Food and Commodity Prices-Market Volatility
Javier Blas, writing on Sunday at the Financial Times Online, reported that, “The world faces ‘the real risk of a food crunch’ if governments do not take immediate action to address the agricultural impact of climate change and water scarcity, according to an authoritative report out on Monday.
“Chatham House, the London-based think-tank, suggests that the recent fall in food prices is only a temporary reprieve and that prices are set to resume their upward trend once the world emerges from the current downturn.
“‘There is therefore a real risk of a ‘food crunch’ at some point in the future, which would fall particularly hard on import-dependent countries and on poor people everywhere,’ the report states. ‘Food prices are poised to rise again,’ it adds.”
The FT article indicated that, “The warning is made as agriculture ministers and United Nations officials gather from Monday in Madrid for a UN meeting on food security likely to conclude that last year’s food crisis, with almost 1bn people hungry, is far from over.”
More specifically from the UN, an AFP article from yesterday reported that, “Global food production, already under strain from the credit crunch, must double by 2050 to head off mass hunger, the head of the UN’s Food and Agriculture Organisation said on Monday.
“The food crisis pushed another 40 million people into hunger in 2008, Jacques Diouf said here at the start of a two-day international conference on food security.
“That brought the global number of undernourished people to 973 million last year out of a total population of around 6.5 billion, he said.”
The article stated that, “A combination of factors, including poor harvests, changing diets in emerging economies and a drive for biofuels, have come together to push food prices up, leading to protests in around 30 countries last year.
“Ireland’s Minister for Overseas Development Aid, Peter Power, said the hunger crisis had not been given the same level of attention as the fight against AIDS, the global financial crisis or climate change.
“‘This silent tsunami is completely unacceptable,’ he said to applause from delegates.
“But Josette Shearan, the head of the UN World Food Program, the world’s largest humanitarian agency, warned the world will only be able to produce enough food for everyone in 2050 if food security is made a top priority.”
And Associated Press writer Daniel Woolls reported yesterday that, “The soaring prices for staples like rice that triggered riots in the developing world last year have come down somewhat, but they remain high compared to levels prior to the crisis.
“The FAO’s food price index in December was 28 percent above its 2005 level and 61 percent higher than in 2000, according to figures released at the conference.
“Josette Shearan, executive director of the World Food Program, said developing countries dependent on agriculture run the risk of getting left out as the world focuses on tumbling stock markets, flagging economic growth and failing banks.
“As people in developed countries fixate on Wall Street and Main Street, she told the conference, ‘we must not forget places with no streets.’”
With respect to the volatility in the market prices of some agricultural commodities, Associated Press writer Marco Santana reported on Saturday that, “It wasn’t so long ago that farmers were frequently asked what they would do with their windfall profits.
“That was last summer, in the heady days of $8 a bushel corn and $16 a bushel soybeans, when it seemed farmers could count on an inexhaustible demand from ethanol manufacturers and food companies.
“Today, corn prices have dropped below $4 a bushel following a surprisingly strong 2008 harvest and plunging demand. Soybeans were trading at close to $10 a bushel.”
The AP article stated that, “‘What we’ve seen these last two years, you almost got to throw out any previous history because we’re in uncharted territory,’ said Ryan Weeks, a 36-year-old fifth-generation farmer of corn and soybeans from Juniata, Neb.”
Later, the AP article indicated that, “Many factors have contributed to the roller coaster ride, especially for Iowa’s hallmark crop of corn. Among them:
“– The dramatic drop in oil prices has forced a corresponding decline in the price of corn-based ethanol. Many ethanol plants have been idled until their profitability improves, reducing demand for corn.”
The influence of energy markets on the agricultural sector is a variable that is being examined not just in the U.S., but also in the EU.
A report released recently by the Center for Agricultural and Rural Development (CARD) entitled, “The Impact of Energy Markets on the EU Agricultural Sector,” which was written by Simla Tokgoz, noted that, “The study shows that the impact of energy prices on the EU agricultural sector is increasing with the emergence of the biofuels sector.”
A complete summary of the CARD report is available here.
Meanwhile, the U.S. Department of Agriculture’s Economic Research Service (ERS) released a report yesterday entitled, “Colombia: A New Ethanol Producer on the Rise?”
