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Alarms sound over world food supply as drought wilts US Corn Belt
Friday, August 10, 2012 8:39 AM
Gettin' old, but still a hippie at heart...
Quote:A historic Midwest drought prompted the US government on Friday to slash supply estimates for nearly everything in the US cornucopia, including corn, soybeans, and sorghum – a move that caused commodity prices to jump and concerns about the state of the global food cupboard to rise.
US corn and soybeans are crucial to global food supply because they are used for food, feed, cooking oil, and even motor fuel. Reduced supply and higher prices mean that poorer, import-reliant nations may not be able to replenish their food stocks.
"This is shocking,” Dan Basse, president of Ag Resources, said during a conference call on Thursday, ahead of the World Agricultural Supply and Demand Estimates report from the US Department of Agriculture. “This is getting people at the United Nations very concerned. The poor in the world are going to see tremendous pressure on their budgetary expenditure for calories. This has become a very scary situation, particularly for those in the world who are impoverished."
With the release of the global supply and demand report Friday morning, prices on the commodities exchange in Chicago rose to all-time highs for corn and soybeans, the hardest-hit crops so far. The estimate for the US corn crop is at the lowest level since 1995-96, when many fewer acres were planted.
The report piggy-backed on the release Thursday of the United Nations Food and Agriculture Organization’s Food Price Index, which showed global food prices rising by 6 percent, largely because of the US drought. Untimely rains in sugar-producing Brazil and dry conditions in Russia's wheat belt, too, have taken a toll.
The hottest July on record in the Lower 48 and scant rainfall have created the widest US drought since 1956, wiping out much of the corn and soybean crops, which are used globally and domestically for food, feed, and ethanol production. In the US, which is the world’s top exporter of corn, more than half the crop is now considered in “poor” condition. The Agriculture Department on Friday slashed yield estimates by 12 percent, from 146 bushels per acre to 123 bushels per acre.
American farmers had planted the largest corn crop ever this year, in response to high commodity prices and high global demand. The US was supposed to be “swimming” in corn this fall. Instead, the harvest will be a “train wreck,” Kelly Wiesbrock, a fund manager for Harvest Capital Strategies, tells the Reuters news service
Higher commodity prices mean poorer countries will import much less, putting millions of people on the lower rungs of the global food chain in jeopardy, and potentially creating a situation similar to the world food crisis of 2007-08. In all, estimates for this year's global grain supply are down by 180 million metric tons – enough to fill about 360 supertankers to the brim.
"This is not some gentle monthly wake-up call,” Oxfam spokesman Colin Roche told the press after the latest figures were released. “It's the same global alarm that's been screaming at us since 2008. These new figures prove that the world's food system cannot cope on crumbling foundations. The combination of rising prices and expected low reserves means the world is facing a double danger."
Government economists expect corn prices to rise to a record $9 a bushel, up from a $6 bushel estimate in early July. But private ag economists suggest that the drought is worse than advertised and that prices could go even higher.
Such prices could make some farmers and commodity traders wealthy, but they could be devastating for poorer, food-importing nations. “The U.S. leads the world in exporting corn, soybeans and wheat, and the surging prices are expected to be felt across the international marketplace, hurting poor food-importing countries,” said a study by British charity Oxfam issued ahead of this week’s UN report. http://www.csmonitor.com/USA/2012/0810/Alarms-sound-over-world-food-supply-as-drought-wilts-US-Corn-Belt
Friday, August 10, 2012 9:06 AM
Down the centuries you have slurred the meaning of the words, WE THE PEOPLE...
Quote:Originally posted by Niki2:
Where do we go...from here?
Friday, August 10, 2012 3:59 PM
America loves a winner!
Friday, August 10, 2012 4:54 PM
Friday, August 10, 2012 6:27 PM
Quote:Originally posted by FREMDFIRMA:
Maybe if they didn't waste so much of it by processing it into HFCS....
Friday, August 10, 2012 8:40 PM
You think you know--what's to come, what you are.
You haven't even begun.
Monday, August 13, 2012 4:51 PM
The poster formerly known as yinyang.
Quote:Corn farmers struggle to cope with rootworm resistance
The corn rootworm is called the billion-dollar pest, a rough estimate of how much money U.S. farmers spend annually to keep it at bay.
The best weapon they've ever had is a genetically modified corn plant containing a protein that kills the insect. But many bug experts are convinced that rootworms have developed a resistance to the protein, so that they can feast on the plant's roots and survive.
On top of a punishing drought, the leading corn pest is adding to crop damage in parts of Minnesota and elsewhere -- even though the plants are supposed to be immune from the bug, the corn rootworm beetle.
"We're not going to make this go away," said University of Minnesota professor Bruce Potter, a pest management specialist. "We're stuck with managing this problem."
U.S. Environmental Protection Agency officials looked at some problem fields in the Midwest last week and hope to hear some research results soon from Monsanto, which distributes genetically modified seeds.
