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Heatwave blisters eastern USA, drought parches southern USA

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20110727 – The National Drought Mitigation Centre at the University of Nebraska at Lincoln has catalogued the consequences, using media reports, government analyses and contributions from the public, said The Economist in its report on the US drought and heatwave. In ‘Drought in the South: Bone-dry – Drought has blanketed nearly a third of the lower 48‘ the weekly said: “There are wildfires in the south-west and water restrictions in the south-east. Fields are scrubby and fallow, and in some counties the ground is riddled with deep cracks. Farmers are struggling to produce crops, and ranchers are worried about watering their cattle. As their losses mount, crop prices have risen.”

Drought-wracked landscape in the southern USA. Photo: The Sydney Morning Herald/Jason South

According to a report from the Texas AgriLife Extension Service, wheat was selling at more than $8 a bushel at the beginning of the summer, compared with an average annual price of $5.25 last year. Still, Texas farmers will bring in only an estimated $274m this year; the average for the past five years was more than twice as high.

Meteorologists say it is impossible to explain fully how these things happen. In 2010 the westward slopping of cooler water across the tropical Pacific, a phenomenon called La Niña, made itself felt on weather around the world. That La Niña is now over, according to scientists, but the patterns of atmospheric circulation that were associated with it are persisting, which could account for some of the drought. There is also the problem of man-made climate change, which is expected to intensify both droughts and floods.

In recent years, the Colorado River has become less reliable, said the Scientific American. Since 1999, abnormally low precipitation totals and hot and dry conditions have brought reservoir water levels close to record lows. The multiyear drought, the most severe since documentation began more than 100 years ago, has put the water supply in the thirsty Southwest in jeopardy.

Graphic: The Economist

This year, heavy snowpack and spring precipitation have brought the region some relief by partially refilling the reservoirs. But while National Oceanic and Atmospheric Administration research shows that snowmelt runoff into the upper basin hasn’t been this high since 1986, the southern end of the Colorado River continues to stop shy of the Sea of Cortez, where it used to run until the late 1990s.

The paradox is that this season stands in such stark contrast to the past 11 years of drought, highlighting the types of variability that climate change can wreak on the hydrological cycle. The Bureau of Reclamation released the first of three interim reports last month as part of its broader Colorado River Basin Water Supply and Demand Study. The report is designed to provide an outlook on the next “highly uncertain” 50 years (until 2060) of the river’s life. Authors wrote that in the nearly quarter-million-square-mile Colorado River Basin, “climate change, record drought, population increases and environmental needs” are likely to make water supplies ever scarcer.

NASA’s Earth Observatory has said that by July 2011, Texas and New Mexico had completed the driest six-month period on record. Average rain between January and June was more than eight inches (203 millimeters) below average in Texas and 3.5 inches (89 millimeters) below average in New Mexico. Record warm temperatures also persisted in Texas between April and June. The lack of rain and the warm temperatures added up to exceptional drought.

This image shows the impact of drought on plants throughout Texas, New Mexico, and Oklahoma. Made with data from the Moderate Resolution Imaging Spectroradiometer (MODIS) on the Terra satellite, the image compares plant growth between June 26 and July 11, 2011, with average conditions for the period. The image [left] is dominated by brown, showing that plants were growing less than average throughout Texas and New Mexico. The image supports an assessment by the U.S. Drought Monitor, which states that 94 percent of the range and pastureland in Texas was in poor or very poor condition in June 2011. In Oklahoma, 78 percent of range and pastureland was in poor condition.

Though drought is not a disaster that strikes all at once, it is nonetheless a devastating event that can cause death, disease, and loss of money and property. For these reasons, drought is termed the creeping disaster. So far farmers in Texas have lost 30 percent or more of their crops and pasture in 2011. The loss led the U.S. Department of Agriculture to declare a natural disaster in 213 Texas counties and additional counties in Arkansas, Louisiana, New Mexico, and Oklahoma. The declaration qualifies farmers in these regions for low-interest loans to cover their losses.

20110724 – This temperature chart by state explains the heat gripping southern and eastern USA. The heat wave enveloping the Eastern Seaboard brought punishing record temperatures to the Washington region Friday, sending scores of people to emergency rooms with heat-related illnesses and closing down outdoor events. The combination of heat and humidity produced a heat index in Washington of 121 degrees, the highest since July 1980.

Unhealthy levels of heat and humidity are encompassing much of the eastern half of the US, according to NOAA’s National Weather Service, as a persistent heat wave continues its grip on the central US while expanding into the East. According to NOAA’s National Weather Service, approximately 132 million people in the United States are under a heat alert (Excessive Heat Warning or Watch or Heat Advisory) as of Friday morning.

Temperatures in the 90s to near 100 degrees will feel as hot as 115 degrees or higher when factoring in the high humidity. Record high temperatures are likely to be set in some locations — adding to the more than 1000 records that have been set or tied so far this month.

