From reading the news you could be forgiven for thinking the plagues of Egypt have descended on the world’s farms.
African swine fever, a livestock disease likened to Ebola, is cutting a swath through China’s 440 million-strong pig herd, and could lead to as many as 200 million being culled. Hot on its heels is the fall armyworm, a crop pest that could spread across the whole of the country’s 130 million hectare crop belt within a year, eating up supplies of corn and sugar cane. Over in the U.S., the wettest 12 months on record have left farmers unable to plant corn and soybean crops. Is the specter of hunger about to return to the world?
Look, for instance, at the Bloomberg Agriculture Subindex, which tracks the prices of major farm commodities going back to 1960. A month ago it touched its lowest level since the early 1970s, having fallen about 14% in the past year.
There are fundamental reasons behind that. In cereals, the most crucial element of food supply, the world has spent five years building up a formidable surplus of 855 million metric tons, split roughly 3-5-2 between wheat, corn and rice. That stockpile is about 50% bigger than it was at the start of the decade, while consumption has risen by less than 20% to 2.28 billion tons.
This cushion means that we’re a long way from global shortages. Stocks-to-usage ratios are running around 30%; well above the low-teens that tend to predict higher prices. Even the stocks-to-disappearances ratio for major exporters (arguably a better predictor of price rises) is only marginally down from recent levels at 17.6%.
That’s because there’s a world of food production beyond the U.S. and China. The yield, or output per hectare, of Russia’s wheat crop is forecast to be the second-highest on record this year. Productivity is also at record levels for India’s rice and wheat farmers and corn in Ukraine.
On top of that, some of the world’s food disasters this year could be complementary. Bad weather and trade wars are likely to put a dent in American exports of soybeans and corn-derived animal feed to China – but with all those hogs being culled, there’s likely to be a lot less demand for such products, anyway. Indeed, poor conditions for next year’s corn and soybean plantings is in one sense just what America’s farm belt needs, given the near-record crops forecast this year for the former and a glut of the latter, which pushed prices to their lowest levels in a decade in May.
Many of the biggest risks to agriculture now are political, rather than environmental. The U.S. posted its biggest agricultural trade deficit on record in April, an extraordinarily rare outcome for a country that’s traditionally one of the world’s biggest exporters. And the threat of swine fever and armyworm in China would diminish if the country wasn’t so dedicated to using the appetites of its people as a trade-war bargaining chip.
To be sure, the world’s agricultural trade is always just a few terrible seasons away from disaster. Thanks to poverty, war and social breakdown in Africa, the Middle East and Latin America, there were 821 million undernourished people in 2017, the highest level in nearly a decade. About three-quarters of that number live in the countries whose farms are most exposed to the increased variability of the world’s climate. And consumption of cereals, after running short of production for the best part of a decade, is now outpacing the volume of new crops coming in from the fields.
Still, with hefty stocks to fall back on, there’s no reason to think current conditions are any more dangerous than they’ve been in the past. While current events are a wake-up call about the fragility of our food security, our stomachs will be full for a good while yet.
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David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
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