All Things Considered: March 2011
This is shaping up to be a very, very interesting year. Which, if you
believe in the old Chinese curse, “May you live in interesting times,”
is a bad thing.
This is shaping up to be a very, very interesting year. Which, if you believe in the old Chinese curse, “May you live in interesting times,” is a bad thing.
Making it all the more interesting is that there is precious little anyone can do to bring on much-needed boredom. As advanced as we think we sometimes are, we have yet to develop sure-fire ways to control the weather. We seem to be able to influence it over the long term (though some continue to deny that) and we can mitigate some of its worst impacts over the short term with irrigation and water conservation technologies. But when the weather gets really interesting, all we can do is get out of the way and watch.
In the past year alone we’ve had to watch as much of the Canadian Prairies went under water. Pakistan had its worst flooding ever and Australia experienced the same.
Meanwhile Argentina is in the midst of a drought, Russia which had finally become a significant exporter of wheat the previous year, saw its crops literally catch on fire because of relentless heat and drought, and this winter much of the U.S. winter wheat crop is threatened by a dry fall and a lack of snow cover this winter.
The result has been slashed production and much lower than usual quality in the crops that have been harvested. This has led to rapidly rising prices for grains, oilseeds and other crops.
Recent reports indicate flax is in short supply and prices are headed up with little prospect of a decrease. Even sugar has reached the point where there are reports that some Brazilian producers are shifting supplies from ethanol production onto world food markets.
Meanwhile, in the U.S., politicians, who are nothing if not sensitive to the pressure and power of well-financed lobby groups, voted to extend ethanol subsidies and the ethanol mandate. With corn prices soaring, and world demand for U.S. corn surging, the decision was made to divert more corn from food to fuel. Up here in the Great White North we continue with our “me too” ethanol policy.
As we look toward spring there are forecasts that parts of the Prairies, thanks to last year’s rain and heavy snow this winter, will be too wet to seed in the spring. This could reduce expected production by five to 10 per cent below the multi-year average.
In the United States, the USDA is already forecasting that its stockpiles of corn and soybeans will be down to near record-low levels.
When the 2011 crop is ready for harvest soybean, supplies will be down to 140 million bushels and corn stocks will be about 745 million bushels, the smallest year-to-year carryover since 1995.
The stocks-to-use ratio for corn is projected at 5.5 per cent. The USDA said the ratio reflected a decline in the yield estimates for last year’s crop and an increase in ethanol use.
The stocks-to-use ratio for soybeans is projected at 4.2 per cent, the lowest ever.
On the livestock side, there is good and bad news. The bad news is, of course, the rapidly rising cost of feed. The good news is that beef and hog supplies are tightening and prices are rising. This also seems to be playing out on milk markets.
If agriculture were like a steel company the response to the current situation would be straightforward – you crank up production. While farmers everywhere will no doubt try, it’s hard to do if the soil is too wet or too dry or if spring comes late and winter comes early. And even if the seed gets in the ground a summer heat wave or relentless rain can undo even the best made plans.
Maybe 2011 will be like 2009, when big crops pulled us back from the brink. Or maybe 2011 will be like 2010 and we’ll have a real mess.
While there is nothing we can do about the weather, there are some things that could and, in my opinion should, be done. This first is the creation of a world grain bank. It could be run by the FAO or under some other form of multinational agreement. Crops would be bought and stored during good years and then sold and distributed in bad years. This would have the added benefit of reducing the wild swings in prices by increasing demand in years when supplies are plentiful and increasing supplies when production is poor.
The second thing that should be done is to take a hard look at producing ethanol from grain, especially the practice of having both a government-mandated minimum ethanol content in gasoline and production subsidies. The combination has the effect of increasing demand for corn and increasing the ability of ethanol producers to bid up corn prices at the expense of hard-pressed livestock producers.
Neither of these measures is politically easy.
But if we have another bad year, political noise could be the least of our worries.
Making it all the more interesting is that there is precious little anyone can do to bring on much-needed boredom. As advanced as we think we sometimes are, we have yet to develop sure-fire ways to control the weather. We seem to be able to influence it over the long term (though some continue to deny that) and we can mitigate some of its worst impacts over the short term with irrigation and water conservation technologies. But when the weather gets really interesting, all we can do is get out of the way and watch.
In the past year alone we’ve had to watch as much of the Canadian Prairies went under water. Pakistan had its worst flooding ever and Australia experienced the same.
Meanwhile Argentina is in the midst of a drought, Russia which had finally become a significant exporter of wheat the previous year, saw its crops literally catch on fire because of relentless heat and drought, and this winter much of the U.S. winter wheat crop is threatened by a dry fall and a lack of snow cover this winter.
The result has been slashed production and much lower than usual quality in the crops that have been harvested. This has led to rapidly rising prices for grains, oilseeds and other crops.
Recent reports indicate flax is in short supply and prices are headed up with little prospect of a decrease. Even sugar has reached the point where there are reports that some Brazilian producers are shifting supplies from ethanol production onto world food markets.
Meanwhile, in the U.S., politicians, who are nothing if not sensitive to the pressure and power of well-financed lobby groups, voted to extend ethanol subsidies and the ethanol mandate. With corn prices soaring, and world demand for U.S. corn surging, the decision was made to divert more corn from food to fuel. Up here in the Great White North we continue with our “me too” ethanol policy.
As we look toward spring there are forecasts that parts of the Prairies, thanks to last year’s rain and heavy snow this winter, will be too wet to seed in the spring. This could reduce expected production by five to 10 per cent below the multi-year average.
In the United States, the USDA is already forecasting that its stockpiles of corn and soybeans will be down to near record-low levels.
When the 2011 crop is ready for harvest soybean, supplies will be down to 140 million bushels and corn stocks will be about 745 million bushels, the smallest year-to-year carryover since 1995.
The stocks-to-use ratio for corn is projected at 5.5 per cent. The USDA said the ratio reflected a decline in the yield estimates for last year’s crop and an increase in ethanol use.
The stocks-to-use ratio for soybeans is projected at 4.2 per cent, the lowest ever.
On the livestock side, there is good and bad news. The bad news is, of course, the rapidly rising cost of feed. The good news is that beef and hog supplies are tightening and prices are rising. This also seems to be playing out on milk markets.
If agriculture were like a steel company the response to the current situation would be straightforward – you crank up production. While farmers everywhere will no doubt try, it’s hard to do if the soil is too wet or too dry or if spring comes late and winter comes early. And even if the seed gets in the ground a summer heat wave or relentless rain can undo even the best made plans.
Maybe 2011 will be like 2009, when big crops pulled us back from the brink. Or maybe 2011 will be like 2010 and we’ll have a real mess.
While there is nothing we can do about the weather, there are some things that could and, in my opinion should, be done. This first is the creation of a world grain bank. It could be run by the FAO or under some other form of multinational agreement. Crops would be bought and stored during good years and then sold and distributed in bad years. This would have the added benefit of reducing the wild swings in prices by increasing demand in years when supplies are plentiful and increasing supplies when production is poor.
The second thing that should be done is to take a hard look at producing ethanol from grain, especially the practice of having both a government-mandated minimum ethanol content in gasoline and production subsidies. The combination has the effect of increasing demand for corn and increasing the ability of ethanol producers to bid up corn prices at the expense of hard-pressed livestock producers.
Neither of these measures is politically easy.
But if we have another bad year, political noise could be the least of our worries.