Global implications of the US drought

Need to export wheat to avail higher prices, rising oil costs could again lead to shortages, price hikes in Pakistan.

A severe drought has spread across central US — where roughly one-third of the world’s staple grains are produced — which has damaged staple crops and heightened the risk of a global food crisis.

While the full impact of the drought on food supply and prices won’t be exactly known for months, the effect will be significant given that the US is the world’s biggest producer of corn and soybean crops, which have been badly hit. Corn is what is called a mega-crop used in the production of meat, cereals, beverages, animal feed and agro-based fuels. With growing feed costs, the prices of meat can also be expected to rise dramatically as can those of dairy products. Besides the US itself, the current disaster will have a major impact on import-dependent countries across Asia, the Middle East, Africa and the Caribbean.

Economists are trying to calm fears by pointing out that supplies of rice and to a lesser extent, wheat — which are the key staples for many of the world’s poorest people — remain abundant. However, the reduced supply and high prices of corn and soybean are set to cause serious hardship among poor people in countries which depend on imported grain such as Peru, Guatemala, El Salvador and Colombia in South America and much of East Africa. Even those African countries that produce their own corn will suffer because they are locked into the higher global prices.

Wheat prices have also increased, which have added to crop production uncertainties. This has further been exacerbated by dry conditions in Russia, Ukraine and Kazakhstan, excessively wet weather in Europe and a below-average start to the Indian monsoon season. This uncertainty has led hedge funds to begin speculations on future trends. The Food and Agriculture Organisation has expressed concerns about price swings due to such speculations, which would make food an unaffordable commodity for millions of households around the world.

In 2008, riots erupted in more than 30 countries after a similar confluence of severe weather and speculation drove up staple food prices. Among the billions of people living on two dollars a day or less, the cost of food consumes as much as three-quarters of a family’s income.

Having felt the severe brunt of the previous global food crisis and due to the ongoing food insecurity in the country, Pakistan should be paying close attention to what is happening at the global level. Pakistan’s wheat output is barely able to meet the domestic requirement. However, the compulsion to export wheat to avail of higher prices, its smuggling across the border and the escalating oil prices could again lead to shortages and a corresponding spike in prices, which will be disastrous for over half of our population that is already food-insecure, chronically hungry or else malnourished. Relevant stakeholders identified in the Government National Zero Hunger Action Plan should be alert to these threats and should begin taking preemptive measures to avert further hunger, rather than reacting retrospectively.

The current scenario also gives us another wake-up call for more earnest efforts, at both the national and international levels, to contend with the emergent challenges of our global world. An American Meteorological Society study has, in fact, linked this summer’s record-setting dry spell in the US and other extreme weather events around the world with projections issued by climatologists since the past three decades. Poor people in developing countries unfortunately have to face the brunt of the consequences of growth-obsessed production processes, which are fuelling natural disasters such as flood and droughts and, in turn, food crises. National governments need to place greater emphasis on food sovereignty than export-oriented cash cropping. Developed countries must not only endorse these efforts but must also rethink their hypocritical agricultural policies, which subsidise their own farmers while exerting pressure on developing countries to do the opposite.

Published in The Express Tribune, August 7^th, 2012.