Briefings Magazine

The Great Food Shortage?

The next time food prices jump, some middle-income countries won’t be able to afford to buy grain.

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By: Simon Constable

Constable, a former TV anchor at The Wall Street Journal, is a fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.

For much of history, a bad harvest could be the difference between life and death. Fortunately, since World War II, grain production has generally kept pace with the global population. But over the past five years, reserves of corn, wheat, and soybeans have dwindled by up to 11 percent, spurring a double-digit price increase worldwide. Two major drivers of the increase are severe weather, which has caused crop destruction, and Russia’s invasion of Ukraine, which has created interruptions in food production. All of this might sound bad, but it may only be the warm-up for something worse.

Some experts forecast more extreme weather this year, along with ongoing military action, both of which could further squeeze supplies and push food prices still higher. The implications for those living in poverty around the world could be brutal, says Jake Hanley, managing director at commodities-fund company Teucrium. “Food shortages are a real humanitarian thing and are always local,” he says.

The next time food prices jump, some middle-income countries—among them North African states like Egypt—won’t be able to afford to buy grain. For richer economies, such as the US and Western Europe, however, higher grain prices may seem inconsequential to household budgets. “People are still spending $7 for a coffee,” Hanley says.

But the effects of a grain shortage, however minor they may appear on their face, could ultimately affect production of pork and beef. As most people know, wheat is used to make bread and pizzas. But fewer understand that these three grains are also fed to livestock, typically cattle and hogs. This means grains are vital for protein production. When grain prices are significantly elevated, raising animals can become so unprofitable that farmers choose instead to cull their herds, experts say.

“Unusually severe weather systems jeopardize key growing areas for corn and wheat.”

The food chain’s canary in the coal mine this year is Brazil, the world’s largest soybean producer and its third-largest corn grower. Its soybean crop has already been hurt badly by the El Niño weather system, whose hot, dry conditions in a key soybean-growing area could make the harvest far smaller than originally expected, says Shawn Hackett, president of Hackett Financial Advisors. “It’s the hottest, driest year ever,” he says.

On top of that, the US’s own soybean-growing season faces the effects of a La Niña weather system (which alternates with El Niño), namely, “hot, dry weather which is highly unlikely to produce good yields,” Hackett says. This too could further reduce global inventories. Unusually severe weather systems also jeopardize key growing areas for corn and wheat. “It’s the highest risk I’ve seen in over a decade,” Hackett says.

Beyond the risks associated with extreme weather, any ongoing military conflict could do a lot of harm. “Flash points will likely be the Black Sea and the Red Sea,” Hanley says. Traditionally, the Black Sea has been the point of origin for approximately 30 percent of global wheat exports, which then go to North Africa via the Mediterranean Sea. Grain transport has become even more difficult now that the Black Sea has become a war zone for Ukraine, which has no Navy, and Russia’s Black Sea Fleet.

Should conflict in the Red Sea hinder oil shipments, there could be consequences on global energy costs. This in turn would raise the expenses of grain delivery, including vehicle fuel, for farmers—a development that would disproportionately hurt lower-income countries.

It’s of course possible that climate and geopolitical issues could shift in other, unanticipated ways. But it’s hard to find many analysts who are not worried. “If weather and war are an issue, then I’m going to reread the Book of Revelation,” Hanley says, referring to the Biblical text that forecasts the end of the world as we know it.


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