Brazen FAO flies its double helix colours

The matter that faces us now concerning the United Nations Food and Agriculture Organisation (FAO) is: how should we consider what its activities represent? Like other UN agencies, the FAO works according to a mandate, which is agreed upon by its member states. Where the FAO is concerned, that mandate has to do with agriculture, not in the form of crops produced per hectare or acre, but in terms of who the cultivators and growers are, what their living and working conditions are, and the manner in which the crop and food they produce reaches the hands of those who need it.

Looked at in this way, an organisation such as the FAO has as one of its responsibilities the provision of support, in as many ways as possible, of the majority of those who grow food and the majority of those who buy food. In recent years however, the UN FAO has set aside this responsibility, deliberately and according to a plan. This dereliction of duty – in fact it is a duty agreed upon by FAO member states, of which there are 197 – can only be explained in one way: the FAO of today no longer represents the smallholder cultivator and farmer and peasant, and no longer represents the rural communities for whom agriculture is a dominant part of their biocultural life.

If the FAO now functions as an industry association (that is, representing the interests of a range of industries and technologies within the agriculture and food sector) then that is the choice of the organisation, presumably with the consent of the member states. However, such a deviation from its role hitherto then calls into question the funding it receives from said members, for that funding has for the 70 years of the organisation’s existence been predicated upon the FAO fulfilling its responsibility towards smallholder and peasant farmers, wherever in the world they may be. If the FAO is today an industry organisation – which its recent actions proclaim it to be – then the 197 member states must stop giving the organisation an annual contribution.

Will such a cessation of financial support make a difference to the FAO of 2016? Let us examine how the organisation is funded. The total FAO Budget planned for 2016-17 is US$ 2.6 billion. Of this amount, 39% comes from contributions paid by member countries, whereas 61% is to come from what are called “voluntary contributions from members and other partners”. Some countries pay more than others, some very much more, some not at all. The USA maintains an outstanding towards the FAO that is ludicrous – it is US$ 96.97 million in arrears.

But what is of concern to us is the alteration in the balance of the members’ contributions and the so-called voluntary contributions, in the rough ration of 40 to 60. This means that 6 out of 10 dollars that the FAO receives is used for what the organisation calls “support technical and emergency (including rehabilitation) assistance to governments for clearly defined purposes linked to the results framework” and which is different from the activities provided for under the “regular budget”.

Under the circumstances that I have just described therefore, the FAO-hosted international symposium, titled ‘The Role of Agricultural Biotechnologies in Sustainable Food Systems and Nutrition’, which is under way 15-17 February 2016, is what any trade organisation would call an interest group gathering with an intent to change policy and practice in a manner that profits and benefits the members of that interest group.

It is opaque to us for now, based on the information provided by the FAO on this symposium, whether the money spent on transporting to Rome “over 400 scientists, representatives of government, civil society, the private sector, academia, farmers’ associations and cooperatives” for a conference to “explore how agricultural bio-technologies can benefit family farmers, particularly those in developing countries, who need to improve nutrition and food systems while facing the challenges of poverty, climate change, and population growth” – whether the money spent to do so comes out of the regular budget or out of a voluntary contribution. An answer either way must only lead to further very critical questions asked of the FAO senior management.

These questions must be asked of FAO at all levels – particularly in FAO member states whose contributions to the organisation’s regular budget may be minuscule, but whose food and agriculture line ministries and departments, whose institutions and laboratories are induced or coerced into accepting an “inter-governmentally mandated package of best practices” that does everything to help the international agriculture biotechnology and industrial crop cultivation corporations and traders, and nothing whatsoever for those member countries’ peasant and smallholder farmers.

What the FAO is doing with this bio-technology symposium is worse than unconscionable and worse than being wilfully unmindful about the evidence of the harm – to animal populations, ecosystems and humans – caused by biotechnologies and especially those employed for agricultural purposes. The serious harm to health and the ecological and agronomical impacts of glyphosate and glyphosate tolerant crops for example are the most thoroughly researched. The same kind of evidence has now emerged for Bt crops and Bt toxins. Evidence that genetic modification per se is harmful is as broad and unimpeachable, with the uncontrollable processes of genetic modification having led to the phenomena of antibiotic resistance (reported from all over the world), the creation of new pathogens, the incidence of cancers, and the hijacking of the human body’s natural nucleic acids to do harm.

It is deliberately misleading and deeply cynical for the FAO to claim, with a banal insouciance, that this symposium “focuses mainly on the broad range of biotechnologies that could result in yield increases, better nutritional qualities, and improved productivities of crops, livestock, fish and trees benefitting family farmers and their food systems, nutrition and livelihoods”. This is the sort of cartoonish PR piffle that the UN sustainable development goals (the SDGs) have been wrapped in to appeal to the social media tendencies of the world’s teenagers.

For the last two years out of the four that José Graziano da Silva has been at the head of the organisation, the tilt towards industrial agriculture and biotechnology has become very much more pronounced compared with the already sorry condition the organisation was during the second term of Jacques Diouf (the Senegalese diplomat who was director-general from January 1994 to 31 December 2011). Under da Silva the “agriculture for nutrition” campaign line has become very much more prevalent, and has been supported – voluntary contributions facilitated by the FAO’s Partnerships and Advocacy Branch (an office by itself, and a very industrious one) – by a host of private sector networks and consortia whose interests encompass biofortification, pharmaceuticals, and agricultural biotechnologies.

The symposium has been condemned fiercely and jointly by 42 international and regional organisations with 131 national and local organisations (173 in all) led by La Via Campesina, Grain and ETC Group. “It is clear that, through the FAO, industry wants to re-launch their false message that genetically engineered crops can feed the world and cool the planet, while the reality is that nothing has changed on the biotech front,” is Via Campesina’s statement which adds that GMO use “throws farmers off the land” while “the industrial food system that it promotes is one of the main drivers of climate change”.