More than 4000 daily high temperature records were tied or broken in June, mostly east of the Rockies, and there were 159 reports of the record hottest temperature for June and 42 reports of all-time record hottest temperature ever. Drought intensified across parts of the Southwest to Southeast. While the southern Plains’ 1950s drought of record is unsurpassed in terms of duration, the current drought in parts of Texas is more intense than the 1950s drought when measured by the Palmer Hydrological Drought Index. While blanketing the southern U.S. with hot and dry weather, a upper level high pressure system effectively blocked any Gulf of Mexico moisture from feeding into the area. Meanwhile, the upper-level low pressure trough in the Northwest attributed to the cool, wet anomalies in the region.

Right now, the Examiner has said, approximately 29 percent of the country is experiencing some level of drought. About 12 percent of the US is experiencing “exceptional drought”, which is the highest level of drought. The combination of very little rain and scorching heat over much of the nation has been absolutely devastating. Many areas have been dealing with high temperatures in the 90s and the low triple digits for weeks.

The US Drought Monitor has said that the drought conditions across the Southern Great Plains persisted, and worsened across most areas, with localized improvements due to isolated rain events. AHPS precipitation estimates in excess of 5 inches prompted the improvement across southeastern Texas while sparse rainfall just east of El Paso also allowed for minor improvement. The rest of the southern Great Plains experienced continued hot (2 – 8 degrees F above normal) and dry weather.

Exception drought (D4) coverage was expanded in coverage across portions of Texas, including Erath, Hood, Somervell, Comanche, Jim Wells, and Duval counties. Additional expansion and intensification of the less severe drought conditions was included in the latest analysis across central Texas. Range and pastureland across Texas and Oklahoma continued to deteriorate. Across Texas, 94% of the range and pastureland was described as being in poor or very poor condition. This is a record weekly value, although measurement sof this kind only extend back to 1995. Across Oklahoma, 78% of the range and pastureland described as poor or very poor, tied for the fifth highest percentage (August 6, 2006). The rest of August 2006 saw statewide poor and very poor conditions expand to over 80% of all range and pasturelands.

World crop estimates in June – lower wheat, corn and coarse grain, rice mixed

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Here it is, just released. The World Agricultural Supply and Demand Estimates (WASDE) of the USDA, 09 June 2011. Highlights and key points for the major crop groups follow:

Global wheat supplies for 2011-12 are projected slightly lower this month as an increase in beginning stocks is more than offset by lower production. Global beginning stocks are projected 4.9 million tons higher mostly reflecting increased stocks in Russia as feeding is reduced 2.0 million tons and 5.0 million tons, respectively, for 2009-10 and 2010-11. Beginning stocks for 2011-12 are also raised 0.5 million tons each for Argentina and Canada with the same size reductions in 2010-11 exports for each country. Partly offsetting is a 1.5-million-ton decrease for 2011-12 beginning stocks for Australia with higher 2010-11 exports.

World wheat production is projected 5.2 million tons lower for 2011-12. At 664.3 million tons, production would be the third highest on record and up 16.1 million from 2010-11. This month’s reduction for 2011-12 mostly reflects a 7.1-million-ton decrease for EU-27 wheat output. Persistent dryness, particularly in France, but also in Germany, the United Kingdom, and western Poland, has reduced yield prospects for EU-27. Production is also reduced 1.0 million tons for Canada as flooding and excessive rainfall, particularly in southeastern Saskatchewan and adjoining areas of Manitoba, are expected to reduce spring wheat seeding. Production is increased 1.5 million tons for Argentina and 0.5 million tons for Australia, both reflecting favorable planting conditions and strong producer price incentives to expand area. Production is also raised 0.5 million tons for Pakistan as increased use of higher quality seed and adequate water supplies resulted in higher-than-expected yields.

Global wheat trade for 2011-12 is projected slightly higher reflecting a 0.5-million-ton increase in expected imports by EU-27. Exports are lowered 3.0 million tons for EU-27. Export increases of 2.0 million tons and 1.0 million tons, respectively, for Australia and Argentina offset the EU-27 reduction. Exports are raised 0.3 million tons for Pakistan with the larger crop. Global wheat consumption is projected down 3.3 million tons, mostly reflecting a 2.5-million-ton reduction in EU-27 domestic use.

Global coarse grain supplies for 2011-12 are projected down 7.8 million tons this month with lower beginning stocks and production. Reduced U.S. corn production, lower EU-27 barley production, and reduced corn beginning stocks in China, more than offset increases in China corn production. EU-27 barley production is lowered 2.2 million tons as prolonged dryness across western and northern Europe has sharply reduced yield prospects in the major producing countries. China corn area is raised for 2010-11 in line with the most recent official government area estimates with the year-to-year percentage increase for 2011-12 largely maintained.

