Monheim, Germany
July 27, 2011
Agricultural commodities are great travellers:
Soy goes to Europe, wheat to Africa and rice to North America. But the system is fragile: speculators, rising energy and transport costs, and last but not least extreme weather conditions are making trade in farm produce increasingly fraught. The climate is becoming more and more unpredictable and threatens harvests worldwide - and with them, the survival of countless people. The UN estimates indicate that the Horn of Africa may soon face the world’s worst famine ever, as the region has been hit by the most severe drought in sixty years. More than ten million people have been affected and are now fleeing their homes.
(Graphic: Harvest time for wheat)
Plants do not actually need very much to germinate and grow: nutrient-rich soil, sunlight and rain. But extreme weather conditions such as periods of heat, drought, heavy rainfall or hail can wipe out entire harvests in a short time.
The weather is both a friend and a foe to farmers, because everything they do from sowing to harvest depends on it. The weather also has an impact on the pests and diseases that occur, and how much damage they can cause to yields of cereals, fruit and vegetables. The amount of food available to the world depends above all on the climate.
Spiraling food prices
The prices of most agricultural commodities have risen steadily over the past few years. One of the reasons for this lies in the growing world population. According to Dr. Joachim von Braun, Head of the International Food Policy Research Institute until 2009 and currently Director of the Center for Development Research in Bonn, “the world’s population will stabilize at around nine billion from 2050 onwards, but its food consumption will be the equivalent of that of twelve billion people today.” Another factor in the rise of agricultural commodities is that the biofuel industry is booming on the back of rising oil prices.
In an attempt to control food price fluctuation, the agriculture ministers of the twenty largest industrialized and emerging countries (G20) agreed in early July 2011 to set up an international database called the Agricultural Market Information System, or AMIS for short. This will record production and stock levels for rice, corn, wheat and soybeans, making the global agricultural markets more transparent.
Poor yields caused by bad weather, fluctuating oil prices and shifting exchange rates affect food prices only in the shape of fairly short-term price hikes. But people in emerging countries, who spend more than half of their income on food, are hit particularly hard by such price rises. Consumers in the poorest countries spend around 20 percent more on food in 2010 than they had done the previous year. And according to the Food and Agriculture Organization (FAO), wheat and corn prices reached record levels in February this year.
But estimates from the United Nations and the U.S. Department of Agriculture (USDA) indicate that retail food prices in the United States rose by only 1.5 percent last year. In addition, people in wealthy industrialized countries spend a far smaller proportion of their income on food.
More weather extremes
The latest price rises are due in part to poor harvests following unfavorable weather events: drought hit Russia in the summer of 2010 and later Argentina, while heavy rainfall in Canada and Australia at the start of the year caused severe damage to arable land. Weather experts put this down to the La Niña phenomenon, in which the surface temperatures of the ocean from the west coast of South America to the Philippines are lower than normal. This has far-reaching consequences: winter in the northern hemisphere is colder, while drought threatens South America and the south of the United States, and heavy rainfalls hit Indonesia, Malaysia and Australia. According to a trend research study carried out by Claire Schaffnit-Chatterjee, an analyst for db research, extreme weather events will become more common as a result of climate change, exerting greater influence on the price of agricultural products
Summary of farm weather in the first half of 2011:
The United States: hot in some parts, cold and wet in others
American farmers had to struggle with widely differing weather conditions this spring: the south was very dry and warmer than usual, with the risk of fire in some places. Farmers in the east, mid-west and northern California faced different problems: heavy rain and cool temperatures, which meant that they had to wait until later than usual to sow corn and soy. Heavy rain and flooding also delayed sowing in some parts of the grain belt.
Conditions in the United States affect the world’s supply of feed cereals such as corn, sorghum, barley, oats and rye. The USDA’s assessment is gloomy. Experts forecast U.S. corn yields almost eight million tons down on the previous year in 2011, a smaller barley harvest in the European Union (EU) and lower baseline stocks of corn in China, the world’s second largest corn producer after the United States.
Growing conditions were also not ideal for winter wheat, as unfavorable conditions prevailed last autumn when the crop was due to be sown: drought in the south and violent storms in the north. The weather was also very cold, with very little snow that can act as a blanket to protect seedlings. Rainfall was low in the spring, and strong winds dried out fields that had been irrigated.
