major Food Shortages And Massive Humanitarian Disaster

Here is a batch of entries on the world's agricultural situation from Nogger's Blog.

(emphasis mine) [my comment]

UK Winter Wheat Plantings Sharply Lower

Our old chums at DEFRA have finally confirmed the evidence of my own eyes
, saying that the UK's winter wheat area is 1.6m ha., down 0.3m ha from 1.9m ha last year.

That's a reduction of 15.8% according to my calculations. A reduction in production of that magnitude would slash 2.75mmt off our output this year giving us a crop of 14.75mmt.

And that is IF we were to achieve the same yield as last year. Unless you are a hermit living in a cave with broadband then you would probably be able to guess that we won't probably be matching last years' record yields.

So there we go boys & girls, we could be looking at a crop of around 14mmt this summer.
That's the exportable surplus gone.

Ensus will be in the market looking for a million tonnes for their plant in Teeside by then too, followed by Vivergo looking for a similar amount for their Saltend plant in 2010.

No wonder I'm bullish.

US Weather Situation

Little relief seems to be in sight for drought-affected wheat crops in Texas, Oklahoma and Kansas in the week ahead, according to QT Weather's latest forecast.

Most winter wheat is currently in poor or very poor condition. In addition, top soil moisture is inadequate for spring planting in many areas. A farmer in Hill County reported dry soil 4 feet below the surface statewide, 70 percent of grazing land is currently in poor or very poor condition. Oats and winter grasses...cold season forage for many livestock...have been widely insufficient... 80 percent of oats are in poor or very poor condition...supplemental feeding of livestock has been widespread.

Heavy rains largely missed the area last week, catching only a small amount of wheat country in Eastern Kansas, say QT Weather. The week ahead will now become drier and heat up particularly across the drought stricken Southern Plains with nineties in Texas and eighties into Oklahoma and Kansas.
Temperatures skyrocket to twelve to eighteen degrees above normal over the next five days Montana to Texas.

Wheat Output In Russia/Ukraine Seen Sharply Lower In 2009

Wheat output in Ukraine will decline by 29.7% to 18.2mmt in 2009, according to the International Grains Council.

Ukraine produced 25.9mmt of wheat in 2008, and is expected to be the world's fifth largest exporter of the grain in 2008/09.

Wheat production in Russia meanwhile is seen dropping 21.5% to 50mmt, down from 63.7mmt in 2008, they say.

A combination of lower plantings, reduced inputs and a return to more normal yields is seen as being behind the decline.

[Remember, Ukraine and Russia are two of the few places NOT experiencing droughts.]

Some Videos Of Interest

Now showing on NoggerTV, especially the top one, relating to the drought situation in China. Have the government REALLY sorted it out like they are saying?

It seems like they may have been "exaggerating" the results of their efforts somewhat judging by this report from the Washington Times.

Who'd have thought that eh, the Chinese government being economical with the truth?

Saudi Arabia To Tender For More Than 1MMT Wheat

Saudi Arabia may soon issue tenders for as much as 1.1mmt of wheat, according to media reports.

The Kingdom's own domestic wheat harvest may fall as low as 1.2mmt this season,
down by around a third on last year.

This will mean that the country will need to import around 1.5mmt of wheat this year, the reports state.

Saudi Arabia expects to grow no wheat of its own domestically by 2016, and is actively looking to effectively grow all of its wheat requirement on contract abroad by then.

The Next Big Thing

A report from the Fairtrade Foundation reveals that in places like Uganda, Malawi, Nicaragua, India, Sri Lanka and parts of the Caribbean, poor families are spending up to 80% of their entire household budget on food items.

The cost of fuel and fertiliser means that in some cases families are missing meals,
cutting the amount they plant or selling off their land.

If
farmers in Europe and America are reducing plantings because the economics don't stack up, imagine what it must be like in some of these places.

With the global recession forecast to last well into 2010, food production, or lack of it, could well be a very serious problem sometime in the next 18 months.

Throw in a serious crop failure or two and we could be looking at a massive humanitarian disaster.

I hope I'm wrong.

EU Wheat Ends Mixed; Heads, Sand Etc As CWB Cuts Global Production 50MMT

EU wheat futures closed narrowly mixed Tuesday with very little fresh fundamental news in the market.