China corn production increases 5.0 million and 6.0 million tons, respectively, for 2010-11 and 2011-12 with yields unchanged month-to-month. More than offsetting the higher production levels is higher estimated corn consumption for both feeding and industrial use. China corn consumption is raised 8.0 million tons and 13.0 million tons, respectively, for 2010-11 and 2011-12. Together these changes leave projected 2011-12 corn ending stocks down 12.0 million tons for China. At the projected 51.0 million tons, China’s stocks would be down 2.7 million tons from 2010-11 and just below the levels of the preceding 2 years, better reflecting the continuing rise in domestic corn prices as production struggles to keep pace with rising usage. Although China’s stocks represent 46 percent of the world total for 2011-12, China is not expected to be a significant exporter.

Global 2011-12 corn trade is raised slightly this month with higher imports for EU-27 and higher exports for Ukraine. Ukraine exports are raised 1.0 million tons with higher production and stronger expected demand from EU-27. Russia exports are lowered 0.5 million tons with lower production. Other important trade changes this month include a 0.2-million-ton increase in sorghum imports by Mexico, driving the U.S. export increase, and a 1.5-million-ton reduction in EU-27 barley exports with lower production and tighter supplies. Barley imports are lowered for Saudi Arabia and China. Global corn ending stocks for 2011-12 are projected down sharply this month, falling 17.3 million tons mostly reflecting the usage revisions in China. The projected 5.2-million-ton drop in U.S. ending stocks accounts for most of the rest of the decline. Global corn stocks are projected at 111.9 million tons, the lowest since 2006-07.

Global 2011-12 rice supply and use are lowered from a month ago. Global production is projected at a record 456.4 million tons, down 1.5 million from last month’s forecast, primarily due to a decrease for China. Additionally, production projections are raised for Egypt and Guyana, but lowered for the United States and Cuba. China’s 2011-12 rice crop is projected at 138.0 million tons, down 2.0 million from a month ago; primarily due to the impact of prolonged drier-than-normal weather in the Yangtze River Valley affecting mostly early rice. Egypt’s crop is increased 0.9 million tons to 4.0 million due to a 33 percent increase in area—based on a recent report from the Agricultural Counselor in Cairo. The global import and export forecasts for 2011-12 are little changed from last month. Global consumption for 2011-12 is lowered 0.8 million tons, primarily due to lower consumption expected in China, but partially offset by increases for Egypt, EU-27, and Vietnam. Global ending stocks for 2011-12 are projected at 94.9 million tons, down 1.3 million from last month, due primarily to reductions for China and the United States which are partially offset by increases for Egypt, the Philippines, and Vietnam.

Global oilseed production for 2011-12 is projected at 456.9 million tons, down 2.3 million from last month, mainly due to lower rapeseed production. EU-27 rapeseed production is reduced 1.2 million tons to 18.8 million mainly due to lower yields resulting from dry conditions in April and May in major producing areas of France and Germany. Rapeseed production for Canada is lowered 0.5 million tons to 13.0 million due to reduced area planted resulting from excessive moisture this spring. China soybean production is reduced 0.5 million tons to 14.3 million reflecting lower area as producers shifted to corn. Other changes include increased sunflowerseed production for Russia, and reduced cottonseed production for Australia, Pakistan, and the United States. Brazil’s 2010-11 soybean production is increased 1.5 million tons to a record 74.5 million, reflecting yield and production increases reported in the most recent government survey. [Get the full WASDE report here.]

Big dry in Europe, big dry in USA

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This image, made with data collected by the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Terra satellite, reveals high temperatures that contributed to hazardous fire conditions. Image: NASA's Earth Observatory

An afterword about the drought conditions in the USA, centering on the state of Texas, and analysis from the USDA and the World Meteorological Organisation on the extremely dry conditions over northern Europe. This is May 2011 and keeping in mind what happened last year in Russia and Central Asia, we’re going to watch the big crop-growing areas very carefully over the next few weeks.

NASA’s Earth Observatory has said ‘Drought and Heat Create Hazardous Fire Conditions in Texas’ – So far in 2011, more than 1.4 million acres have burned in Texas, a result of some 800 fires. Why is fire activity so extreme in Texas this year? This image reveals high temperatures that contributed to hazardous fire conditions.

Fire needs dry fuel to burn, and weather conditions in March and April turned Texas into a tinderbox. The state began the winter dry season with abundant vegetation, following a moist spring in 2010. But then drought settled over the state in late 2010 and early 2011, culminating in the driest March on record. Many areas received less than 5 percent of their normal rainfall, according to the state climatologist.

In addition to being dry, March and April were warmer than normal. The image shows ground temperatures for April 7 to April 14 compared to long-term average for the week. The red tones indicate that most of Texas was much warmer than average, further drying out the abundant grasses, shrubs, and trees already suffering from a lack of rain.

In its latest World Agricultural Production report (2011 May) the United States Department of Agriculture (USDA), Foreign Agricultural Service has said that the European Union’s (EU) primary wheat and rapeseed region is struggling with dryness. “Dryness prevailed in northern Europe during March and April and continues into May, with far-below-normal precipitation levels and much-above-average temperatures. The high temperatures accelerated plant development so that crops are two to three weeks ahead of normal.”