‘Transgenicos’, El Salto magazine, by jcharlie http://jcharlie.deviantart.com/

The same corporations (feted by FAO as valuable private sector partners) are going beyond conventional GMO plant varieties toward ‘extreme biotech’ strategies such as synthetic biology to create new genetic constructs, Via Campesina has warned. “Not only do they ignore the rights of farmers, they are using biotechnologies to patent plant genes that are already in peasants’ fields and that we have selected ourselves. They want to forbid us to produce our own seeds and oblige us to buy their patented GMOs every year as well as their toxic pesticides, indispensable to grow those GMOs. In animal husbandry and fisheries where transgenic salmon and pigs already exist, we see the same scenario, the strengthening of industrial production and the increase in the use of antibiotics.”

Grain, which works to support small farmers and social movements in their struggles for community-controlled and biodiversity-based food systems, has in its comments said that two of the FAO keynote speakers at the symposium are known proponents of GMOs, and the agenda and side events over the three days include speakers from the Biotechnology Industry Organization (a biotech trade group in the USA), Crop Life International (the global agro-chemicals trade association), DuPont (one of the world’s largest biotech seed companies) and CEVA (a major veterinary medicine corporation), among others.

“FAO has only invited one speaker or panellist openly critical of GMOs,” Grain has said (that one is from Via Campesina). “One of the two speakers at the opening session is a former assistant director general of FAO who has pushed for so-called Terminator seeds (GMO seeds programmed to die at harvest time forcing farmers to purchase new seeds every growing season), in opposition to FAO’s own public statements.”

Just when the biotech companies that make transgenic seeds are merging, the ETC Group has stated (with Syngenta having agreed to sell itself and its technologies to the government-owned China National Chemical Corporation, or ChemChina, only a fortnight ago), “the corporate vision of biotechnology is showing up at FAO” with the symposium being “another attempt by multinational agribusiness to redirect the policies of the UN agency toward support for GMOs”. ETC Group has demanded that FAO put an end to biopiracy and to its support for genetically modified crops, but as I have outlined earlier, the biotechnology purveyors in the FAO will have none of it because the structures of funding and control have been altered perhaps beyond the reach of the organisation’s member states.

What is left to do? Proscribe the UN FAO for its anti-small farmer and anti-peasant activities, encourage members states to demand that FAO mend its ways or step out of the organisation, and meanwhile demand that governments central and local ban all environmental releases of GMOs and synthetic biology. As the 173 signatories to the statement on the symposium show through their work, action can be taken locally in communities, villages, towns, municipalities, regions, as well as nationally and globally. As for the benighted symposium, here is a news article by FAO on the conference, this is the page for the event, the brochure, summaries of presentations (which provide one more confirmation of the fundamentally destructive intentions of the biotech industry), and a ‘key messages’ sheet from FAO whose manner and attitudes betray the extent to which an industrial mind now runs this particular UN agency.

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Why the FAO food index is also an oil gauge

The revealing relationship between the FAO cereals price sub-index, the OPEC Reference Basket price of a barrel of crude oil, and the Baltic Dry Index (right scale).

The Food and Agriculture Organisation (FAO) of the UN has released its food price index data and commentary for 2014 October. This would be of considerable interest if only the index described the tendencies of food prices as experienced by consumers. Alas FAO’s food price index, as we have remarked upon several times in the past, pays no attention to the true cost of food staples.

Of what use is the FAO index, which is used as a reference by any government (and UN member state) to judge the value of its food exports (or to judge whether when importing grain it is paying what seems to be a fair price)? In the first place, the index (which itself is composed of separately calculated cereal, vegetable oil, dairy, meat and sugar indices) is not a consumer food price index.

The FAO food price index and its component sub-indices for the period 2012 January to 2014 October. A general downward trend, says the FAO, but this is the picture for international food trade and not consumer food retail price.

The FAO has not claimed it is, but neither has the agency clearly and plainly said it is not. It should, because financial and general interest media all over the world report the ups and downs of this index as if it portrays how local food prices move, and of course it does not.

The FAO index is used by international traders whose business it is to buy and sell food staples (including cereal, vegetable oil, pulses, dairy, meat and sugar). Perhaps some of them use it as a benchmark while others forecast trends from its sub-indices. It may be used to validate the accuracy of a particular kind of agricultural commodity futures index, and help judge whether an investment in the production of food, its movement, its stocking or its trade is going to be a good investment or not. As you can gather, it is not an index that consumers can use, because consumers are local and this is assuredly not.

What pulls the FAO food price index up, down or sideways? There are two important factors at work on the main index. One is the price of petroleum products, the other is the cost of moving grain (or any other food staple). You may assess the short or long-term trend of the food index against the current or projected price of Brent crude (preferred in Europe), West Texas Intermediate (preferred in the USA) or the OPEC reference price (preferred almost everywhere else).

The FAO food price index and its component sub-indices for 2014 till October. The downward trend of the last six months, which the FAO commentary is faintly praising, mirrors the trend of crude oil prices over the same period.

And then you will assess what the food price index describes against the cost of moving a large quantity of the agricultural commodity to be traded across an ocean, for which the Baltic Dry Index will be consulted.

[If you are a trader and want the FAO food price data and movements, go here. The usual commentary can be found: “The FAO Food Price Index averaged 192.3 points in October 2014, marginally (0.2 percent) below the revised September figure but 14.3 points (6.9 percent) short of its corresponding level one year ago” and so on.]

To help determine what the FAO food price index is depicting, I have made charts for the index (and sub-indices) for the period 2012 January to 2014 October; for the index (and sub-indices) for 2014 till October; a chart that shows the FAO cereals sub-index together with the OPEC Reference Basket Price for a barrel of crude oil and the Baltic Dry Index (this is the shipping index most commonly referred to for the movement of dry goods by sea) for the period 2012 January to 2014 October; and a chart that plots the changes (from month to month) in the three indexes taken together (FAO Cereals, OPEC Reference and Baltic Dry).

The FAO food price index and the OPEC Reference Basket price of oil have much more in common than the Baltic Dry Index, which has swung with volatility since 2012 January.

What they describe can be found in the captions, but it becomes clear from a glance at the FAO-OPEC-Baltic charts that the food price as calculated by FAO has very much more to do with how energy is used to produce food staples (that is, the use of petroleum products directly, and the use of fossil fuels-derived energy) and how energy is used to transport, store, process, transport it again and retail it.

