Food Prices and Supply

Food Prices and Supply Kirk Condyles for The New York Times Updated: July 26, 2012 In the summer of 2012, scorching heat and the worst drought in nearly a half-century sent food prices up, spooking consumers and leading to worries about global food costs. On July 25, the United States government said it expected the record-breaking weather to drive up the price for groceries in 2013, including milk, beef, chicken and pork. The drought has affected 88 percent of the corn crop, a staple of processed foods and animal feed as well as the nation’s leading farm export.

The government’s forecast, based on a consumer price index for food, estimated that prices would rise 4 to 5 percent for beef in 2013, with slightly lower increases for pork, eggs and dairy products. The drought comes along with heat. So far, 2012 is the hottest year ever recorded in the United States, according to the National Oceanic and Atmospheric Administration, whose records date to 1895. That has sapped the production of corn, soybeans and other crops, afflicting poultry and livestock in turn.

The impact of the hot and dry weather on the nation’s farmers has put new pressure on Congress to move ahead on a pending five-year farm bill. But House Republican leaders have been reluctant to act because of divisions within the party’s rank-and-file about the cost of the nearly $1 trillion bill. The legislation includes several federal agriculture programs that farmers have come to expect, though it does not include any specific drought assistance. Several important disaster relief programs expired at the end of 2011, leaving farmers and ranchers who have lost cattle or grazing land with few options without Congressional action.

For now, analysts said they expected the broader economic impact of rising food prices to be modest. Americans spend just 13 percent of their household budgets on food. Economists fear a far greater impact outside of the United States because America is a major exporter of a broad variety of agricultural products. Experts Warn of a Global Spike in Food Prices In early September, agricultural experts urged international action to prevent the global spike in food prices from causing global hunger.

The directors of three major United Nations food and agriculture programs sounded the alarm both on the immediate problem of high food prices and the “long-term issue of how we produce, trade and consume food in an age of increasing population, demand and climate change. ” Agricultural production fell in a number of major crop exporters during summer 2012. Besides damaging the corn crop in the United States, droughts also hit Russia and Ukraine, hurting the wheat harvest, as well as Brazil, affecting soybean production.

Low yields have translated into high prices. In late August, the World Bank reported that food prices climbed 10 percent from June to July, with the price of both corn and wheat jumping 25 percent to records. Soybean prices climbed 17 percent over the same period, and rice prices declined moderately, the Washington-based institution said. The World Bank and the United Nations food agencies — along with other development and aid groups — have urged countries to prepare for what seems likely to become the third food price shock in five years.

Low-income countries that rely on agricultural imports should invest in safety-net programs for the poor, they recommended. They also urged countries to bolster local production. Groups including the World Bank and the United Nations have also warned against trade protectionist policies in light of climbing food prices. International groups increasingly see inconsistent yields and drastic swings in food prices as a problem driven by climate change — and a global challenge that is not intermittent, but here to stay.

Since the food crisis in 2007 and 2008, they have bolstered international cooperation to help foster more stable food supplies and keep the most vulnerable countries prepared. Oxfam, the international nonprofit, issued a report in early September estimating how extreme weather events might affect food prices in the coming decades — forecasting that the prices of a number of food staples could surge far beyond the projected increases. The United Nations agencies warned that too few countries were producing too large a proportion of staple crops — leaving the world more vulnerable to droughts and floods.