Dry/drought conditions in Europe. Image: WMO

The report said that dryness is reportedly also interfering with fertilizer uptake by the crops. Both wheat and rapeseed crops need rainfall soon to prevent sharp yield reductions in northern France, northern Germany, England, and western Poland. These affected areas comprise a large portion of the EU’s primary wheat and rapeseed belt.

Planting conditions were generally favorable for EU winter wheat and rapeseed crops last autumn, with adequate soil moisture across most countries, including France and the United Kingdom. In some areas of central Europe however, (including Germany, Hungary, and Romania), rain and wet soils impeded planting, and some fields were likely left unplanted to be sown later with spring crops. Overall, the EU’s winter was rather mild despite one period during late February when minimum temperatures dropped to between minus 15 and minus 20 degrees Celsius for several days in snow-free areas of eastern Germany and western Poland.

The World Meteorological Union, for all its heavyweight authority, has only a couple of paras about the drought conditions in Europe 2011. “A long-lasting dry period persists over large parts of Europe since January 2011. According to data of the Global Precipitation Climatology Centre (GPCC), especially the months February to April 2011 had a considerable rain deficit over large parts of Europe. The 3-month totals over this period ranged between 40 and 80% of the long-term mean 1951-2000 over large areas (see figure below), in many parts of central Europe even below 40%.”

The United Kingdom had extremely dry conditions in March and April, said the WMO, especially in its southeastern parts and experienced its driest March since 1953. The other parts of western and central Europe all had a dry February, March and April. 2011 was up to now one of the driest 10 years in nearly whole Switzerland since 1864. April 2011 was one of the 10 driest April months in Germany since 1881, in continuation of similarly dry April months in 2007, 2009 and 2010. Also the preceding winter 2010/11 was very dry at least in western Europe, causing a very low soil moisture during March and April.

Written by makanaka

May 12, 2011 at 20:42

Foodgrain outlook, 2011 March – the prices effect now visible

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FAO, The Second Report on the State of the World’s Plant Genetic Resources for Food and AgricultureThe World Agricultural Supply and Demand Estimates (WASDE), the monthly forecast of the United States Department of Agriculture (Farm Service Agency, Economic Research Service, Foreign Agricultural Service) was released on 2011 March 10.

Highlights and main points for the major crop groups are:

WheatGlobal 2010-11 wheat supplies are projected 1.9 million tons higher reflecting higher production. Argentina production is raised 1.0 million tons based on higher reported yields. Australia production is raised 1.0 million tons with higher yields in Western Australia where wheat quality was not hurt by harvest rains as in the east. Other production changes include a 0.5-million-ton reduction for EU-27 with a smaller crop reported for Denmark and a 0.6-million-ton increase for Saudi Arabia on an upward revision to area.

Global wheat trade is projected lower partly reflecting reduced import prospects for a number of smaller markets as high prices trim demand. The largest import reduction, however, is for Russia where imports are lowered 1.5 million tons. Despite last year’s drought, Russia appears to be meeting its wheat needs as the government’s export ban helps maintain supplies for domestic users. With lower imports by Russia, Ukraine exports are lowered 1.5 million tons. Ukraine’s export restrictions have also disrupted trade with non-FSU countries. Exports are lowered 0.5 million tons for EU-27 on tighter supplies and the rising value of the Euro. Although exports are unchanged for the Australia October-September marketing year, exports are raised 1.0 million tons for the 2010-11 July-June international trade year increasing expected competition for U.S. wheat exports over the next few months.

FAO, The Second Report on the State of the World’s Plant Genetic Resources for Food and AgricultureGlobal 2010-11 wheat consumption is projected lower with the biggest change being a 1.5-million-ton reduction in expected wheat feeding for Russia. With increased global production and reduced usage, world ending stocks for 2010-11 are projected 4.1 million tons higher.

RiceGlobal 2010-11 projections of rice production, consumption, and exports are lowered from a month ago, and ending stocks are raised. The decrease in the global production forecast, still a record at 451.5 million tons, is due entirely to a decrease in the rice crop in India, which is partially offset by increases for Argentina and Brazil. India’s rice crop is forecast at 94.5 million tons, down 500,000 tons from last month due to an expected decrease in average yield. Drier than normal weather in the eastern and northern rice growing regions is expected to lower Rabi yields. The increases in Argentina and Brazil are due to an expected increase in harvested area.

Global consumption is lowered 5.3 million tons to 447.0 million, still a record, primarily due to reductions in India (-4.0 million) and China (-0.5 million). Conversely, global ending stocks are raised 4.9 million tons to 98.8 million attributed mostly to increases for India, China, Bangladesh, and Burma. India’s 2010-11 ending stocks are raised 3.6 million tons to 21.6 million based on recently received information on government-held stocks. China’s 2010-11 ending stocks are raised nearly 1.0 million tons based on information from the Agricultural Counselor in Beijing. Global 2010-11 exports are lowered nearly 0.5 million tons, due mostly to reductions in Burma, China, and India.

