Russia grain export ban benefits US farmers, sparks talk on climate change
The International Grains Council cut its projected world grain output Thursday. Drought in eastern Europe has sparked a Russia grain export ban.
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For the US, the world's No. 1 exporter of wheat and corn, the effect is even greater. "The sharp fall in Black Sea region exports will see a marked shift in trade flows, with US exports in particular placed much higher than before," the International Grains Council said in its Aug. 26 report (pdf).
The US Department of Agriculture on Aug. 12 boosted its forecast for US wheat exports by 5.4 million metric tons, to 32.7 million metric tons, for the year 2010-11. The USDA projects agriculture exports to surpass $100 billion this year, second only to 2008, when agriculture exports topped $110 billion.
Could there be food riots?
Food riots are not expected, as happened in 2008 when escalating food prices led to rice export bans. At that time, grain stocks "were very tight," says Gerald Bange, head of the USDA's World Agricultural Outlook Board, but since then the world has seen several good harvests.
The world produced a record-high yield, in 2008-09, of 683.3 million metric tons of wheat, followed in 2009-10 by 680.3 million metric tons.
The year 2009-10 ended with 194 million metric tons of wheat stock, an increase of 28 million metric tons. The USDA forecasts the year 2010-11 to end with 175 million metric tons of wheat stocks, which is still much higher than the end of 2007-08.
"What happened in Russia is manageable, given we had large stocks going into it," says Mr. Bange. The USDA forecasts American food inflation this year at 1.5 to 2 percent, and at 2 to 3 percent next year – compared with 2008 food inflation of 5.5 percent. "I think that the impact of the situation on food prices will be very small, very small," he says.
Still, consumers around the world may feel some effects. Rising wheat costs, for example, led Sara Lee Corp. on Aug. 12 to say it expected to raise bread prices over the next year.
Gwynne Dyer, author of "Climate Wars," wrote in a recent column that "in poor countries, where people spend up to half their income on food, the higher prices will mean that the poorest of the poor cannot afford to feed their children properly."
Is climate change to blame?
Russia's leaders blamed the drought on global warming, though Lester Brown of the Earth Policy Institute in Washington, D.C., says no one event proves or disproves climate change. But heat and drought similar to that experienced in Russia are projected to occur more frequently as Earth's temperature rises, he says.
The rule of thumb, says Mr. Brown, is that with every degree (Celsius) rise in average temperature, we lose 10 percent of food production. Over the next century, the global temperature is expected to rise up to 11 degrees F. By comparison, the Russian drought killed 2 percent of the world's grain harvest.
USDA's Gerald Bange offers a less dire outlook. For decades, he says, corn yields have increased annually by two bushels per acre per year. "It continues to grow, and I'm not prepared to say it will plateau in my lifetime," he says. Other countries such as China, he adds, have much room to improve their crop productivity.
Both Brown and Bange agree that what happened in Russia could happen elsewhere with more serious consequences.
"We're lucky that this heat wave was centered in Moscow instead of Chicago," says Brown. "At most, the Russians lost 40 million tons of grain. If Chicago were to have average temperatures in July of 14 degrees [Celsius] above the norm, it would have cost us and the world 150 million tons of grain."