News & CommentaryArchive
Aug 10, 2010
A Warning Sign of the Next Food Crisis?
This week Russia announced that it was banning all exports of grain from the country. The action is significant because Russia accounts for about 17% of the global grain trade—Egypt is especially dependent on Russian wheat. The ban comes amidst one of the worst droughts in Russian and Eastern European history and floods in Canada which have sent yields plummeting and grain prices soaring. Early this week global prices had risen more than 90 percent since June.
It all sounds like a replay of 2008 when it was drought in Australia and floods in the US that began to send food prices soaring around the globe. In this instance, however, there is less (or perhaps more) here than meets the eye. A big factor in Russia’s decision, apparently, is that Russian export companies were complaining about having to make good on futures contracts signed with the price of grain was much lower. The ban lets them sell grain at market prices in Russia rather than exporting grain at the much lower prices that had agreed to earlier this year. In contrast to some of the export bans seen in 2008 (for instance Thailand’s ban of rice exports) there is no prospect of Russia running low on grain—the harvest is forecast to meet domestic needs and the country has 24 million metric tons in storage, more than it exported last year.
So while Russia’s decision isn’t necessarily a sign of another rampaging food crisis, it is just another alarm bell about the state of the world food supply and how susceptible the system is to weather and government action. Russia’s behavior, by the way, bears out a point we made earlier this year when alarms were raised about African governments leasing huge amounts of land for food production to foreign governments and companies: governments will intervene in food markets for the short-term benefit of their own population (and of politicians’ prospects for holding onto power).
Ultimately, this is another data point on the priority of improving yields around the world, fighting the brown revolution with every tool we have, and ending the unjust and evil tyranny of developed world food policy.