FAO, The Second Report on the State of the World’s Plant Genetic Resources for Food and AgricultureCoarse GrainsGlobal coarse grain supplies for 2010-11 are projected 2.5 million tons lower this month with lower corn beginning stocks and reduced corn, barley, sorghum, and oats production. Global corn beginning stocks are lowered 0.6 million tons with upward revisions to Brazil exports and India feeding in 2009-10.

Global 2010-11 corn production is reduced 0.5 million tons as lower production in Mexico and India is partially offset by higher production in Brazil. Brazil corn production for 2010-11 is raised 2.0 million tons reflecting higher reported area and yields in the summer crop and expectations for increased area for the winter crop with government planting dates extended for crop insurance and loan programs. Mexico corn production is reduced 2.0 million tons as the unusual early February freeze destroyed standing corn crops across much of the northwest winter corn region, which normally accounts for about one-fourth of the country’s total corn production. Replanting is expected to offset some of the loss, but seasonally high temperatures in the coming months limit the growing season window.

Global 2010-11 sorghum and barley production are each lowered 0.5 million tons and oats production is lowered 0.3 million tons. Lower sorghum output for India more than offsets an increase for Australia. Lower barley and oats output for Australia account for most of the reduction in world production for these coarse grains.

Global 2010-11 coarse grain imports are raised this month as increases for corn and sorghum more than offset a reduction for barley. Corn imports are raised 1.1 million tons for Mexico with the lower production outlook. Corn imports are raised 1.0 million tons for EU-27 on stronger expected feeding. A 0.5-million-ton reduction for Russia corn imports is partly offsetting. Sorghum imports are raised for EU-27 and barley imports are lowered for Russia, Saudi Arabia, and China. Increased corn feeding in EU-27 is more than offset by reductions in feeding in Russia and lower food, seed, and industrial use in India and Mexico. Projected global corn ending stocks are raised slightly.

GM emergency signalled over Monsanto’s Roundup Ready crops

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The Farm and Ranch Freedom Alliance has reported that one of the USA’s s senior soil scientists has alerted the national government to a newly discovered organism that may have the potential to cause infertility and spontaneous abortion in farm animals, raising significant concerns about human health.

Dr Don Huber, professor emeritus at Purdue University, believes the appearance and prevalence of the unnamed organism may be related to the weed killer known as Roundup (made by Monsanto) and/or to something about the genetically engineered Roundup-Ready crops. In a letter to US Secretary of Agriculture Tom Vilsack, the professor called on the US national  government to immediately stop deregulation of Roundup Ready crops. His letter begins:

Dear Secretary Vilsack: A team of senior plant and animal scientists have recently brought to my attention the discovery of an electron microscopic pathogen that appears to significantly impact the health of plants, animals, and probably human beings. Based on a review of the data, it is widespread, very serious, and is in much higher concentrations in Roundup Ready (RR) soybeans and corn—suggesting a link with the RR gene or more likely the presence of Roundup. This organism appears NEW to science!

This is highly sensitive information that could result in a collapse of US soy and corn export markets and significant disruption of domestic food and feed supplies. On the other hand, this new organism may already be responsible for significant harm My colleagues and I are therefore moving our investigation forward with speed and discretion, and seek assistance from the USDA and other entities to identify the pathogen’s source, prevalence, implications, and remedies.

We are informing the USDA of our findings at this early stage, specifically due to your pending decision regarding approval of RR alfalfa. Naturally, if either the RR gene or Roundup itself is a promoter or co-factor of this pathogen, then such approval could be a calamity. Based on the current evidence, the only reasonable action at this time would be to delay deregulation at least until sufficient data has exonerated the RR system, if it does.

For the past 40 years, I have been a scientist in the professional and military agencies that evaluate and prepare for natural and manmade biological threats, including germ warfare and disease outbreaks. Based on this experience, I believe the threat we are facing from this pathogen is unique and of a high risk status. In layman’s terms, it should be treated as an emergency.

Written by makanaka

February 21, 2011 at 18:44

The global transmission of high food prices-World Bank’s February evidence

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Higher global wheat prices have fed into sharp increases in domestic wheat prices in many countries, the February 2011 Food Price Watch of The World Bank has said. The transmission rate of global wheat price increases to the domestic price of wheat-related products has been high in many countries, according to the report. “For instance, between June 2010 and December 2010, the price of wheat increased by large amounts in Kyrgyzstan (54%), Bangladesh (45%), Tajikistan (37%), Mongolia (33%), Sri Lanka (31%), Azerbaijan (24%), Afghanistan (19%), Sudan (16%), and Pakistan (16%). Several of these countries have a large share of calories consumed from wheat-based products, particularly for the poor. Global food prices continue to rise, though not uniformly for all grains.”