Europe: dry for too long
Spring was much too dry and hot in northern France, Germany, Poland and south-east England in particular. The temperatures between February and April were up to five degrees Celsius above the normal average, and only half the usual amount of rain fell, with some regions having barely 30 percent of their usual rainfall. Poor weather conditions in northern Europe also led to plant growth being 25 percent less than normal. The prospects for the oilseed rape harvest in Poland are particularly bleak, as experts expect yields to be 18 percent down on 2010.
The rainfall did at last start to increase in June, but that was too late to prevent yield losses. According to Dr. Helmut Born, Secretary-General of the German Farmers’ Federation (DBV). “In some parts of the country the rain was literally just a drop on a hot stone.” In the west and south-west of Germany, rain was sometimes very heavy but just ran off the parched surface of the earth and never reached the roots. Crops like winter barley ripened too soon, in a phenomenon which experts call ‘premature ripening’: cereal plants which have suffered drought stress drop their kernels before they are fully formed, leading to small kernels with a low starch content.
France was hit particularly hard by low rainfall. Analysts at Credit Suisse expect that the wheat harvest could be up to 30 percent lower than normal if the drought persists.
However, the situation in eastern Europe has improved. Russia has lifted its wheat export ban after just over a year, and the Ukraine will probably be able to export more grain than at the same time last year. According to Handelsblatt, last summer Russia suffered a once-in-a-century drought which burnt 17 percent of its arable land and led to yields falling by more than a third.
Asia: two different situations
Persistent drought, especially in the middle and lower sections of the Yangtze river, had a massive impact on agriculture in south-east China. In late May the amount of water taken from the Three Gorges Dam was increased so that drought-hit farmland in many areas could be irrigated. Five provinces of central and eastern China suffered the worst drought since 1961 in spring, with rainfall being less than half the usual level in some places.
The weather was extremely dry at the start of the year in India as well, especially in the west of the country. Yields of important Indian crops such as cotton, rice and sugar cane will only become clear after the summer monsoon, which brings long periods of rainfall from June to September.
In contrast, south-east Asia experienced unusually heavy rainfall, which is good for rice grown in paddy fields. But persistently wet weather causes rice plants to ripen more slowly, delaying the harvest.
Boosting wheat growth
Increasing yields is a key goal for plant breeders. They want to produce corn and wheat plants that bear many ears and kernels. The impact of the climate and changing environmental conditions have encouraged breeders to work on developing tougher varieties that are better able to cope with heat and drought or are resistant to pests. Other goals include increasing resistance to winter conditions and shortening the time that plants take to ripen.
For Bayer CropScience, cereals are a core area of its worldwide seed and plant research and development activities. A major step was the cooperation agreement with the CSIRO (Commonwealth Scientific and Industrial Research Organization), Australia’s national research body. Work has concentrated on crops such as wheat, aiming to increase yields, improve drought tolerance, make more effective use of fertilizers and improve disease resistance.
Bayer CropScience is working with another partner, Evogene Ltd., to use the latest technology to identify naturally occurring genes in wheat or other plants that can stimulate these properties in wheat. It is also setting up its first wheat-breeding station in North America, close to Lincoln in the state of Nebraska. Work at this station will focus on varieties of Ukrainian wheat that are particularly resistant to cold and drought and have high potential yields, with the aim of developing them so that they are suitable for growing in other parts of the world.
Key figures about wheat:
Approximately 25 percent of global agricultural land is utilized for wheat cultivation, making wheat the largest food crop worldwide in terms of area. Wheat is the second most-produced cereal crop after corn with more than 650 million tons produced every year. Wheat productivity is increasing at less than 1 percent annually, while the annual productivity increase required only to meet population growth is approximately double that percentage. Main wheat producing regions are Australia, the Black Sea Region, China, the European Union, India and North America.
Links:
The website of the U.S. Department of Agriculture contains current information and reports about agricultural commodities, weather and statistics.
www.usda.gov
The Crop Prospect and Food Situation report sets out the food situation in various countries.
www.fao.org
The World Bank’s 2010 World Development Report examines the links between climate change, poverty and agricultural development.
www.econ.worldbank.org
The db research trend report (in German) describes the factors influencing harvests, market trends and food prices.
www.dbresearch.de
Volksbank AG research has recently published a study (in German) into the price trends of various agricultural commodities.
wwwen.volksbank.com
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