There's no official confirmation of rootworm resistance, and Monsanto so far contends there is none. But Potter has seen what he calls a "ridiculous" increase in rootworms apparently unfazed by the usually deadly protein in southern and western Minnesota this summer.
Earlier this week he was at a workshop on a farm that has had resistant rootworm problems. The session drew about 100 farmers and agricultural consultants.
Potter told them the genetically modified corn is basically backfiring.
"Instead of making things easier, we've just made corn rootworm management harder and a heck of a lot more expensive," Potter said.
Farmers themselves may have accelerated the development of rootworm resistance. A decade ago most farmers alternated corn in a particular field with soybeans or some other crop -- a proven strategy for containing the pest. But with grain prices high and corn yielding big profits, a growing number of farmers plant corn in the same field year after year.
That's something Steven Bradbury, director of the EPA's Office of Pesticide Programs, said he saw last week when he visited rootworm hotspots in Iowa and Nebraska.
"Growers, especially in high population areas where there's many years of continuous corn, are noticing increasing challenges in controlling the corn rootworm beetles," Bradbury said.
In a field with alternating crops, most of the insects die off if they have hatched in, say, a soybean field. But with continuous corn, those that can survive the genetically modified corn thrive year to year and can quickly grow in numbers.
read more: http://minnesota.publicradio.org/display/web/2012/08/03/regional/corn-rootworm/
Monday, August 13, 2012 5:37 PM
Monday, August 13, 2012 6:08 PM
Quote:Originally posted by 1kiki:
In which case, the drought might actually reduce pest populations.
Tuesday, August 14, 2012 3:25 AM
"We'll know our disinformation program is complete when everything the American public believes is false." -- William Casey, Reagan's presidential campaign manager & CIA Director (from first staff meeting in 1981)
July 24, 2012 from KCUR
Stop by most any unirrigated farm across the lower Midwest and you'll see crops in distress. Midwestern corn and soybean farmers are taking a beating during the recent drought, but it's not likely to drive many out of business.
Most of those farmers carry terrific insurance, and the worse the drought becomes, the more individual farmers will be paid for their lost crops. The federal government picks up most of the cost of the crop insurance program, and this year that bill is going to be a whopper.
Despite a withered soybean crop that he says won't even let him break even, Loren Alderson, a farmer in Nickerson, Kan., isn't too worried.
"The government has a program of crop insurance, revenue insurance, and it certainly is a lifesaver for years like this," Alderson says.
That's an attitude typical of most farmers affected by this drought, says Bruce Babcock, who specializes in agriculture economy at Iowa State University. They're not too worried because the great majority of them have crop insurance, he says. In the Corn Belt, upwards of 85 percent of farmers carry crop insurance, if you can call it that.
"It's not really insurance, because, as we know, when we buy insurance, we have to pay the full premium," Babcock says, "and that premium covers not only the losses, or the claims that are made, but also the administration and profit for the company."
When a farmer buys crop insurance, the government picks up most of the premium, and it also pays operating expenses for the companies. Those two subsidies cost close to $8 billion a year. But taxpayers also insure crop insurance companies against catastrophic loss.
So, as claims from this year's drought mount, the USDA will shoulder a larger and larger share of the payout. Babcock says it'll likely be taxpayers, not insurance companies, paying the bulk of this year's crop insurance claims, which could easily run more than $10 billion.
"The drought really shows how important the program is, and who's really funding it," Babcock says.
Payouts are going to be extra high because most Corn Belt farmers also carry coverage tied to the changing value of the crops they produce. The drought has cut projected supply and pushed prices way up.
The more bushels of corn that are lost, the more each one of those lost bushels tends to be worth for a farmer's insurance settlement, and the more taxpayers owe drought-stricken farmers.
"Crop farmers are going to be OK coming out of this drought," Babcock says. "Taxpayers are not going to be; they're going to be paying large losses."
Of course, taxpayers do expect to eat, even after an agricultural disaster, so, arguably, in that light, crop insurance makes sense, says Tom Zacharias, the president of National Crop Insurance Services.
"It's designed to help the consumer," Zacharias says, "so that we know that we have stable, secure food supply. [And] we want to keep farmers in business from year to year."
Zacharias says crop insurance is a pretty efficient way of doing it, because while farmers pay into the system year after year, they don't get any money out until something goes wrong. In normal years, crop insurance companies eat the losses, and he says those insurance companies are eager to please.
"These folks are 24/7," he says. "We have loss-adjuster staffs in the field as we speak."
So, disaster coverage payments typically arrive in time to cover getting the next crop in the ground and keeping the food system running. But, farmer Loren Alderson says, that's about as far as it goes.
"Technically, you don't lose money," Alderson says, "but if you're especially a younger farmer who's got land payments to make and machinery payments to make, they're not going to be able to make those costs with insurance."