The World Bank’s Food Price Watch is produced by the Bank’s Poverty Reduction And Equity Group, Poverty Reduction And Economic Management Network. The World Bank’s food price index rose by 15% between October 2010 and January 2011, is 29% above its level a year earlier, and only 3% below its June 2008 peak. A breakdown of the index shows that the grain price index remains 16% below its peak mainly due to relatively stable rice prices, which are significantly lower than in 2008. The increase over the last quarter is driven largely by increases in the price of sugar (20%), fats and oils (22%), wheat (20%), and maize (12%).

Maize prices have increased sharply and are affected by complex linkages with other markets. In January 2011, maize prices were about 73% higher than June 2010. These increases are due to a series of downward revisions of crop forecasts, low stocks (U.S. stocks-to-use ratio for 2010-11 is projected to be 5%, the lowest since 1995), the positive relationship between maize and wheat prices, and the use of corn for biofuels.

Ethanol production demand for corn increases as oil prices go up, with sugar-based ethanol less competitive at current sugar prices. Recent United States Department of Agriculture (USDA) estimates show the share of ethanol for fuel rising from 31% of U.S. corn output in 2008-9 to a projected 40% in 2010-11. Increased demand for high fructose corn syrup from countries such as Mexico, as they substitute away from higher priced sugar, also contributes to higher demand for corn. Prospects of easing in this market depend partly on the size of the crops in Latin America, particularly Argentina, which has been affected by unusually dry weather due to the La Nina effect, and the extent of import demand from China in 2011 as well as oil and sugar price trajectories.

Domestic rice prices have risen sharply in some countries and remained steady in others. The domestic price of rice was significantly higher in Vietnam (46%) and Burundi (41%) between June–December 2010. Indonesia (19%), Bangladesh (19%), and Pakistan (19%) have increased in line with global prices. These Asian countries are large rice consumers, especially among the poor. Rice prices have increased in Vietnam despite good domestic harvests. This is primarily due to the depreciation of the currency, which has fuelled overall inflation and expectations of higher demand from large importers and led  to the minimum rice export price being raised by the Vietnamese government. Rice price increases in Sri Lanka (12%) and China (9%) have been relatively moderate in the second half of 2010, while in Cambodia and the Philippines the retail price of rice remained largely unchanged during this period.

Largest Movers in Domestic Prices, June to December 2010
Wheat
Kyrgyzstan (retail, Bishkek) 54%
Bangladesh (retail, national average) 45%
Tajikistan (retail, national average) 37%
Mongolia (retail, Ulaanbaatar) 33%
Sri Lanka (retail, Colombo) 31%
Azerbaijan (retail, national average) 24%
Afghanistan (retail, Kabul) 19%
Sudan (wholesale, Khartoum) 16%
Pakistan (retail, Lahore) 16%

Rice
Vietnam (retail, Dong Thap) 46%
Burundi (retail, Bujumbura) 41%
Bangladesh (retail, Dhaka) 19%
Pakistan (retail, Lahore) 19%
Indonesia (retail, national average) 19%
Mozambique (retail, Maputo) 14%

Beans
Burundi (retail, Bujumbura) 48%
Cameroon (retail, Yaounde) 43%
Uganda (wholesale, Kampala) 38%
Kenya (wholesale, Nairobi) 22%

Maize
Brazil (wholesale São Paulo) 56%
Argentina (wholesale, Rosario) 40%
Rwanda (wholesale, Kigali) 19%

Food production and grain trade, Jan 2011

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The International Grains Council (IGC) has released its Grain Market Report for 2011 January. The IGC said that world grains supplies are forecast to tighten in 2010-11 but the outlook is little changed from two months ago. World production is expected to decline by 3.8%, to 1,726m. tons: the wheat estimate is lifted on better than expected southern hemisphere crops but the maize total is cut.

A serious drought has developed in eastern China over the past few months. Total precipitation has been scarce since October 2010, with some locations on the North China Plain receiving less than 10 percent of normal precipitation through December 2011. A lack of snow cover has deprived the dormant winter wheat crop of valuable moisture and protection from frigid temperatures and winds. Seasonably dry and cold weather is expected to continue for the next two weeks. USDA's WASDE said the impact of the drought has been mitigated by the widespread availability of water for irrigation, but crop stress could become serious if the drought continues after the winter wheat emerges from dormancy in February/March 2011.

By far the biggest fall in grains output was in drought-affected Russia, with big reductions too in the EU, the US, Kazakhstan and Ukraine. A further rise in world grains consumption is forecast in 2010-11, to 1,787m. tons. However, at 1.4%, the rise is flatter than in recent years. The expansion in industrial use has slowed markedly, especially in the US ethanol sector, although recent use there has been higher than anticipated. Total feed use will only rise moderately this year.

The forecast fall of 62m. tons in global carryover stocks mirrors the reduction in the major grain exporters, with big declines in Canada, the EU, Russia and the US. World trade in grains is expected to rise by 2m. tons, to 242m., only marginally more than before, with bigger imports by the EU and Russia expected to outweigh reductions in Near East and Far East Asia. Because of the fall of 29m. tons in Black Sea shipments, exports by Argentina, Australia, the EU and the US are expected to climb steeply.

