Wednesday, September 8, 2010

Stocks-to-use Ratios of Rice, Wheat, Cereal and Coarse Grains with a discussion on Food Security September 2010

(Click on Chart to enlarge) The stocks-to-use ratio—grain supply measured against grain demand—is simply: Ending stocks divided by Total Use. Please note that cereal includes wheat, rice, barley, maize, rye, oats, millets, etc. Coarse grains include corn, which is largely produced in the U.S., where one-third of the crop goes towards ethanol production.

There has been much in the news lately discussing food inflation, speculation, and global food supply scares. Much of the supply issue, as of now, is hype, sensationalism, and lazy reporting, which is why I put together this chart from the very recent FAO September 1, 2010 updated report. This year's cereal use is expected to be slightly higher than production, but is expected to end at 23%, down 2% from last year. Last year's opening stocks were at an eight-year high. During the food crisis of 2007/08 cereal stocks-to-use hit a low of 19.5%.

Food inflation in Asia and other nations, however, is very real and concerning. Policy determines much in agriculture, and food inflation is no exception. Why do they riot in Mozambique over bread prices? Because their governing situation is worsening and because it sets the price of bread. Domestic policy changes in Mozambique such as less wheat and gas subsidization due to deteriorating national finances which have resulted in a greatly devalued currency explain both the food inflation and the frustration of the citizens. In poorer nations, citizens spend much more of their income on food.

Governmental policies of export and import restrictions, hoarding, subsidies, panic buying, and infrastructure standards of food storage and transport, as well as investor speculation, currency valuations, individual national inflation rates, weather and climate change, the evolving monoculture genetics, rising input costs, and global macro economic health all impact food security.

Currently, slack remains in the agricultural commodity production system. This should afford reasonable global food security for some time, however, it is always subject to the unpredictable wildcards of weather and geopolitics. A sustained global deflationary period would also provide a short-term oversupply of agricultural commodities.

In the coming decades we will most likely be facing deteriorating global macro economic conditions, increasing climate-change induced weather disruptions (floods and droughts), and more volatility in agricultural commodity prices and the price of energy used to produce and transport those commodities. Expect many more Mozambique-like situations to play out, along with a resulting increased desire and attempt at human migrations.

Finally, why is the discussion always on how future agricultural production can meet population growth, never on how population growth can be curtailed to meet the limits of agricultural production? I notice this in article after article. True food security means regional food security. If shortages do occur in the future, and they will, each nation will feed itself first.

reference: FAO [pdf]