While it will take months to figure the true costs of this rapidly intensifying drought, it is clear there is going to be plenty of pain to go around.
Tuesday, August 14, 2012 3:39 AM
Quote:Originally posted by AURaptor:
Good thing we have a Federal MANDATE that we must burn 10% of all corn by putting it towards fuel.
Tuesday, August 14, 2012 9:20 AM
Tuesday, August 14, 2012 10:43 AM
Tuesday, August 14, 2012 10:48 AM
Tuesday, August 14, 2012 12:41 PM
Quote:Originally posted by chrisisall:
I'm just glad this climate change stuff is a lot of hooey.
Tuesday, August 14, 2012 4:48 PM
Quote:Originally posted by Kwicko:
So as more and more crops become complete write-offs, prices go up, and farmers make more if they just till the whole crop under rather than try to salvage any of it, because the "crop insurance" will pay them market price for a complete loss - and the more they lose, the more they get paid to lose even more!
Thursday, August 16, 2012 4:12 AM
Quote:Originally posted by REDREAD:
Just did a quick search, and according to this, rootworms appear to be one of the few pests that don't seem to mind the dry conditions:
So no luck there.
||| Blog post explaining my name change: http://www.fireflyfans.net/blog.aspx?bid=9414 |||
Thursday, August 16, 2012 4:19 AM
Quote:Originally posted by chrisisall:
I'm just glad this climate change stuff is a lot of hooey.
Chrisisall, wearing a frilly Mal thing on his head, and ready to shoot unarmed, full-body armoured climates
Sunday, August 19, 2012 6:55 PM
Beir bua agus beannacht
Monday, August 20, 2012 7:55 AM
Quote:Because of the severe heat and drought in the Midwest, global food prices are going up. Why? Because the U.S. is the leading producer and exporter of staple grains. We are for food production what Saudi Arabia is for oil production. Our crop shortages have ripple effects throughout the food system and disrupt the global markets, especially in the food-insecure nations.
The U.S. hasn't reached 2008's level of high food prices yet because rice and wheat stocks are ample. These are the two most important food grains for human consumption worldwide.
Corn and soybean levels are extremely tight, and their prices have skyrocketed since June. However, these two grains are mostly used as livestock feeds. Corn is also diverted to produce ethanol because of our government mandate.
Earlier this month, the United Nations urged the U.S. to ease its ethanol mandate. The origin of this policy goes back to 2005 when Congress set requirements of corn to be used for automotive fuel. In 2007, the Energy Independence and Security Act greatly increased those requirements to improve air quality and become more energy secure. Behind the scenes, however, corn and other agricultural lobbyists were promoting the mandate to create a larger market for corn. Using current numbers, this year's ethanol mandate would theoretically require 44% of this year's corn crop, a third of which is recycled back as distillers grains for livestock feed.
We are being told by the ethanol producers, the corn growers and Secretary of Agriculture Tom Vilsack that eliminating the ethanol mandate would not significantly reduce global food costs. But how could that be when roughly 14% of the world's corn crop is being converted into ethanol in the U.S.? In addition to corn being used for biofuel, taxpayer-subsidized biodiesel is using up more soybeans each year.
While some say that attempting to change the ethanol mandate is politically impossible in an election year that depends so much on the Midwest swing states, there is a loud and growing chorus of voices that are calling for an urgent end to the mandate. Greg Page, CEO of Cargill, one of the world's largest agricultural corporations, recently urged: "We need to move to more market-driven biofuels policies, not inflexible mandates, subsidies and tariffs."
Just as the USDA's recent estimate of a corn yield at 123 bushels per acre is certain to be reduced further, its estimate of food costs rising only 3% to 4% next year is certain to be raised.
The least politically palatable condition in any nation is high food prices. Expect beef, pork, chicken, turkey, eggs, fats and oils, cereals and dairy products to go up the most in the coming months. Americans have already reduced their meat consumption over the past few years partly because of higher prices.
It is time for policymakers to admit they made a mistake in setting the corn ethanol mandate level too high in 2007. This year, the mandate is 13.2 billion gallons of ethanol, which would require 4.7 billion bushels of corn. The mandate is set to top out in 2015 at 15 billion gallons.
If politics dictates that we must have an ethanol mandate, then at the very least we should consider cutting the level by half, which could be done by using only 5% ethanol, or E5, in gasoline instead of E10, which is a combination of 10% ethanol and 90% unleaded gasoline.
The mandate should never be allowed to use more than 20% of the annual U.S. corn crop. This amount would be enough to help stimulate corn demand for this overproduced commodity. As a bonus, more sustainable farming practices could return to the Midwest following this frenzy of growing corn on corn, fencerow to fencerow, to cash in on the high prices.
It often takes a crisis to get government to take action and correct a policy that was wrong to begin with. This growing season, we have had extreme heat and drought in the most productive farming region in the world. Let's use this unfortunate plight to get our ethanol policy right, before it causes food prices to go up more.
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