IGC said that international grain and oilseed prices advanced strongly in December and again in January, with some values at their highest for two years. However, export prices remained below the peaks recorded early in 2008. While there has been little fundamental change in the overall supply and demand balance in the past two months, markets were driven higher by concerns about supplies of quality milling wheat and the tightening outlook for maize and soyabeans.

The influence of other commodities, including crude oil, also featured regularly on the major exchanges. For wheat, reports that the extremely wet conditions in eastern Australia would render at least one-third of the country’s large wheat crop unfit for flour milling were especially bullish. More recently, better prospects for US exports and a winter wheat acreage report showing a smaller than expected rise in Hard Red Winter wheat plantings further triggered buying.

USDA Crop Explorer, south India rice coverage, 2011 forecast

IGC said that China was among several recent customers for Australian feed grade wheat. For maize, there were worries about a reduced official US carryover forecast as well as about whether plantings for the next crop would be sufficient to prevent stocks falling further in 2011-12. The impact of dryness, attributed to the La Niña event, on Argentina’s upcoming harvest added to the market’s nervousness. Similarly, despite quite ample current stocks, US soyabean prices moved higher, initially because of continued heavy demand from China but more recently due to a lower official US supply estimate and strength in crude oil. Rice export prices also increased, but while Thai values in late-December climbed to a ten-month peak, they subsequently fell back as the main crop harvest advanced. After mostly declining since June, ocean freight rates for grains firmed slightly in recent months, despite a further slide in the Capesize sector.

The US Department of Agriculture’s World Agricultural Supply and Demand Estimates (WASDE) for 2011 January has said that global 2010-11 wheat supplies are raised slightly this month as increased beginning stocks are mostly offset by lower foreign production. Beginning stocks for Argentina are up 0.9 million tons with upward revisions to 2008-09 and 2009-10 production estimates. Argentina production is also raised 0.5 million tons for 2010-11 as harvest results indicate higher-than-expected yields. Production in Brazil is raised 0.4 million tons as favorably dry harvest weather boosted yields for the 2010-11 crop. EU-27 production is raised 0.3 million tons based on the latest official estimates for Poland. More than offsetting these increases are reductions for Kazakhstan and Australia. Kazakhstan production is lowered 1.3 million tons based on the latest government reports. Australia production is lowered 0.5 million tons as heavy late-December rains and flooding further increased crop losses in Queensland.

According to WASDE 2011 January, world wheat imports and exports for 2010-11 are both raised slightly. South Korea imports are raised 0.4 million tons, mostly offsetting an expected reduction in corn imports. Imports are also raised 0.2 million tons each for Thailand and Vietnam based on the pace of shipments to date and the increased availability of feed quality wheat in Australia. Imports are lowered 0.5 million tons for EU-27 based on the slow pace of import licenses to date. Major shifts among exporters are projected as importers focus on U.S. supplies to meet their milling needs. Australia exports are reduced 1.5 million tons as quality problems limit export opportunities. Kazakhstan exports are reduced 1.0 million tons with lower supplies. While Argentina marketing-year (December-November) exports are raised 0.5 million tons, exports during the remainder of the July-June world trade year are expected to be lower based on the slow pace of government export licensing.

Global 2010-11 wheat consumption is projected 1.2 million tons lower, mostly reflecting reduced wheat feeding in EU-27, the United States, and Kazakhstan. Food use is also lowered for EU-27 and Pakistan. Partly offsetting are increases in feed use in South Korea, Thailand, and Vietnam, and higher expected residual loss in Australia with the rain-damaged crop. Global ending stocks are raised 1.3 million tons with increases for EU-27, Argentina, and Australia, more than offsetting the U.S. reduction.

WASDE 2011 January said that global 2010-11 rice production, consumption, trade and ending stocks are lowered slightly from a month ago. The decrease in global rice production is due primarily to a smaller crop in Egypt, which is down 0.5 million tons (-14%) to 3.1 million. Egypt’s area harvested in 2010-11 is reduced 19 percent from a month ago and is down 30 percent from the previous year. A reduction in the Egyptian government’s support of producer prices has discouraged farmers from planting rice. Additionally, the Egyptian government has imposed water restrictions thus reducing irrigation water availability. Furthermore, government restrictions have reduced exports. Global imports are increased slightly due primarily to increases for Indonesia and Turkey, but partially offset by a reduction for Egypt. Global exports are increased slightly due mostly to an increase for Thailand, partially offset by a decrease for Egypt. World ending stocks are projected at 94.4 million tons, down 0.4 million from last month and last year.

FAO food price index tops the 2008 peak

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The UN Food and Agriculture Organization’s food price index has risen to 214.7 for December 2010, which is above its peak of 213.5 in June 2008.

