As the worst drought in the last five decades continues to spread along the central breadbasket region of America like a wildfire, yield forecasts have been buried in ashes and prices for both maize and corn have taken a soaring flight.
And while a record dry July continued to bake the Central and Midwestern US states, FAO downgraded its forecast for maize production in America by 25 million tons from its June forecast, to 350 million tons as of July- which in retrospect remains arguably optimistic as of now.
Previously, the agencys June Crop Prospects and Food Situation report had predicted the world cereal production to increase by 3.2 percent over last year on the back of a significant expansion in maize plantation in the US.
On one hand, while the US government officials have claimed that this increased plantation is likely going to offset the drop in yields due to the drought, most agricultural and trade analysts remain unconvinced amid fears that the length and severity of the draught is very likely to cue price volatilities and have a lasting impact on trade policies and global food security.
And while maize has been sky-rocketing, prices for soybean have also seen sharp spikes, reaching their highest levels in nearly four years. Trading at $672/ton on Wednesday, the jump in prices comes as a result of a combination of factors including decreased acreage in favour of corn, the raging drought throughout the US and South America as well as record levels of imports by China which has been stockpiling rather aggressively throughout the year.
Concerns remain rife as the World Banks latest Food Price Watch report backs analyst predictions, recording a 25 percent hike in the prices of both maize and wheat along with a 25 percent jump in soybean prices. Overall, the WB Food Price Index- which keeps a watch on the prices of internationally traded food commodities - ended up 6 percentage points higher than it was in July last year, further turning predictions of favorable price prospects on their head.
"We are vulnerable because even in a good year, global grain production is barely sufficient to meet growing demand for food, feed and fuel - this, in a world where there are 80 million extra mouths to be fed every year," said UN Food and Agriculture Organization Director-General José Graziano da Silva; UN World Food Program Executive Director Ertharin Cousins; and IFAD President Kanayo Nwanze in a joint statement released on Tuesday.
The three officials most directly responsible for feeding the worlds hungry, however, maintained that the situation could be brought under control through "swift and coordinated" international action, expounding the importance of governments to refrain from panic-buying and imposing trade restrictions.
On the global front however, the declining situation of the cereal market presents a contrasting set of threats and opportunities. On one hand, while US maize crop and Russian wheat failure have been threatening global food security, the poor agricultural performance of the two giants is spelling big bucks for farmers in countries like Brazil. Brazil is expected to reap an all-time high maize output which; while unlikely to restore demand-supply equilibrium in one go, is expected to ease some pressure off the market.
However, while the jury still remains out on whether the next global food crisis is around the bend, cautious winds are prevalent. The true effects of the current price hikes in grains is unlikely to affect the end-consumer overnight, and is likely to become evident when the crops are harvested later this year, with the consumers on the better end of the bargain on account of the trickle-down effect which might save them from a huge shock.
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