Grain Crisis?

Recent world news on grain supplies is definitely not comforting. Planet Ark (Reuters) report that drought is once again hitting the Murray-Darling basin in Australia. This will probably mean another bad harvest, unless they get rain over the next few weeks.

As I have reported before, wheat and other grain prices on the world market have recently been rising considerably. This is due partly to bad harvests in many parts of the world, but a surging demand for grain to make ethanol for fuelling cars is one of the most important factors in these rising prices. The ever increasing population on this poor planet of course also increases demand for grain, as does the increasing affluence of some countries, such as China and India, which creates more demand for meat, thereby increasing demand for grain to feed the livestock. Global grain stocks are now at a 26-year low after several years of harvests not keeping up with demand.

As world market prices keep rising, we will probably see more big producer countries protecting their own interests, as they don't want to export so much grain that they don't have enough for their own people. Ukraine, the world’s sixth largest wheat exporter, has already introduced prohibitively high export tariffs. Now Russia also considers stopping wheat exports. This has led import-dependent countries such as India and Egypt to panic buy, leading to still higher wheat prices on the world market. What we will see soon might be some LIFDCs (Low-Income Food-Deficit Countries) totally priced out of the market. As I said the other day, Zimbabwe already seems to be there. This in turn would lead to severe economic stress on international aid organisations providing food relief.

What is currently just a spike in world market prices for grain might quickly turn into a disaster for some countries. Even not-so-poor countries that are dependent on imports might find themselves in a difficult situation. If there simply is no grain for sale on the world market, it doesn't matter how much you are willing to pay for it - you just cannot get any!