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Will a Global Food Crisis Return?

Russia's decision to keep its grain export ban in place until late Y 2011 raised again the specter of a repeat of the Y 2008 food crisis and the ensuing political upheaval and violence across the globe. While Prime Minister Vladimir Putin was making the announcement Thursday at a government meeting, at least six people were killed in Mozambique riots over food price hikes. More than 100 people were injured in the deadly riot hitting Maputo, capital city of the southern African country, where local people have seen the price of a loaf of bread rise by 25%. Russia's longer ban may contribute to higher global prices, which make analysts raise their concerns that the Y's 2007-2008 food crisis might return and similar unrest over food prices will soon occur elsewhere in the world. There are certainly ample reasons for their concerns. Moscow announced a ban on grain exports last month in face of a record drought that has destroyed a quarter of its harvest. During a government meeting, Putin said his country might extend the ban into next year "in order not to create unnecessary nervousness, to secure stability and predictability of business for all market players." The expanded ban from Russia, the world's fourth largest wheat exporter, has sent international market prices to 2 yr highs. The UN Food and Agriculture Organization (FAO) said it has recently further revised down its forecast for Y 2010 world wheat production, putting this year's wheat crop at 648M tonnes, down 5% from Y 2009 but still the 3rd highest ever. According to the Rome-based organization, world food prices rose in August to the highest level since September 2008. "In the past few weeks, global cereal markets experienced a sudden surge in international wheat prices on concerns over wheat shortage," the FAO said in a statement posted on its website. Besides Russia, severe drought and heat waves across the world have also wreaked havoc in countries such as Ukraine, Germany, Poland, Hungary and northern France, which have all seen an decline in grain production. Moreover, extreme weather conditions could have an even longer impact as they could make the winter sowing conditions more difficult for next year's crops. However, some analysts believed that the chances of seeing the 2008 food crisis again is slim, despite all the ominous signs. "There isn't much possibility of the Y 2008 food crisis repeating itself," said a senior strategist with the China Institute of Contemporary International Relations. There are sharp differences between the current food price situation and the spring of Y 2008, according to Chen Fengying. The Y 2008 Global food crisis was triggered by market speculation, US bio-fuels production and high Crude Oil prices, said Chen. "However, speculation in global food market currently is not that rampant compared with Y 2008," especially after the United States signed into law in July the financial regulation reform bill aimed at curbing speculation, Chen said. Moreover, the 2nd and 3rd generation bio-fuels production in the Untied States now has a less demand for grains, she added. According to Chen, the main culprit behind the current food price hike is natural disasters. "Natural disasters worldwide are the main problems," Chen said, but adding that they have yet to make a big impact on grain outputs and agricultural products in North America and Europe.---Paul A. Ebeling, Jnr. www.livetradingnews.com