The recent FAO report, “Crop Prospects and Food Situation,” published in October, makes an alarming observation: “the combination of higher export prices and soaring freight rates is pushing up domestic prices of bread and other basic food in importing developing countries, hitting the group of Low-Income Food-Deficit countries (LIFDCs) particularly hard and causing social unrest in some areas.”
Blamed for the soaring prices of agricultural raw materials are sustained demand at the global level, for both food and non-food (mainly agrofuel) uses, and, in particular, international stock levels, which have reached their lowest point since 1947.
This “scissors effect,” characterized by soaring prices and tightening supply and stocks, constitutes a major risk for developing countries, many of which have crossed the food security threshold, with food costs rising 14 percent since 2006.
Furthermore, FAO forecasts are hardly optimistic, as indicated by Paul Racionzer of the Global Information and Early Warning System (GIEWS): “On current indications, this year’s cereal harvest would only just meet expected utilisation levels in the coming year, which means that stocks will not be replenished.” Likewise, factors that determine worldwide demand are on track to remain just as strong, as evidenced on international markets by the high demand out of China and India, demand that is set to continue into the long term.
Once global stocks have fallen below the warning threshold – set by the FAO at 70 days of current consumption, and the case today – they can no longer act as shock absorbers on the futures and physical markets, leaving agricultural markets even more vulnerable to external impacts, particularly those related to climate. As Michel Portier, an expert with Agritel, points out, “a new climate incident in 2008 would be catastrophic and would be sure to cause a major food emergency.”
If international institutions continue to dismantle the most recent regulatory tools while failing to warn the public and national decision makers of the dangers of an indiscriminant use of the “stockless production” strategy, which is well understood in industry yet dangerous in the agricultural sector, they could cause one of the gravest food shortages of the last few decades.