An ERS summary of this report, which was written by José Toasa, indicated that, “Colombia’s sugarcane-based ethanol industry, after operating for only 3 years, is the second most developed in the Western Hemisphere. Most Colombian ethanol plants are energy self-sufficient and even generate surplus power that is sold to the national electric grid. Colombia’s sugarcane-based ethanol production is increasing: proposed expansion projects have the potential to more than triple daily production from 277,000 million gallons in 2007 to almost 1 million gallons in 2010. Most of the expansion is intended for exports, principally to the United States. However, it is unlikely that Colombia could export ethanol anytime soon because domestic production is insufficient to meet nationwide requirements that gasoline contain a 10-percent ethanol blend.”
Vilsack on the Farm Bill
A news release issued yesterday by USDA stated that, “Agriculture Secretary Tom Vilsack today announced he will extend the comment period for the 2008 Farm Bill Farm Program Payment Limitation and Payment Eligibility rulemaking process.
“Vilsack discussed his priorities as Secretary of Agriculture during a teleconference call today with agriculture and other reporters across the country and said that as part of the regulatory review process outlined by the White House and Office of Management and Budget (OMB), he is directing the Department to extend the comment period for the payment limits rule for an additional 60 days.
“‘Let’s be clear – in no way is this move a signal that we will modify the rules for the 2009 crop year,’ Vilsack said. ‘Sign up has begun and it’s important that clear and consistent rules remain in place so that producers can prepare for the crop year and manage their risk appropriately.’”
A complete audio replay and transcript of yesterday’s teleconference with Secretary Vilsack is available here.
In more detail with respect to yesterday’s news briefing from Sec. Vilsack, Philip Brasher, writing yesterday at The Green Fields Blog (The Des Moines Register) explained that, “ Tom Vilsack held his first telephone conference call with reporters and farm broadcasters today. (These phone calls became standard practice for USDA during the Bush administration as an alternative to traditional news conferences. Participating reporters get at most one question and no followup. So if there’s not a lot of detail that’s one of the reasons why.)
“Vilsack announced that he was reopening the proposed new eligibility rules for farm subsidies. This means the issue of what it means to be ‘actively engaged’ in farming is back on the table. It’s going to be interesting to watch how the Obama administration handles this, given the blowback USDA could get on the Hill, especially from southern senators, such as Democrat Blanche Lincoln of Arkansas, where farms are significantly bigger than they are in Vilsack’s home state. There is no more passionate opponent of tightening subsidy limits in all of Congress than Lincoln. Will the Obama administration take her on?”
A news release issued yesterday by Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) indicated that, “Senator Tom Harkin (D-IA) today issued the following statement in response to Agriculture Secretary Tom Vilsack’s first media teleconference this morning, at which he announced the Department is extending for 60 days a comment period on the payment limitation rule implementing the 2008 farm bill provision. Harkin is Chairman of the Senate Committee on Agriculture, Nutrition and Forestry, the Committee that ushered through the farm bill.
“‘I commend Secretary Vilsack for using his first news teleconference to discuss his approach to farm bill implementation. The regulations covering farm commodity and income protection programs payment limitations and eligibility are very important, and USDA should apply the necessary time to make sure the rules are sound and carefully written. The extension announced today is a common sense approach toward careful farm bill implementation. It will allow adequate time for everyone interested in the program to weigh in and provide suggestions that would help target payments and ensure payments are going to those producers for whom they are intended.’”
For additional analysis of yesterday’s news briefing with reporters, I strongly recommend this update by Chris Clayton (“Vilsack on Just About Everything You Want to Know”), which was posted yesterday at the DTN Ag Policy Blog.
Lula and Obama
Reuters News reported yesterday that, “President Barack Obama wants to work with Brazil on biofuels and pledged to advance global trade talks as a way to stoke economic growth, President Luiz Inacio Lula da Silva’s spokesman said on Monday.
“Lula and Obama spoke by phone for about 25 minutes and agreed to meet in March in Washington, Lula spokesman Marcelo Baumbach said.
“Obama may visit Brazil in the Northern Hemisphere’s summertime, between July and September, though no date has been set.
“In his national radio address last week, Lula urged Obama to make the Doha round of global trade talks a priority.”