Paris May milling wheat traded down EUR2.25 at EUR139.00/tonne, whilst London November feed wheat traded up GBP0.50 at GBP122.50/tonne.

Syria bought 200,000mt of Russian wheat, to add to last weeks order of 240,000mt of Russian wheat for Egypt.

At least some wheat is being bought on the export market. Even if it is all being mopped up by Russia.

It seems to me that the trade can see no further than the end of it's nose at the moment.

The CWB have just forecast
Canadian and US production down by 16 and 15 percent respectively in 2009.

Large as they are,
neither of those estimates don't even seem to take into account serious drought conditions in both countries as of yet. And things could be a lot worse than that in my opinion.

The CWB predict global wheat production of 633mmt in 2009, down from 683mmt in 2008. That is a serious loss of wheat. And suppose they are only half right. Is that a ludicrous assumption?

I don't think so.
Just imagine wheat output in 2009 100mmt lower than in 2008. We'd have ending stocks of just a few weeks of supply. That is very very very tight indeed. Tighter than a tight thing on it's way to a tight things convention. We are talking TIGHT.

Here's a few figures:
US production in 2009 is seen at 57.8mmt down from 68mmt according to the CWB. Canadian all wheat output in 2009 is predicted at 23.9mmt down from 28.6mmt, according to the CWB; EU-27 production is seen down from 150.5mmt to 140.0mt according to Strategie Grains; Russia down from 63mmt to 53.6mmt [Newer estimates put this number at 50mmt] according to Informa; and Ukraine down from 25.5mmt to 19.1mmt [Newer estimates put this number at 18.2mmt] according to UkrAgroConsult.

How much is that?
Over forty million tonnes less, and that is without China, which could be down anything f rom 10mmt to 30mmt, maybe more. And Strat Grains are probably being over-kind to Europe. And none of these figures account for a weather problem [Such as global droughts]. These are all based on lower plantings and a return to trendline yields. The US and Chinese crops are already at risk from failing to meet trendline yields.

That is a lot of wheat to go missing.
Whilst global consumption is expected to reamin steady at 652mmt/per annum.

Is it just me here, or is everyone being blinded again? Last year it was how oil was going to $200/barrel plus and the only way was up, this year we are all doom & gloomed and the only way is lower.

I seriously believe that
grain/food commodities will move very sharply higher and that they will probably be the first commodities to do so. Exactly when that will be of course is difficult to say. If we are optimistic I'd say in last half 2009, if we are more pessimistic then first half 2010. [I disagree, it will be sooner.]

Looking a little further ahead than that even, as the credit crunch continues to bite, if prices stay where they are or even fall further then plantings and inputs for the 2010 crop could be even lower.
[I doubt it. Within the next two to three months, the world will wake up to the food catastrophe it is facing, and then smarter nations will begin stockpiling wheat. Prices will soar.]

Throw a crop disaster or two and potentialliy very tight 2009 ending stocks into that mix and
we could be in a situation where the 2008 all-time high of Ł200/tonne wheat looks ludicrously cheap.

My reaction: Nothing has changed. We are still facing a massive humanitarian disaster.

1) The UK's winter wheat area is down 15.8% from last year (1.6m from 1.9m)

2) With a drop in yields, UK wheat output will be down 20% (14mmt from 17.5mmt), which will leave the UK with no wheat to export.

3) US winter wheat looks set for a drop of over 40% from 2008. There has been little relief for drought-affected wheat crops in Texas, Oklahoma and Kansas. Most US winter wheat is currently in poor or very poor condition. 70 percent of grazing land is currently in poor or very poor condition. 80 percent of oats are in poor or very poor condition

4) Wheat output in Ukraine will decline by 29.7% to 18.2mmt in 2009.

5) Wheat production in Russia meanwhile is seen dropping 21.5% to 50mmt

6) Continuing drought means China's wheat production likely to fall at least 30%.

7) Saudi Arabia's domestic wheat harvest is set to fall 33% to 1.2mmt this season. It will need to import 1.5mmt of wheat this year. Saudi Arabia expects to grow no wheat of its own domestically by 2016.

8) Global food production in 2009 likely to drop at least 200mmt to 483mmt

9) Global consumption is expected to remain steady at 652mmt/per annum.


Conclusion: The math doesn't add up. At this point it is already too late to do anything, millions will starve.