I see it as an index that describes the energy quotient of industrially produced food staples, and so it has little if anything to do with any other form of agriculture, in particular the smallholder, family-oriented and organic agriculture that the FAO advertises its concern about.

On foodgrain stock forecasts, the IGC and USDA are both tentative

Foodgrain exports forecasts for 2012-13 by the USDA’s WASDE. These are the major exporting countries, exports in million tons.

In this late February capsule of the foodgrain forecasts from the International Grains Council (IGC) and the US Department of Agriculture’s WASDE (world agriculture supply and demand estimates) we see estimates for slightly higher production, but also somewhat lower consumption. The question is: what about stocks, on which there is never enough knowledge distributed as to who holds them (government or private, traders or bankers) and how they are used by food markets or agricultural commodities markets?

Still, here is what the IGC has said:

Following minor revisions to the 2012-13 forecasts, the estimate for total grains end-season stocks (excluding rice) has been revised up by 4mt to 326m, including increases for both wheat and maize. Overall, however, they remain down 40mt year-on-year at a six-year low, or a 17-year low for the major exporters.

IGC’s 2013 February grain market report presented the first forecast for the 2013-14 supply and demand balance for wheat. “While world output is tentatively projected up 4% year-on-year, much is expected to be absorbed by higher demand and end-season stocks are likely to rise by just 2mt, following a 21m decline in 2012-13. The forecast for 2012-13 end-season maize stocks has been revised 1.7mt higher this month, but major exporters’ end-season inventories are still put at a 16-year low,” said the 2013 February report.

Here are the major foodgrain forecasts for wheat, rice, coarse grain and maize:

Wheat
According to the IGC – Major exporters’ stocks for 2012-13 are revised down by 1.5mt, to 49.9mt, but upward revisions for China and India raise the global total to 176mt, which is still down 21m from last year. Increases for Brazil, Iran and Russia help to lift the 2012-13 world trade forecast by 0.8mt this month, to 137.4m. World output for 2013-14 is tentatively projected up 4% year-on-year, but much is expected to be absorbed by higher demand leaving little room for stock building.
According to WASDE – Global wheat supplies for 2012-13 are nearly unchanged with a small increase in beginning stocks more than offsetting a small decrease in production. Global wheat output is projected 0.7 million tons lower. Production is lowered for Kazakhstan and Brazil, but raised for Ukraine, South Africa, and Belarus. Global wheat consumption is virtually unchanged at 673.4 million tons; however, global consumption is projected down 24.6 million tons year to year, mostly reflecting lower feed and residual use in 2012-13. World wheat ending stocks for 2012-13 are also nearly unchanged this month at 176.7 million tons.

Rice
According to the IGC – At 466mt, world rice production is forecast to be little changed year-on-year, as smaller harvests in Asia, particularly in India, are offset by gains elsewhere. World use is expected to rise by 2% year-on-year, to a fresh record, underpinned by increases in Asia’s leading consumers. Global ending stocks are forecast to fall marginally, but supplies in the major exporters are expected to rise to a new record. World trade in 2013 is projected to decline by 5% as key importers in Asia and Africa reduce purchases from last year’s highs.
According to WASDE – Global 2012-13 projections of rice production and consumption are raised from last month, but trade and ending stocks are lowered. Global 2012-13 rice production is forecast at a record 465.8 million due to increases for Bangladesh, Bolivia, and Nepal partially offset by reductions for Argentina and Laos. Global consumption is raised 0.7 million tons to a record 469.3 million as relatively small changes are made to several countries including Bolivia, Iraq, and Nepal. Global exports for 2012-13 are lowered slightly due mainly to reductions for Argentina and China. Imports are reduced for Bangladesh, Cuba, Egypt, and Indonesia. Global 2012-13 ending stocks are reduced 0.5 million tons to about102.0 million due mostly to decreases for Egypt and Indonesia.

Coarse grain
According to WASDE – Global coarse grain supplies for 2012-13 are projected 2.1 million tons higher as a decrease in beginning stocks is more than offset by a 2.9-million-ton increase in production. Lower 2012-13 beginning stocks mostly reflect an increase in 2011-12 corn exports for Brazil and revisions to the Paraguay corn series that lower 2011-12 corn area and yield. Global 2012-13 production is also higher this month for sorghum, barley, oats, and rye. Sorghum production is raised 0.4 million tons for Mexico with higher area and yields for the summer crop, but lowered 0.2 million tons for Australia with reduced prospects for area and yields. Global barley, oats, and rye production are up a combined 0.6 million tons on larger reported crops for the FSU-12 countries.

Maize (corn)
According to the IGC – Global production is forecast to decline by 3% year-on-year, with sharp falls in the US and EU offsetting rises elsewhere, including in China and the southern hemisphere. Despite some less than ideal weather in recent months, Brazil and Argentina are still set to harvest record crops. Due to tighter supplies, world use is expected to dip by 1% year-on-year, led by reduced demand from the US ethanol sector. With total use again expected to exceed production, closing stocks will decline for a fourth consecutive year, including a sharp drop in the major exporters.

A tale of five food indices

Food and agricultural commodities indices behaviour from 2009 January to 2012 November. There are five series – FAO’s food index, FAO’s cereals index, Unctad’s food sub-index, the IMF’s food price index, the IGC’s grains and oilseeds index.

Agricultural commodity and food price indices have ended 2012, as a group, at their highest levels in the last four years.

This chart uses index data from five series – two are from FAO (its food index and its cereals index), there is the Unctad food sub-index (of its long-running commodities index), there is the IMF food price index (which includes cereals, vegetable oils and sugar), and there is the IGC grains and oilseeds index.

I have set them all to ‘1’ in 2009 January and observed their behaviour over 46 months (until 2012 November).
For about a year between 2009 July and 2010 August, there was fairly wide divergence between this group of indices, the FAO cereals index and the IGC index maintaining a lower track, the IMF cereals index not rising above 10% of its starting value, the Unctad food index being volatile and the FAO food index at the top.

From 2010 July to 2011 March all the indices rose steeply and in concert. Thereafter till around 2012 July there was a slow general decline (from about 40% above starting point to about 25% above starting point) for all the indices (with the FAO food index about 15% above the rest).

