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Another factor holds the potential to invite sudden widespread famine. Recent years have seen record increases in grain prices, with supplies reaching record lows as expanding nations such as China bring ever-growing demand.
In 2007 and 2008, a global food crisis was marked by dangerously low grain reserves. There were only “64 days of carryover stock [harvested grain stored in stockpiles and silos] in 2007” (Earth Policy Institute). Wheat reserves then plummeted to a 60-year low, and the price per bushel of Chicago wheat futures surged to more than $11.00 for the first time.
As of this writing, the planet is again threatened with a major food supply crisis. Carryover stock in September 2010 hovered around 72 days, dangerously close to the levels that ignited the crisis three years before.
This has in part been caused by a chain reaction: Heat waves, the drought and wildfires in Central Europe and Russia—leading to a 32 percent grain output decrease in Kazakhstan, a 19 percent decline in the Ukraine, and a 27 percent decrease in Russian wheat production over the previous year—which in turn led to a government-imposed wheat export ban.
The International Business Times brought grim news from Russia: “July was the hottest month in Russia—the world’s third-largest wheat exporter—since record-keeping commenced over 130 years ago, with deadly forest fires causing more than 30 deaths. Moreover, large parts of the wheat harvest are being destroyed. The expected amount available for export by Russia has been nearly halved, and could fall further if the drought continues.”
Russian Prime minister Vladimir Putin stated, “I think it would be expedient to introduce a temporary ban on export grains and other agricultural goods...We cannot allow an increase in domestic prices and we need to maintain the number of cattle.”
This problem could worsen dramatically if drought deprives the region of the water needed for the 2010-11 winter wheat crop. Given that Russia and its neighbors account for one quarter of all wheat exports worldwide, prices for this staple crop have again spiked sharply. Now 40 percent of the crop could be lost.
But the Black Sea region is not the only part of the globe where wheat supplies are dwindling. Canada—afflicted with the opposite crop-destroying condition of too much rain—is lagging in production and accompanying exports. Germany and Poland are also suffering.
Consider. The United States Department of Agriculture continues to slash world wheat crop-yield estimates for the fourth straight month (as of September, 2010). Wheat prices worldwide during this time period exploded, punctuated by “a record surge of 38 percent in July” (ibid.).
Corn supplies are also lagging, with similar price-inflating results. In late 2010, corn stockpiles were projected to fall to the lowest levels in seven years. The reduced corn crop has the added effect of making livestock feed, often corn-based, much more expensive. This price increase is then passed on to consumers of beef, pork and poultry products.
This snapshot summarizes the worsening scenario: “Corn prices surged once again—this time on worries that the U.S. harvest will come in well below initial estimates. As yield statistics flow in from farms in the Midwest, many farmers are reporting that the corn haul is lower than last year. The U.S. Department of Agriculture recently cut its official projection for the 2010 harvest, and many analysts expect that farms across the country will produce [only] an average of 160 bushels of corn per acre—or perhaps even lower” (ETF Database).
“Although a loss of five bushels an acre may seem small, it makes a big difference to supplies when multiplied across the 87.9 million acres planted, and would likely push U.S. supplies in storage next year below one billion bushels, a psychologically significant threshold. Avoiding that scenario will require higher prices” (The Wall Street Journal).
Consumers are beginning to see this firsthand. The U.S. Agriculture Department projects a jump in retail prices for a wide variety of foods in late 2010 and 2011—beef and other meats, cereal and breads, dairy products, coffee and more.
This is an ominous trend. Do not expect it to go away more than temporarily—if at all! It is only the beginning.

U.S. Wheat Reserves

Since the 1980s, the U.S. strategic wheat reserves, as well as another grain stockpile called the Bill Emerson Humanitarian Trust, have been sold for cash—reducing stockpiles to near zero. In fact, by 2000, all government-owned stocks of wheat were sold out.
The only remaining reserves in the country were those privately held by Farmer Owned Reserves (FOR) and commercial grain buyers. These stockpiles have been severely depleted as well, with no government plans to replenish the reserves.
Here is what Larry Matlack, President of the American Agricultural Movement (AAM), explained (emphasis mine): “Our concern is not that we are using the remainder of our strategic grain reserves for humanitarian relief. AAM fully supports the action and all humanitarian food relief. Our concern is that the U.S. has nothing else in our emergency food pantry. There is no cheese, no butter, no dry milk powder, no grains or anything else left in reserve” (Tri-State Observer).
This same official went on to state that the entire USDA Commodity Credit Corporation (CCC) inventory would be reduced to 2.7 million bushels of wheat—roughly enough to make only one-half loaf of bread for each person in the United States!
Pause to reflect on what has happened to what has been called the world’s breadbasket. How have the mighty fallen!
Reserves of other agricultural commodities such as sorghum, rice and corn have also come to be virtually non-existent. Income generated by the sale of U.S. grain is being held (rather than the grain itself) as a surplus by the CCC in a “trust for food,” to be spent by the government in the event of a domestic or global crisis. The rationale is that food could then be purchased with grain sale profits rather than burdening taxpayers with the cost of maintaining large stores of grain. Such foolish, shortsighted and dangerous thinking!
The only arena left that could maintain stockpiles of wheat without returning to government-sponsored storage is the FOR and commercial buyers, which collectively hold approximately one bushel of wheat per person in the U.S., the lowest in 60 years.
Add to these crises the growing trend of farmers devoting more acreage to other crops such as soybeans and corn, motivated by higher profit margins made possible by government-subsidized bio-fuel programs.
These statistics are all early “handwriting on the wall”!

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