IFPRI proposes steps to counter USA drought and prevent global food crisis

BY EDMUND SMITH-ASANTE

Shenggen Fan

The United States is currently experiencing the severest drought to plague the country since the 1950s, says International Food Policy Research Institute (IFPRI) Director General, Shenggen Fan.

According to him, this has been largely due to below-normal rainfall and above-normal temperatures and has serious implications for the world’s food security.

Stating these in a press release issued Monday August 6, 2012, the IFPRI director general said the severity of the conditions which span half the country, “increased dramatically since early July, adversely affecting the production of maize (yellow corn) and soybeans, thus driving up agricultural prices, and increasing the volatility of those prices to excessive levels.

He cautioned that rising maize and soybean prices can cause an increase in other commodity prices as the livestock industry switches from maize to wheat for animal feed and consumers are forced to shift their consumption to other commodities like wheat.

Revealing that in the last two months alone, wheat prices have risen by 26 percent, Shenggen Fan said Egypt and Brazil, the two largest importers of wheat, may likely experience adverse effects of potential price hikes, because they import more than half of their total wheat supply (Egypt, the fourth largest importer of US maize, imports 42 percent of total maize available).

Further, given that the United States plays a key role in international commodity markets since it is the top producer and exporter of maize and soybeans and as of 2011, US production of maize and soybeans accounted for more than 30 percent of total world production, while exports of those crops represented over 40 percent of total world exports, the current situation sends alarm signals the world over, contends IFPRI.

However, the institute opens a window of hope by outlining six steps that can minimise the effect of the US drought on food production and thus global food security.

First, it suggests that developments in food supply, consumption, prices, and trade, as well as agricultural commodity speculation, should be closely monitored by key institutions, including the US Department of Agriculture (USDA), Food and Agriculture Organisation (FAO), United Nations Conference on Trade and Development (UNCTAD), the World Bank, and the World Food Programme (WFP), and G20 supported initiatives like Agricultural Market Information System (AMIS) in collaboration with local partners, to quickly help detect any imbalances and facilitate swift responses.

IFPRI also insists that food crop demand for biofuels, particularly in the United States and European Union must be cut substantially, as should mandates for ethanol content in fuel, to help relieve the pressures on both domestic and global food markets, saying currently about 40 percent of total maize production in the United States is used to produce ethanol.

“Countries must stay away from imposing export restrictions when food prices increase because they lead to tighter market conditions and panic purchases by food-importing countries, thereby exacerbating food price hikes,” the institute further recommends.

IFPRI again contends that if the situation is to be nipped in the bud, then large food-producing countries must be ready to deploy some of their grain reserves to address food emergencies, with emphasis on vulnerable populations.

It adds that WFP’s access to food purchases must be enhanced in order to facilitate effective responses during times of crises, as such emergency preparedness is crucial because rising food prices have implications for the effectiveness of WFP’s food assistance programming, as well as the availability of funds for resilience building activities.

Lastly, the institute recommends that crop production in developing countries for the next season must be enhanced, in order to reduce the effect of high and volatile prices on their national food security.

IFPRI argues that in the long run, boosts to smallholder productivity, including enhanced access to high-quality/stress-tolerant seeds, fertilizer, new and affordable technologies, and rural infrastructure, must be made top priority, adding that innovations in financial services, for example, the use of modern communication technologies; risk-management mechanisms, such as weather-based index crop insurance; and institutional arrangements like social and rural knowledge networks, are also imperative.

Meanwhile, according to the Economic Research Service of the US Department of Agriculture (USDA), 62 percent of US farms are located in areas experiencing drought, while about 40 percent of maize and soybeans and 44 percent of livestock are produced in areas experiencing severe drought, stating that as a result, national crop yield and harvest estimates for maize and soybeans have been lowered considerably.

Experts also suggest that crop losses for maize are coming close to 20 percent and could reach 30 percent or more if extreme drought conditions persist. “Prices of maize and soybeans have already started to rise rapidly and could increase further depending on the degree of severity and extent of the drought,” they contend, disclosing that in the past two months alone, US export prices for maize and soybean increased by 30 and 19 percent respectively, with prices for both crops reaching record highs.