From 2012 July there has been another steep, albeit shorter, jump for all, and at 2012 November the series at the top is the IGC index, with all five at about 35% to 45% above their starting values.

At end 2012, total grains consumption falls, says IGC

For its final Grain Market Report for 2012, the International Grains Council (IGC) has revised slightly its grains supply and demand forecasts for 2012-13 “as harvests have been completed in some countries, but the outlook is largely unchanged”.

Total grains production is expected to fall by 5% year-on-year, said the Report for 2012 November, “and despite a contraction in consumption for the first time in 14 years, stocks are set to fall by 45mt to 324mt”.

The IGC Grains and Oilseeds Index is down by 2% from a month earlier but as the Report has said “this masks divergent underlying trends… the soyabean and rice sub-indices have declined by 7% and 1% respectively”. [You can get the Grain Market Report for 2012 November here (pdf), and the data tables for the crops in this zip file.]

In the wheat market, the Report has said that speculation about dwindling Black Sea supplies and the prospect of export curbs in Ukraine have dominated, yet flows from the region have defied expectations.

“This has limited price upside from weather-related worries for 2012-13 crops currently being harvested in the southern hemisphere, and conditions for the recently planted winter wheat in the north,” said the Report. Given high prices, the total wheat harvested area for 2013-14 is set to increase by 2%, although the IGC has warned that conditions for parts of the US crop are a concern.

Maize prices outperformed other grains with improved US export hopes and less than favourable planting conditions for South American crops which are critical given tight supplies. In contrast, rice prices have been relatively stable, but Asian markets were pressured by new crop supplies and mostly limited activity.

Of GM food crops, Bt cotton and an honest committee in India

The Lok Sabha (the 15th Lok Sabha) of the Parliament of India has released the report of the Committee on Agriculture (2011-2012) on ‘Cultivation Of Genetically Modified Food Crops – Prospects And Effects’. This report was presented to the Lok Sabha on 09 August, 2012.

Cover of the report. Click for the full report (pdf, 6.35 MB)

The report stands as a comprehensive indictment of the genetically modified food crops industry and its attempts to wrest control of India’s foodgrain and commercial crops production. The Committee sought views and suggestions on the subject from the various stakeholders and 467 memoranda, most of them signed by several stakeholders were received. In all, the Committee received documents running into 14,826 pages. The Committee also extensively interacted with various stakeholders including state governments, farmers organisations, NGOs, and also with farmers and their families during study visits during this period. Altogether, 50 individuals and organisations gave oral evidence before the Committee. Verbatim records of the proceedings of the oral evidence runs into 863 pages.

This small extract is from pages 24 to 29 of the 532-page Committee report:

GM crops are released in environment only after stringent evaluation of food/biosafety protocols/issues. To have a holistic and comprehensive view on the pros and cons of application of bio-technology on agricultural sector the Committee took on record IAASTD Report as it is an authentic research document prepared after painstaking effort of four years by 400 scientists from all over the world. India is a signatory to this Report which has been extensively quoted in a subsequent Chapter of the present Report of the Committee. Amongst various recommendations germane to all spheres of agriculture and allied activities and sectors, the following recommendations on bio-technology caught the attention of the Committee in all context of their present examination:

Conventional biotechnologies, such as breeding techniques, tissue culture, cultivation practices and fermentation are readily accepted and used. Between 1950 and 1980, prior to the development GMOs, modern varieties of wheat may have increased yields up to 33% even in the absence of fertilizer. Even modern biotechnologies used in containment have been widely adopted. For example, the industrial enzyme market reached US$1.5 billion in 2000. Biotechnologies in general have made profound contributions that continue to be relevant to both big and small farmers and are fundamental to capturing any advances derived from modern biotechnologies and related nanotechnologies. For example, plant breeding is fundamental to developing locally adapted plants whether or not they are GMOs. These biotechnologies continue to be widely practiced by farmers because they were developed at the local level of understanding and are supported by local research.

Much more controversial is the application of modern biotechnology outside containment, such as the use of GM crops. The controversy over modern biotechnology outside of containment includes technical, social, legal, cultural and economic arguments. The three most discussed issues on biotechnology in the IAASTD concerned:

o Lingering doubts about the adequacy of efficacy and safety testing, or regulatory frameworks for testing GMOs;
o Suitability of GMOs for addressing the needs of most farmers while not harming others, at least within some existing IPR and liability frameworks;
o Ability of modern biotechnology to make significant contributions to the resilience of small and subsistence agricultural systems.

The pool of evidence of the sustainability and productivity of GMOs in different settings is relatively anecdotal, and the findings from different contexts are variable, allowing proponents and critics to hold entrenched positions about their present and potential value. Some regions report increases in some crops and positive financial returns have been reported for GM cotton in studies including South Africa, Argentina, China, India and Mexico. In contrast, the US and Argentina may have slight yield declines in soybeans, and also for maize in the US. Studies on GMOs have also shown the potential for decreased insecticide use, while others show increasing herbicide use. It is unclear whether detected benefits will extend to most agroecosystems or be sustained in the long term as resistances develop to herbicides and insecticides.

Biotechnology in general, and modern biotechnology in particular, creates both costs and benefits, depending on how it is incorporated into societies and ecosystems and whether there is the will to fairly share benefits as well as costs. For example, the use of modern plant varieties has raised grain yields in most parts of the world, but sometimes at the expense of reducing biodiversity or access to traditional foods. Neither costs nor benefits are currently perceived to be equally shared, with the poor tending to receive more of the costs than the benefits.

