What You Should Know About the Food Supply


Once a month a gaggle of mostly unheralded agriculture scribblers in Washington rise at dawn and troop over to a highly secure, windowless room on the fifth floor of the U.S. Department of Agriculture.

For hour and half they pore over a couple of U.S. Department of Agriculture reports to produce a raft of stories and data that are largely ignored outside the grain trading circles of Chicago.

It is the U.S. government’s monthly crop report and if we lived in a predicable world, this data should make your eyes glaze over. Really, who cares how much corn and soybeans America produces?

Unfortunately, that might be a notion for days gone by. With the upheaval in climate around the globe, there is a growing awareness about how much food countries are producing, especially from the United States, the great granary to the world.

U.S. department of agriculture in Washington, D.C.
U.S. department of agriculture in Washington, D.C. (Photo credit: Wikipedia)

Some fear there are rising tides of change that threaten to come crashing down around us in the years ahead. Population is on the rise  – it hit 7 billion souls on Halloween of this year — and so is the demand for more high-end food stuffs such as meat from the rapidly industrializing nations, led by China and India. And just as we are coping with that, climate seems in great flux in the world today. Be it enveloping fires in Russia, drought in Texas or massive flooding in Thailand, the upheaval is taking its toll on farmers and on prices.

Rapidly changing weather patterns have caused sharp declines in crop production in a number of countries over the past few years. The fires and soaring temperatures in the Black Sea region in 2010 forced Russia to suspend exports, sending markets in a tizzy for a spell.

This year a series of calamitous weather event strikes struck the United States and corn soared to over a $7 a bushel as concern mounted farmers would be harvesting a much smaller crop.

“After all, this year has seen supply being impacted by adverse weather in the US – a wet spring followed by extremely dry temperatures during the pollinating period, which raised concerns on yield damage, for both corn and soybeans,” as Barclays Capital said in a recent report.

Fortunately some good news has been breaking out. When those aforementioned farm writers emerged from USDA’s  important October crop report, the news released to the world showed that crops were only down about one percent below the previous month’s forecast. U.S. farmers were on track to produce more than a billion bushels of corn, which is nothing to sneeze at. Similarly,  American farmers were expected to harvest a healthy load of soybeans and wheat.

The markets in Chicago did not get too excited the day that report came out in early October. Traders restrained from bidding up prices on some notions that the high price of corn, then above $7 a bushel, was starting to force some consumers of the feed to turn to other sources, taking pressure off demand.

Then in November, with the fall harvest in its final stages, the Agriculture Department cut its estimate of the corn crop by another 1 percent, partly due to the lowest yield in nearly a decade, a reflection of the challenging weather conditions this year. This all means U.S. corn stocks will be the lowest in more than 16 years.

Corn prices, however, have come down and are trading under $6 a bushel, in line with a broad decline in commodity and stock prices globally.

While prices are easing, there are still some concerns for folks outside of the trading world. For those more worried about food security, the world’s cupboards are looking bare. U.S. stockpiles amount to just a few weeks supply. It was hoped that this year the crop would have  been even larger, so the stocks could be expanded, rather than just keeping steady.

Nevertheless, it looks like this year’s harvest is in the bag; Mother Nature pulled a rabbit out of the hat for the United States once again.

But contemplate for a moment, what would happen if the United States suffered a drought comparable to the one that withered Midwest crops in 1988? What if it was combined with a big failure in Australia or from Russia? Those razor thin stocks would disappear mighty fast. Markets would soar, consumers would pay and the globe’s already huge army of the poor would swell.

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