U.S. agriculture has been facing a poor harvest this year, aggravating the global food supply crisis, industry executives have said.
The supply of food worldwide has been tight, since Russia’s war in Ukraine cut off vital shipments of resources needed to make fertilizer and grain products from the region.
Several high-level executives from big agricultural firms such as Bayer, Corteva, Archer Daniels Midland, and Bunge, told The Wall Street Journal that it will take at least two more years of good harvests in North and South America to ease the supply pressures.
“The current market expectation is that global grain and oilseeds markets need two consecutive normal crop years to stabilize global supplies,” said Chuck Magro, chief executive of Corteva, at an investor presentation this week.
This year’s grain harvest has fallen below normal yields in the West, hindering efforts to restock global crop supplies he explained.
The United States and South America, two of the world’s major crop exporters, faced persistent drought conditions this summer.
The hot summer worsened drought conditions in states throughout the U.S. Grain Belt, which saw a major reduction in the harvest due to lack of water and a wet spring planting season earlier in the year.
The Agriculture Department announced on Sept. 12, that it had lowered its nationwide corn production estimates to 13.9 billion bushels.
This is 3 percent lower than its projections in August, about 8 percent lower than the total amount harvested last year.
Projections for soybean production estimates in September were down 3 percent from August, down slightly from 2021.
Maintaining a Food Truce
Global recession fears have also weighed on food commodity markets and the prolonged conflict in Ukraine has not helped matters.
Wheat price futures at the Chicago Board of Trade have risen 17 percent over the past 12 months, according to the WSJ.
Corn is up by about 28 percent, while soybeans jumped 14 percent.
Food prices skyrocketed after Russia’s invasion of Ukraine in late February.
Crop prices began to ease after a July agreement between Russia and Ukraine—brokered by Turkey through the United Nations—allowed more than a million tons of grain stored in Ukraine to be exported via the Black Sea.
Around 15 percent of grain stocks in Ukraine have been lost since the invasion in February, according to the Ukraine Conflict Observatory, a U.S.-based NGO.
Ukraine was only able to export about 40 percent of the grain it normally shipped during that period before the Black Sea agreement, according to Juan Luciano, CEO of Archer Daniels Midland, at a September investor conference.
A combine harvests wheat in a field near the village of Zghurivka, amid Russia’s attack on Ukraine, in Kyiv region, Ukraine on Aug. 9, 2022. (Viacheslav Musiienko/Reuters)
Luciano said the deal has allowed the country to boost shipments to about 60 percent of previous capacity and that it could be boosted to 80 or 90 percent if the agreement holds.
However, Russian President Vladimir Putin, said earlier this month, that his country may pull out of the deal, accusing the West of diverting Ukrainian grain to their own countries instead of allowing it to arrive in countries in the developing world that needed it most.
Putin’s statement led to the latest jump in wheat prices, which had been declining since the deal.
Western leaders immediately accused the Kremlin of spreading misinformation about the destination of Ukrainian grain that was to be shipped out of the Black Sea
“Contrary to Russian disinformation, this food is getting to Africa, the Middle East and Asia,” said European Commission President Charles Michel at a U.N. conference.
Russian officials said that items in the agreement that allowed their country to sell its fertilizer and other agricultural products amid sanctions were being violated.
Experts are warning that disruptions in fertilizer shipments due to the war are seriously affecting harvests around the world.
Agriculture executives have strongly urged that the deal be renewed by late November when it expires, to avoid pressure on global food stockpiles.
Global Food Crisis
The U.N.’s Global Food Security Summit on rising food insecurity on Sept. 20, warned of a devastating crisis next year if the war continues.
Representatives from the United States joined officials from the European Union and the African Union to discuss the effect of the conflict in Ukraine on food prices.
“As we’ve seen over the last years as a result of Covid, before that climate change and, more recently, conflict—notably Russia’s aggression against Ukraine—profound food insecurity touches well over 200 million people on this planet, including, of course, in Yemen,” said U.S. Secretary of State Antony Blinken, who urged renewal of the Black Sea agreement.
The executive director of the U.N. World Food Program, David Beasley, told the U.N. Security Council last week, that the world is now facing “a global emergency of unprecedented magnitude,” with a real risk of “multiple famines” this year.
He said that 345 million people are facing starvation, with 70 million directly affected by food shipments disrupted by the war in Ukraine.
U.N. Secretary-General Antonio Guterres recently said that while enough food is being produced worldwide, the main problem was distribution.
This summer, UNICEF and the U.N.’s Food and Agriculture Organization, said that between 702 and 828 million people were impacted by hunger last year, due to disruptions caused by the pandemic.
Guterres stated that if the current situation in Ukraine does not stabilize in 2022, “we risk to have a real lack of food” by 2023.
Fri, 09/23/2022 – 06:30
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Author: Tyler Durden