Yves here. As much as it is convenient to blame spiraling food prices on pandemic stimulus, the biggest driver is climate-change-induced crop shortages. And that’s even worse because government-policy-induced increases can be remedied (and in fact are by Joe Manchin, on the order of using a Sherman tank to squish a mouse).
Climate change produced food scarcity is a much bigger problem. Yes, we may get period of relief, but the trend is not on our collective side. And some new patterns look to be durable, like sustained drier weather in the US West, including of course the critical growing areas of California, versus wetter in the East.
By Jeff Masters. Originally published at Yale Climate Connections
Aerial view of stranded barges along the Mississippi River in Louisiana, on August 30, 2021, in the wake of category 4 Hurricane Ida. The hurricane significantly disrupted transport of grains and fertilizer in September, contributing to high global food prices. (Image credit: Congressman Garret Graves (R-La), Ranking Member of the House Select Committee on the Climate Crisis)
Global food prices in November rose 1.2% compared to October, and were at their highest level since June 2011 (unadjusted for inflation), the United Nations Food and Agriculture Organization (FAO) said in its monthly report on December 2. After adjusting for inflation, 2021 food prices averaged for the 11 months of 2021 are the highest in 46 years.
The high prices come despite expectations that total global production of grains in 2021 will set an all-time record: 0.7% higher than the previous record set in 2020. But because of higher demand (in part, from an increased amount of wheat and corn used to feed animals), the 2021 harvest is not expected to meet consumption requirements in 2021/2022, resulting in a modest drawdown in global grain stocks by the end of 2022, to their lowest levels since 2015/2016.
The November increase in global food prices was largely the result of a surge in prices of grains and dairy products, with wheat prices a dominant driver. In an interview at fortune.com, Carlos Mera, head of agri commodities market research at Rabobank, blamed much of the increase in wheat prices on drought and high temperatures hitting major wheat producers including the U.S., Canada, and Russia.
Drought and heat in the U.S. caused a 40% decline in the spring wheat crop in 2021, and a 10% decline in the total wheat crop (spring wheat makes up about 25% of total U.S. wheat production). Economic damages to agriculture in the U.S. are expected to exceed $5 billion in 2021, according to Aon (see Tweet below). The highest losses are expected in the Northern Plains, where the spring wheat crop was hit hard by drought and heat. Fortunately, the 2021 U.S. corn crop was estimated to be the second largest on record, 7% larger than in 2020. The 2021 soybean crop was also estimated to be second largest on record, up 5% from 2020.
Drought & heat-related crop insurance payouts now top $2.6B in the United States — and quickly rising. Most losses? Not in the West, but in the Northern Tier.
The overall economic cost expected to exceed $5B. pic.twitter.com/xSFI5z8hVu
— Steve Bowen (@SteveBowenWx) December 1, 2021
Extreme Weather a Key Factor in High Food Prices
Food prices are complex, with weather, biofuel policies, trade policies, grain stocking policies, and fluctuating international financial conditions all important factors. High fuel prices, supply chain disruptions resulting from the pandemic, and high fertilizer prices are all contributing to the current high global food prices.
According to Reuters, global fertilizer prices have increased 80% this year, reaching their highest levels since the 2008-2009 global financial crisis. Primary causes of the current high prices include extreme weather events (particularly the February cold wave in Texas and Hurricane Ida in August), which disrupted U.S. fertilizer production, and the high cost in Europe of natural gas, a key component in producing fertilizer). Fertilizer shortages threaten to reduce grain harvests in 2022, according to CF Industries, a major fertilizer producer.
Carlos Mera of Rabobank pointed out that Russia, a major wheat producer, hiked its export tax on wheat this year to incentivize keeping supplies at home. “That is quite scary,” said Mera. “Events like the French Revolution and the Arab Spring have been blamed on high food prices.” High wheat prices in 2011 (in the wake of export restrictions triggered by the 2010 drought in Russia) helped lead to massive civil unrest and the toppling of multiple governments (the “Arab Spring”).
The current high food prices, combined with the ongoing pandemic, will make the global food supply highly vulnerable to extreme weather shocks in 2022. An upcoming post here will analyze what may be climate change’s greatest threat to society: a food-system shock driven by extreme weather, primarily drought, and causing simultaneous crop failures in multiple key grain-exporting areas.
Bob Henson contributed to this post.