The Committee note with great appreciation the fantastic achievements of India’s farmers and agriculture scientists leading to an almost five times growth in food grains production in the country during last six decades or so. From a paltry 50 million tonnes in 1950 the Country has produced a record 241 million tonnes in 2010-11. In spite of this spectacular achievement that has ensured the food security of the nation, things continue to be bleak on several fronts. Agriculture sector?s contribution to GDP has slid down from 50% in 1950 to a mere 13% now, though the sector continues to provide employment and subsistence to almost 70% of the workforce. The lot of the farmer has worsened with increasing indebtedness, high input costs, far less than remunerative prices for his produce, yield plateau, worsening soil health, continued neglect of the agriculture sector and the farmer by the Government, dependence on rain gods in 60% of cultivated area, even after six and a half decades of Country’s independence, to cite a few. All these factors and many more have aggravated the situation to such an extent that today a most severe agrarian crisis in the history is staring at us. The condition of the farming-Community in the absence of pro-farmer/pro-agriculture policies has become so pitiable that it now sounds unbelievable that the slogan Jai Jawan – Jai Kisan was coined in India.

There is, therefore, a pressing need for policies and strategies in agriculture and allied sectors which not only ensure food security of the nation, but are sustainable and have in built deliverable components for the growth and prosperity of the farming community. It is also imperative that while devising such policies and strategies the Government does not lose track of the fact that 70% of our farmers are small and marginal ones. As the second most populous Country in the world, with a growing economy ushering in its wake newer dietary habits and nutrition norms, a shrinking cultivable area, a predominantly rainfed agriculture, the task is indeed enormous.

In the considered opinion of the Committee biotechnology holds a lot of promise in fructification of the above-cited goals. Several of conventional bio-technologies viz. plant breeding techniques, tissue-culture, cultivation practices, fermentation, etc. have significantly contributed in making agriculture what it is today. The Committee note that for some years now transgenics or genetical engineering is being put forward as the appropriate technology for taking care of several ills besetting the agriculture sector and the farming community. It is also stated that this technology is environment friendly and, therefore, sustainable. Affordability is another parameter on which policy makers and farming communities world over are being convinced to go for this nascent technology.

The Committee further note that in India, transgenics in agriculture were introduced exactly a decade back with the commercial cultivation of Bt. Cotton which is a commercial crop. With the introduction of Bt. Cotton, farmers have taken to cotton cultivation in a big way. Accordingly, the area under cotton cultivation in the Country has gone up from 24000 ha in 2002 to 8.4 million ha at present. Apart from production, productivity has also increased with the cultivation of the transgenic cotton. The Committee also take note of the claim of the Government that input costs have also gone down due to cultivation of transgenic cotton as it requires less pesticides, etc.

Notwithstanding the claims of the Government, the policy makers and some other stakeholders about the various advantages of transgenics in agriculture sector, the Committee also take note of the various concerns voiced in the International Assessment of Agriculture, Science and Technology for Development Report commissioned by the United Nations about some of the shortcomings and negative aspects of use of transgenics/genetical engineering in the agriculture and allied sectors. The technical, social, legal, economic, cultural and performance related controversies surrounding transgenics in agriculture, as pointed out in IAASTD report, should not be completely overlooked, moreso, when India is a signatory to it.

The apprehensions expressed in the report about the sustainability and productivity of GMOs in different settings; the doubts about detected benefits of GMOs extending to most agro-eco systems or sustaining in long term; the conclusion that neither costs nor benefits are currently perceived to be equally shared, with the poor tending to receive more of the costs than benefits all point towards a need for a revisit to the decision of the Government to go for transgenics in agriculture sector. This is all the more necessary in the light of Prime Minister’s exhortion on 3 March, 2010 at the Indian Science Congress about full utilisation of modern biotechnology for ensuring food security but without compromising a bit on safety and regulatory aspects. The present examination of the Committee, as the succeeding chapters will bear out, is an objective assessment of the pros and cons of introduction of genetical modification/transgenics in our food crops which happened to be not only the mainstay of our agriculture sector but also the bedrock of our food security.

Black Sea questions, South Asian rice, the ethanol effect – IGC on grains in 2012 February

IGC's supply and demand graphs for; top row - total grains, wheat, maize; bottom row - rice, soyabean, and IGC freight index

The International Grains Council (IGC) has released its grains market report for February 2012. In its market commentary, which is a cogent 250-word summation of 1,840 million tons of produce and where it will go, the IGC has said:

Grain and oilseed markets mostly strengthened in the past month, the IGC daily index (GOI) up 6% to near four-month highs. The upturn reflected concerns in early February about maize and soyabean crops in South America, as well as the impact of the recent severe cold spell in parts of Europe and the CIS.  Moreover, after a very high rate of shipments from the Black Sea region in the first half of the season, sales activity declined, with US grain, in particular, attracting much more buying interest.

Wheat export prices in Europe climbed by some 8%, in somewhat tighter markets, with reports of logistical problems and possible future export restrictions in the Black Sea region (though denied), seen as potentially bullish. However, global supplies appear ample, with the likelihood that a portion of upcoming large South Asian wheat harvests will be offered for export. US maize (corn) values remained firm, supported by reports of crop losses in South America and active export interest for remaining old crop supplies, although forecasts of a further rise in US plantings this spring added a bearish element.

Oilseed prices rallied strongly in the past month, reflecting worries about the final outcome of soyabean crops in Argentina and Brazil, good demand for US supplies, including a new trade deal with China, and rising crude oil values. International rice market trends were more mixed, with Thai prices supported by domestic support measures but those in Vietnam, especially broken grades, easing to compete with South Asian offers.

[The IGC 2012 February grains market report is here. The data files as excel spreadsheets are available in this zip archive.]

The IGC’s sectoral advice is:

Grains: The world production estimate is lifted by 11m. tons, to 1,841m., largely because of upward revisions in Australia, Kazakhstan, Ukraine, India and Brazil, the latter because losses of its main maize crop will likely be more than compensated by a larger second crop. These upward revisions outweigh a reduced maize figure for Argentina. To an extent, the forecast of world consumption is adjusted higher to reflect the bigger crop estimates, with total use of grains placed 5m. tons above the January forecast, at 1,836m. The change is mainly for feed use, now put at 775m. tons, 4m. more than before and 4% higher than in 2010-11.

Of particular interest is the marked slowdown in the annual increase in industrial use, expected to rise by only 2% this year, with ethanol use of maize in the US set to recede slightly from its peak in 2011. While the latest statistical forecasts of supply and demand suggest that, nominally, global carryover stocks will rise slightly in 2011-12 from last year’s low figure, to 378m. tons (373m.), the total carryover in the eight major grain* exporters is still expected to dip by 6m. tons, to 131m., the smallest figure since 2007-08.

