Monday July 04, 2011

Jim Rogers : Global agriculture supply worsening, may lead to food shortages

This article belongs to the Global food crisis story arc.

bloomberg.com :

The global agriculture supply situation has worsened and a failure to boost food production fast enough to meet demand may lead to shortages, said investor Jim Rogers. "We've got to do something or we're going to have no food at any price at times in the next few years," Rogers said in a Bloomberg TV interview. Monthly food prices tracked by the FAO have surged 9 times in the past 11 months, as global demand for corn and wheat outstripped production and drought and flooding ravaged harvests. The World Bank estimates higher food prices have pushed 44 million more people into poverty. In China, food-price inflation was at 11.7% in May 2011, the highest since the global food-price crisis in July 2008.

Global stockpiles of corn are forecast to drop to 47 days of use, the fewest since 1974. The proportion of the US corn harvest going to ethanol has almost quadrupled since 2002 and will reach 40% in the current marketing year, according to USDA. Ethanol output has increased more than six-fold since 2002, boosted by federal subsidies now being scrutinized by Congress. Corn is 92% higher than a year ago, remains the best performer in the GSCI Agriculture Index, and is currently at $6.685 a bushel in Chicago trading. Inventories of wheat, used in making pasta, noodles, bread and feed for hogs and poultry, will drop to a 3-year low of 184.26 million metric tons as output misses demand for a second year. Demand continues to outstrip global harvests because of rising ethanol production in the US and China's surging demand for meat. "Grain is a solid input into all those food sectors and so there's really no way to go to avoid grain-based inflation," said Kellogg CEO John Bryant.

- Food and energy are the two main categories that are the most sensitive to inflation, and here we are again looking at another possible 2008-style run. Food is particularly worrying what with the factors of climate change, biofuels and falling reserves converging with increasing populations and standards of living. Some say it will be different this time, with governments and central bankers fresh from the 2008 run watching most closely and acting much more quickly compared to the last round. But the primary trend will remain particularly so if the factors of demand and supply are weighted in its favour. The primary trend may be deflected for a short while yet, but the rebound will be that much the stronger.

See also :

1. Food production to peak as fertile land runs out
2. World grain stocks fall to 57 days of consumption
3. Why food costs more
4. High food prices seen leading to strikes, protests in Asia

(2011-07-04 16:50:48 SGT) [Env] Permalink

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