In a worst case scenario (couple of major crop disasters), world production could drop to 400mmt (a 40% drop). Over a billion people (15% of world 6,706,993,152 population) would then face starvation.

I believe prices will recover in next 2 or 3 months, which would help limit the damage by leading to more plantings and better outputs for the world's next crops. If I am wrong and grain prices stay low, things will get really bad in the second half of 2009.

This entry was posted in Euro_Zone, Food_Crisis, News_Developments. Bookmark the permalink.

10 Responses to World Still Facing Major Food Shortages And Massive Humanitarian Disaster

  1. OperationNorthwoods says:

    Millions starving isn't that dramatic of an event. The world's population is still increasing significantly. It is reported that millions starved in the US during the 1930's.

    The collapse of the dollar-based trading system could lead to the deaths of a lot more than a few million, besides offering the possibility of large wars.

  2. Martijn says:

    Well, off course everyone is discovering that the dollar is not pegged to gold and created out of thin air and all that. And off course all that is true and it is also true that the pressure on the dollar has increased due to recent economic conditions.
    On the other hand one should not overlook how many people still have an interest in maintaining the dollar-based system. Therefore, it is far from certain that the dollar is "doomed to fail".

  3. Bowtie says:

    is it time to short us treasury bonds (TBT)?

  4. Anonymous says:

    Eric,
    I agree, and with your last paragraph in particular - prices need to rise fast to give Northern Hemisphere spring cropping farmers incentive to both plant and then look after the crop.

    However 400MT worst case scenario is way too pessimistic.
    But even 600MT production would be very tight.
    There has already been some significant demand destruction - look at US feedlot / intensive meat production as a barometer.

    Biofuel industry is knackered, and even the plants in Uk nogger refers to will not run if wheat is expensive while oil is cheap. Biofuel was a political invention, and 'works' while legislators order certain levels of biofuel inclusion.
    Legislators occasionally see sense and U-turn.

    The Good News is large carry over from 08 harvest.
    More Bad News is that the above carryover, coupled with the immediate short-term mentality, is flooring spot and futures prices.

    We could indeed sleepwalk into a wall.

    In the meantime, from a broad economic perspective, keep a sharp eye on food price from an inflation
    perspective.

    Desperate California water restrictions will impact veg production.

    Finally, don't get too hung up on weather conditions in states such as TX, OK etc, or even France. These things have a habit of balancing out. TX and OK in particular are often 'in drought'.

    But, yes - seed has to be in the ground to have a chance of producing a crop!

    Farmer John

  5. dogismyth says:

    and to think this was all planned. You can kiss the stock market bye bye also. The gamekeeper is getting tired.

    Weather and population control go hand in hand, comfortably so, for those who control both.

    Me thinks someones wants far fewer people on this planet.

  6. Numonic says:

    "On the other hand one should not overlook how many people still have an interest in maintaining the dollar-based system. Therefore, it is far from certain that the dollar is "doomed to fail"."

    If those who have interest in maintaining the dollar-based system really had control we wouldn't be in the mess we are in right now. Fact is it doesn't matter who wants the dollar to survive, you can not repeal the laws of supply and demand, this is simple mathematics, the dollar is doomed. Those who have interest in maintaining the dollar-based system will just go down with the dollar if they continue to hold it. The dollar is overweight with debt and the laws of gravity have not been repealed. The dollar is going to fall and crash.

  7. Anonymous says:

    Here is an interesting link on the evolution of euro. (Yes, sorry that I'm offtopic here...)

    John Mauldin, an intelligent investor and strategist say this, and I'm curious what you think about his comment.

    http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/03/02/europe-on-the-ropes.aspx

  8. Michel says:

    In the FAO site (http://www.fao.org/giews/english/cpfs/index.htm) there are monthly reports on cereal and food situation.
    They forecast a wheat production of 686 MT in "2008/09". In the whole reports, there is absolutely no hint of possible scarcity or price increases.
    I understand that FAO is an "official" body, not prone to give bad news, but if the situation was so bad, they could not overlook it so completely

  9. Mark says:

    Not to forget Argentina that wants to put price controls into place...

    BTW: what effect would a world-wide tax on meat have? ;-)

  10. Mark says:

    @Bowtie:

    The FED promised to buy treasuries, so buying TBT now seems to bit far too early.

    (this is not an investment advice!)

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