As this pair of charts shows, the Baltic Dry Freight Index has dropped not only to a one-year low, but is at a three-year low. Charts: Bloomberg

Wheat: A further increase in the global wheat production estimate for 2011-12, to 695m. tons (653m.), boosts total availabilities to 892m., their highest ever. Projected food and industrial consumption are both revised lower this month, but attractive prices, particularly compared with maize, lift the forecast of feed use by 2m. tons, to 131m. (115m.), the most since the early 1990s. Strong feed wheat demand is reflected in the global trade figure, helping to lift total wheat trade to match the 2008-09 peak, at 136.8m. tons (125.7m.). Even though total consumption is growing at a faster than average pace, world stocks are projected to rise to 211m. tons (196m.), eclipsing the previous record in 1999-00.

Maize (Corn): Maize production in 2011-12 is expected to increase by 4%, to a record 864m. tons. The US crop, while disappointing, was slightly above average, and bumper harvests were collected in China, Ukraine and the EU. A severe drought has reduced yield prospects in South America, especially in Argentina, but Brazil remains on track to produce a record crop. Improved supplies in some countries are boosting consumption, with overall use forecast at a record high. Feed use of maize is expected to increase at a faster than average pace but, with US ethanol production likely to decline slightly, the rise in industrial demand will be below trend. With demand outpacing the increase in supplies, ending stocks are forecast to tighten further, including in the US. Amid solid buying by a number of importers, world trade is forecast to rise to a four-year high.

Barley: Better than expected 2011-12 harvest results, including in Argentina and Australia, lift the estimate of world barley production by 1.1m. tons compared with last month, to 134.7m. World consumption is expected to remain steady, contained by uncompetitive prices in the feed sector, especially in the EU, and by sluggish growth in brewing demand. While higher than previously forecast, carryover stocks are set to remain tight, particularly in the EU and North America. The projection of world trade is raised by 1.2m. tons, to a three-year high of 17.8m., with a steep upturn in buying by Saudi Arabia.

Rice: Due to increases in Asia’s biggest producers, China and India, global rice output is projected to rise by 3% in 2011-12, to 463m. tons. The record outturn will be accompanied by a further expansion in demand, to 460m. tons (449m.), but the 2011-12 carryover is still expected to increase by 4%, to 99m. Much of the forecast rise in global stocks will be due to increases in the major exporters, notably in India and Thailand, seen 14% higher, at a record 32.7m. tons. World trade in 2012 is forecast to contract by 7%, to 32.2m. tons, owing to significantly reduced purchases by key Asian buyers, including Bangladesh and Indonesia.

Ocean freight rates between major export-import regions.

Grains till 2016-17: the IGC speaks

The International Grains Council (IGC) has prepared a summary of projections for grains and cereals. The IGC Secretariat has said of its work that “the figures represent the Secretariat’s view of the general development of the global grains economy in the period to 2016-17, taking into account a number of broad assumptions”.

These include assumed trends in population growth, prices, developments in agriculture and trade policy, as well as prospects for the global economy. “The latter have become increasingly uncertain over the past year”, the IGC Secretariat has said. The IGC has added the proviso that these estimates and the forecast derived from them are subject to risk, and this analysis assumes that current economic problems do not worsen. Here are the sections:

Total Grains
* World grains production in 2016-17 is projected to reach 1.98bn tons, a 158m. increase (+9%) compared with 2011-12; wheat output is forecast to rise by 30m. (4%) and maize by 94m. (11%).
* Despite heightened economic uncertainty, the analysis assumes any slowdown in global economic growth will be temporary and increasing prosperity will boost grains consumption, particularly for feed and industrial uses. Feed use is expected to rise at a slightly faster pace than in recent years, while increases in industrial use will slow from the very rapid rates in the past decade. Diversifying diets, particularly in favour of livestock products, will slow the rise in direct use of grains for human food. Total grains consumption is projected at 1.98bn. tons in 2016-17 (1.83bn. in 2011-12), including 659m. (630m.) for human food, 846m. (769m.) for feed and 343m. (302m.) for industrial uses.

World grains stocks are forecast to show little change in the medium term and are set to remain relatively tight, especially for maize. At the end of 2016-17, world grain carryover stocks are projected at 354m. tons (compared with 360m. at the end of 2011-12), including 118m. (123m.) of maize, 196m. (202m.) of wheat and 26m. (23m.) of barley.
* World grains trade is projected to increase by about 2% per year, to 273m. tons in 2016-17, with wheat and maize rising to new records. Increasing demand for wheat-based foods will lift wheat import needs in Africa and Asia. Imports of maize for feed will rise, especially in Pacific Asia, with China seen as a more regular buyer.

Wheat
* Increases in world wheat production in the five years ending 2016 are expected to be broadly matched by use, and global stocks are expected to be maintained at close to recent levels.
* Planting decisions will be influenced by likely attractive prices for alternative crops, especially maize and oilseeds. Nevertheless, some rise in global wheat area is anticipated, led by gains in the CIS. After a relatively sharp increase of 1.6% in 2012-13, including a recovery in North America, global areas are projected to expand by around 0.4% annually. Taking into account slightly increased average yields over the period, world wheat production is projected to reach a record 714m. tons in 2016-17, representing an increase of 30m. compared with the estimate for 2011.
* World wheat consumption is projected to grow by 1.1% annually, close to the long-term average, reaching 716m. tons in 2016-17, up by 39m. compared with 2011-12. A continued increase in human food use accounts for half the rise, driven by expanding demand in developing countries. At 0.8% per year, the average annual increase is only slightly slower than the longer-term trend of 1.0%. Increases in world feed use mainly reflect a tight S&D outlook for maize and expectations that the cost of wheat will be more attractive than maize at times. Gains in industrial use are expected to accelerate, particularly for biofuels, although overall amounts will remain small relative to total consumption.
* World wheat carryover stocks are projected to stay relatively ample in the next five years, receding only slightly, to 196m. tons. Those in the eight major exporters are projected to show an initial rise, but then fall back to about the same level as currently.
* World wheat trade to 2016-17 is forecast to increase by around 2% per year, reaching a fresh record of 138m. tons. Increases in milling wheat trade will be sustained by rising demand in developing countries in Asia and Africa, while feed wheat may show some further gains if import costs are competitive with maize.

