Global Grain Stocks Drop Dangerously Low
As 2012 Consumption Exceeded Production
By Janet Larsen Earth Policy Institute
The world produced 2,241 million tons of grain in 2012, down
75 million tons or 3 percent from the 2011 record harvest. The drop was largely
because of droughts that devastated several major crops—namely corn in the
United States (the world’s largest crop) and wheat in Russia, Kazakhstan,
Ukraine, and Australia. Each of these countries also is an important exporter.
Global grain consumption fell significantly for the first time since 1995, as
high prices dampened use for ethanol production and livestock feed. Still,
overall consumption did exceed production. With drought persisting in key
producing regions, there is concern that farmers in 2013 will again be unable
to produce the surpluses necessary to rebuild lowered global grain reserves.
Corn, wheat, and rice account for most of the world’s grain
harvest. Whereas rice and most wheat are consumed directly as food, corn is
largely used for livestock and poultry feed and for industrial purposes.
Climbing demand for corn-intensive meat, milk, and eggs plus the recent
increased production of corn-based ethanol have made corn the world’s leading
grain since 1998. In 2012, the global corn harvest came in at 852 million tons,
while 654 million tons of wheat and 466 million tons of rice were produced.
Wheat takes up the most land because corn yields are typically much higher,
averaging close to 5 tons per hectare globally compared with about 3 tons per
hectare for wheat and rice. (One hectare = 2.47 acres.) In the United States,
corn yields in the top-producing areas exceed 10 tons per hectare when
conditions are favorable.
Nearly half the world’s grain is produced in just three
countries: China, the United States, and India. China produced an estimated 479
million tons of grain in 2012—its largest harvest ever—compared with 354
million tons in the United States. India harvested 230 million tons. The
countries in the European Union together produced 274 million tons. (See data.)
The 2012 U.S. grain harvest was 8 percent smaller than the
year before. The heat and drought that gripped nearly two thirds of the
contiguous United States during the summer was particularly severe throughout
the midwestern Corn Belt. As temperatures soared, so did corn prices, hitting
an all-time high of $8.39 a bushel on August 21st. Yields in Iowa, the top
corn-producing state, were down 20 percent from 2011. In Illinois, typically
the number two producer, yields dropped by 33 percent, ending up at the lowest
level since the historic 1988 drought. As of January 2013, each state’s farmers
have collected more than $1 billion in crop insurance payments.
As high corn prices shrank ethanol’s profit margins, a
number of distilleries suspended operations. U.S. corn use for ethanol dropped
to 114 million tons, down from 127 million tons in 2011. About a third of the
total U.S. grain harvest went to fuel for cars.
The reduction of corn use for ethanol production and wheat
use for feed contributed to an abrupt pause in the growth in global grain
consumption, which over the past decade averaged close to 40 million more tons
per year. January 2013 estimates by the U.S. Department of Agriculture put 2012
global grain consumption at 2,284 million tons, down 27 million tons from 2011.
Even with the drop in use, global grain production fell short of consumption by
43 million tons.
Global grain consumption has exceeded production in 8 of the
last 13 years, leading to a drawdown in reserves. Worldwide, carryover grain
stocks—the amount left in the bin when the new harvest begins—stand at 423
million tons, enough to cover 68 days of consumption. This is just 6 days more
than the low that preceded the 2007–08 grain crisis, when several countries
restricted exports and food riots broke out in dozens of countries because of
the spike in prices.
Grain prices receded somewhat during the recent recession,
only to jump again in 2010 when heat and drought withered wheat in Russia,
prompting an export ban. The poor prospects for the 2012 harvest led to the
third spike in world market prices in just six years. This time around, even
with its 2012 harvest forecast to be smaller than in 2010, Russia announced
that it would avoid suspending exports.
Following a record high year in 2011, global grain trade in
2012 dropped back to 2010 levels. The 296 million tons of traded grain made up
13 percent of global consumption. Japan remained the world’s largest importer,
taking in a net 24 million tons (mostly corn to feed livestock and poultry),
equal to 73 percent of what it used. Densely populated South Korea imported 13
million tons of grain, also amounting to 73 percent of its consumption. Feed
corn dominated imports in Mexico—the cradle of corn—as well, with 15 million
tons of grain imports accounting for 32 percent of its use. In the arid Middle
East, Egypt took in 14 million tons of grain, largely wheat for bread, making
up 39 percent of its grain consumption. Saudi Arabia’s 13 million tons of grain
imports, mostly barley for feed, accounted for 87 percent of its use.
China made the list of top 10 net importers for the second
year in a row, taking in 8 million tons of grain in 2012, down from 11 million
tons in 2011. China’s 2012 imports (roughly split between corn, wheat, rice,
and barley) amounted to just 2 percent of its domestic consumption, but the country’s
recent forays into world grain markets following years of self-sufficiency have
captured attention because of China’s enormous potential appetite. (Soybeans
are another story; China takes in 60 percent of world soybean exports.)
Although the United States is by far the world’s largest
grain exporter, its share of the world market is shrinking. The net 49 million
tons of grain the United States shipped out in 2012 was its smallest outflow
since 1971. U.S. corn exports of 22 million tons were less than half the
quantity of five years prior and just slightly larger than outflows from each
of its South American competitors, Argentina and Brazil. For rice, Thailand was
edged out of its top exporter position for the first time in three decades when
India unloaded stocks accumulated during a four-year ban on non-Basmati
exports.
Another hindrance to expanding production is the leveling
off of yields for a number of key crops, importantly rice in Japan and South
Korea and wheat in France, Germany, and the United Kingdom. It appears that
farmers in some areas have maximized productivity and are now running into
biological constraints. On top of that, climate change is heightening the
likelihood of weather extremes, like heat waves, droughts, and flooding, that
can so easily decimate harvests. Although 70 days’ worth of grain stocks once
was considered enough to provide food security, a world with growing climate
instability requires a larger buffer to protect against food price shocks.
Skyrocketing prices hit the poorest among us the hardest, and ultimately they
can spark instability that affects everyone.
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