[The IGC forecast document is available here (pdf)]
[The spreadsheet (xls) with the major grains’ data is available here]

Rice
* Only a modest expansion in the global paddy (rice) area is forecast in the five years to 2016-17, with the average year-on-year increase projected at just 0.3% (compared to an average of 0.7% in the prior five-year period). To some extent, this reflects an expected contraction in China’s sowings, amid a continued shift to diets that are richer in protein. Taking into account slightly reduced average yield gains, global rice production (milled basis) is projected to increase by 23m. tons, to 482m. by 2016-17, an annual average growth rate of 1%.
* Global rice consumption is projected to reach 482m. tons by 2016-17, up by 25m. from 2011-12. At 1.1%, average growth, while broadly in line with the global population trend, will be lower than in previous years. This is due to a forecast contraction in China, as well as more moderate growth in other parts of Asia. Elsewhere, sub-Saharan Africa is expected to be one of the fastest growing regional markets, the result of a rising population and a shift away from traditional, locally-grown cereals.
* The world rice carryover is projected to rise only slightly over the next five years, to 103m. tons. In the five major exporters, stocks are expected to initially increase – centred on inventory accumulation in India and Thailand – before edging slightly lower. Their share of the world total will average around one-third through to 2016-17.
* Global rice trade is projected to expand by nearly 3% annually, to 37.2m. tons by 2017, broadly in line with maize but comfortably exceeding the year-to-year rise in wheat. Growth will be underpinned by larger shipments to Far East Asia, especially the Philippines, and sub-Saharan Africa. The latter sub-region will remain heavily dependent on imports to meet domestic requirements; their share of total consumption is forecast to average 45%.

Maize (Corn)
* The supply and demand for maize (corn) is projected to remain tight, with world inventories projected to drop to historically low levels.
* With firm global demand and generally tight availabilities expected to support world prices, maize plantings are projected to remain high across the forecast period. Increases in area and improvements in yields, especially in the US, Latin America and China, result in large consecutive crops. World maize production is forecast to increase to 949m. tons in 2016-17, some 94m. higher than the estimate for 2011.
* Global maize consumption is projected to rise to 949m. tons in 2016-17, up by 86m. from 2011-12. Growth in use is forecast to decelerate, mainly due to slowing industrial demand. With use for ethanol in the US levelling out, industrial consumption is projected to rise by 2% annually, compared to 12% in the last five years. Despite high prices, rising meat demand in developing countries will lift feed maize consumption by around 2% per year. Population growth, rising per capita incomes and changing dietary preferences are expected to boost meat consumption in parts of Asia, Latin America and Africa.
* World closing stocks are expected to tighten but, with supply and demand seen broadly in balance towards the end of the forecast period, the projected 2016-17 carryover of 118m. tons would only be 5m. below that at the end of 2011-12. US ending stocks are forecast to increase from recent lows, but China’s will decline.

IGC’s 2011 wrap-up – Eurozone crisis has affected crops, barring rice

The International Grains Council has released its grain market report for November 2011. As this will be the IGC’s last report for the year, grain traders in the major exporting countries and buying countries will use this as their end-2011 reference. Here are the main forecasts by the IGC for major crops:

Market commentary – After showing some strength in early November, global grain export prices were again in retreat, though with rice once more the exception. Overall, IGC’s GOI index fell by 16 points, or 6%, to a 13-month low. The recent market downturn can be partly ascribed to bearishly perceived market fundamentals, as harvests neared completion in the northern hemisphere and work started south of the equator. But it was also in reaction to deepening financial uncertainties, notably in Europe, affecting nearly all commodities. Heavy supplies of wheat amid strong export competition, including from new crop grain out of Argentina and Australia, mostly reduced fob values by between $20 and $30 over the past month, narrowing the gap with Black Sea quotations.

Despite initial support from US cash markets and a smaller official crop estimate, CME maize futures in Chicago saw major speculative selling, partly due to increased competition from other exporters but with sentiment considerably dented by worries about the global financial crisis and the collapse of a major brokerage firm. Similar pressures were evident in oilseed markets, led by a decline in US soyabeans, values of which dipped to their lowest since October 2010. As measured by IGC’s sub-index for rice, export prices of this cereal remained firm in the past month: within this measure, quotations in Thailand saw further gains, attributed to the country’s severe floods, while those in Vietnam and South Asia weakened.

Grains – Reduced grain crop estimates for some major producers, including for maize in the US, are only partly offset by increases in the CIS and elsewhere, trimming the global production total for 2011-12 by 3m. tons from October, to 1,816m. This would still represent an increase of 64m. tons over last year, largely due to sizeable recoveries in output in Russia, Ukraine and Kazakhstan. Production of all crops except sorghum will rise this year, with the biggest increases in wheat and maize. Southern hemisphere prospects remain favourable, with rains in South America and Australia mostly boosting yield expectations for wheat and helpful for plantings of maize and sorghum. Consumption of grains will also increase in 2011-12, especially in the feed sector, including a marked rebound in Russia after the previous year’s drought.

At 1,826m. tons, world use is expected to show a rise of 2.2% from the previous year. However, a feature this year will be the marked slowdown in the expansion of industrial use, set to rise by only 1.7%, to 303m. tons. Within this figure, the use of grains in fuel ethanol, which has displayed huge growth in the past decade, is expected to stay close to last year’s 147m. tons, assuming the use of maize for this purpose in the US declines slightly. With the reduction in the global grain crop estimate largely balanced by an upward adjustment in the opening stocks figure and a slight cut in the use forecast, the projection of world carryover stocks is unchanged from last month, at 360m. tons.

[ Data – here are the IGC’s data files (all Excel): Total grains supply and demand ; Total grains trade ; Rice supply and demand ; Rice trade ; Soyabean trade ; IGC’s grains and oilseeds index ]

However, the total for the eight major exporters is trimmed by 3m. tons, largely because of a reduced stocks projection in the EU. World trade in grains in 2011-12 (July-June) is expected to climb by 11m. tons to a record 254m., 4m. more than forecast previously, reflecting larger than anticipated wheat purchases after this season’s marked upturn in medium and lower grade supplies, especially from the Black Sea region, whose total grain shipments are set to total 55m. tons, up from only 22m. last year.

Wheat – The second largest world wheat crop ever and ample carry-in stocks from last year, have sharply boosted global availabilities in 2011-12. While use is rising at a faster than normal pace, world stocks at the end of the season are still expected to climb to their highest level in a decade. Compared with last month, the estimate of world production is 1m. tons lower, at 683m., including a slight downward revision in the US, where the spring wheat crop was even smaller than expected.

Stronger than previously projected feed use adds another 2m. tons to the global consumption forecast, at 679m., boosting the annual percentage increase to about three times the longer-term trend. Because of the increased demand figure, the forecast of global carryover stocks is 2m. tons lower than last month, at 200m., but these would still be the largest since 2001-02. The world trade forecast is lifted by 3m. tons from before to nearly 135m., only slightly below the 2008-09 record. Rather than reflecting a supply shortfall in any one country or region (as it did in 2008-09, when Iran’s imports were higher than usual), import demand appears strong in a wide range of countries, aided by competitive pricing in the major exporters, especially for lower and medium grades.

Maize (corn) – While the US crop was slightly smaller than last year’s, larger outturns elsewhere are expected to lift world maize production to a new record of 853m. tons (826m.). With harvests in North America and Europe entering their final stages, attention is switching to the southern hemisphere, where farmers in Argentina, Brazil and South Africa are set to plant more maize than in 2010-11. Due to strong competition from feed-grade wheat and projected sluggish growth in industrial demand, world use is forecast to increase at a slower than average pace. However, with the total still expected to exceed output, 2011-12 ending stocks are forecast to fall to a five-year low. Trade in the year to June 2012 is forecast to increase by 1% due to strong demand from buyers in parts of Latin America, Asia and North Africa.

Rice – Flooding in parts of Asia has negatively affected crop prospects in some key exporters. Nevertheless, bigger outturns in China and India are expected to lift global production by 2% in 2011-12, to a record 459m. tons. Total rice use is also forecast to expand by 2%, with a further small increase projected in the global carryover, to 100m. tons (98m.). Within the total, inventories in the five major exporters are forecast to increase by 8%, to an all-time peak of 32m. tons. World trade in calendar 2012 is forecast to contract by 0.8m.tons, to 32.5m., on reduced imports by Far East Asia, especially by Bangladesh and Indonesia.

How ‘sticky’ is food inflation? What the FAO food index really says

Using the just released FAO food index update for 2011 August, I have compared the two periods of high food prices, the earlier one in 2007-08 and the continuing period of 2010-11.

Between 2007 Dec and 2008 Sep: for 8 months the Food Index was above 200, and for 10 months the Cereals Index was above 200.

Between 2010 Sep and 2011 Aug: for 11 months the Food Index has been above 200, and for 12 months the Cereals Index has been above 200.

This is the longest period in the last ten years that the FAO food index has been at such a level. This is the backstory of the FAO Food Price Index.

Let’s turn to what the FAO has said about the 2011 August update.

World food prices remained virtually unchanged between July and August 2011. The Index averaged 231 points last month compared to 232 points in July. It was 26% higher than in August 2010 but seven points below its all-time high of 238 points in February 2011. Within the index, cereals prices rose, reflecting the fact that although cereal production is expected to increase, it will not do so by enough to offset the additional demand, so that stocks continue to be low and prices continue to be high and volatile.

The FAO Cereal Price Index averaged 253 points in August, up 2.2%, or 5 points, from July and 36% higher than in August 2010. However, the firmer cereal prices were largely offset by declines in international prices of most other commodities included in the Food Price Index, oils and dairy products in particular.

Cereal price rises stem from a supply and demand balance that remains tight despite the anticipated increase in production. World cereal production in 2011 is now forecast to reach 2,307 million tonnes, 3% higher than in 2010. But this latest forecast is nearly 6 million tonnes lower than the previous forecast published in July.

Among the major cereals, the maize supply situation is a cause for concern following downward revisions to maize crop prospects in the United States, the world’s largest maize producer, because of continued hot weather in July and August. Average wheat prices were also up 9% in August given the strong demand for feed wheat and shrinking supplies of high quality wheat. Nonetheless, world wheat production is forecast to increase by 4.3% (or 28 million tonnes), only 4 million tonnes below the 2009 record.

World coarse grain production is still heading for a record level of 1,147.5 million tonnes, up 2.4% (or 27 million tonnes) from 2010, in spite of lowered maize production prospects in the United States, the world’s largest maize producer. Rice prices also gained with the benchmark Thai rice price up 5% from July, driven by a policy change in Thailand, the world’s largest rice exporter, where paddy rice will be purchased from farmers at above market prices. Global rice production prospects remain favourable, however, with output set to reach a new high of 479 million tonnes, up 2.5% from 2010.

Total cereal utilization in 2011-12 is forecast to increase by 1.4%, almost matching anticipated 2011 production. As a result, global cereal inventories by the close of seasons in 2012 are likely to remain close to their already low opening levels. Only rice stocks are expected to increase significantly, supported by record production. Wheat inventories are likely to decline to their lowest level since 2009 and world stocks of coarse grains are also forecast to plunge, with maize inventories falling to 124 million tonnes, their lowest level since 2007. Given the tight global supply and demand balance for coarse grains, its stocks-to-use ratio is forecast to fall to a historical low of 13.4%.

The FAO Oils/Fats Price Index averaged 244 points in August, following a declining trend since March but still remaining high in historical terms. The FAO Dairy Price Index averaged 221 points in August, significantly down from 228 points in July and 232 points in June, but still 14% higher than the same period last year. The FAO Meat Price Index averaged 181 points in August, up 1% from July. The FAO Sugar Price Index averaged 394 points in August, down 2% from July, but still 50% higher than in August 2010.