This new peak, at a time when the price of crude oil is above USD 90 a barrel, is the strongest signal yet that global foodgrain supply has entered a critical phase. The FAO index has been rising steadily through the second half of 2010 – we discussed it here.

The cereal price index stands at 237.6 which is almost 40 points below the peak of 274.3 (in April 2008). The oils price index stands at 263 which is just under 20 points less than the peak of 282.6 (in June 2008). The dairy price index stands at 208.4 which is 60 points under the peak of 268.6 (in November 2007).

But the sugar and meat price indices are at all-time highs. The meat price index is now at 142.2 (in September 2008 it was 137.4 and its previous all-time high was 139.3 in September 1990). The sugar price index is now at 398.4 which is an extraordinary 180 points above its all-time high of 218 (in March 1990 – it was 207 at the maximum during 2008). The sugar price index crossed 300 in August 2008 and remained above 300 until March 2010, and again crossed 300 in September 2010.

Comparing three-month averages for the FAO food index and its main index components helps us understand how the 2010-11 food price crisis compares with its predecessor in 2007-08:

Food     Meat       Dairy     Cereals    Oils       Sugar
3-month avg
at 2008 Jun    210.4    129.5    240.8    271.7    273.9    173.9
3-month avg
at 2010 Dec    206.4    141.2    206.3    227.0    242.1    373.7

A Bloomberg report quotes FAO senior economist Abdolreza Abbassian: “One might expect prices to come down in spring, and this may be in fact the worst. But given how unexpected the weather events have been, I for one would not want to bet on anything along those lines.” The report said that concern about drought doing harm to Argentine harvests helped corn jump 52% in Chicago last year and soybeans to rise 34%. Prices also gained as China, the world’s largest soybean buyer, became a net corn importer. Wheat added 47% in 2010 as Russia, hit by its worst drought in a half-century, banned all cereal exports.

“Eyes will be on the Argentina corn crop,” Abbassian said. “There is still, unfortunately, a potential for grain prices to strengthen on the back of a lot of uncertainty. If anything goes wrong with the South American crop, there is plenty of room for them to increase further.” Potential damage to South American soybean and corn crops is of greater concern for world grain prices than harm to wheat in Australia caused by floods, according to the economist. Argentina and Brazil are the world’s second- and third-biggest corn and soybean exporters after the US. “The watch is definitely on South America for the next two weeks,” Abbassian said. “Given the very tight corn market, and demand from China for soybeans and the tight soybean market, if those commodities start to rise more, that will also lift wheat.”

Agrimoney has a report polling commodities fund managers in several financial centres worldwide for their views. What they say about the impact major forecasts, such as the World Agricultural Supply and Demand Estimates, have is worth paying close attention to. The WASDE report provides the US Department of Agriculture’s comprehensive forecasts of supply and demand for major US and global crops.

Reuters has reported that India’s food inflation rose for the fifth straight week to the highest in more than a year, reinforcing fears it has spilt over to broader prices and cementing expectations of a January interest rate hike. “But the spurt in prices of many basic foodstuffs has also raised questions over the government’s ability to control price rises through monetary policy, with poor infrastructure, hoarding and supply bottlenecks contributing to stubbornly-high food inflation.”

Unseasonal rains are officially blamed for pushing up prices of vegetables such as onions and tomatoes, but some commentators point instead to poor agricultural productivity and transport after years of few reforms and weak government investment. Onion prices, a key food staple for Indian families, rose over 23% percent over the week to December 25. The food price index rose 18.3% in the year to December 25 and the fuel price index climbed 11.6%. This compared with 14.4% and 11.6% annual rises the previous week.

The Wall Street Journal has said that food prices in India are continuing their sharp rise, increasing concerns among economists about a prolonged spell of high prices and adding pressure to the central bank to raise interest rates later this month. “The Reserve Bank of India next meets on Jan. 25 to consider an interest rate rise after pushing up rates six times in 2010 – one of the most aggressive tightenings of any central bank. But calls for a further move keep coming, most recently with the International Monetary Fund saying in a report released Thursday that rates need to be higher to curb inflation.

“The central bank will need to walk a fine line, however, since liquidity within the bank system is tight and further rate hikes could exacerbate that problem, economists said. Data from the Ministry of Commerce and Industry Thursday showed that the wholesale price index for food articles rose 2.5% in the week ended December 25 from the previous week. The year-on-year inflation rate for food surged to 18.32% from 14.44% the week before. It was the fifth straight week of rising food prices, which have been hovering at elevated levels in recent months.”

Grain markets and trade for the last third of 2010

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Earth_Observatory-La_Nina

Continuing a trend that began earlier in the year, La Niña conditions strengthened through the summer of 2010, evidenced by a streak of cool water across the equatorial Pacific Ocean. This map reveals a broad swath of cool water stretching from South America to New Guinea. The ocean is not, however, uniformly cool. Pockets of warm water are mixed with the cool, particularly in the western Pacific. Warmer waters in this region can lead to increased rainfall, and La Niña conditions may have played a role in the devastating floods in Pakistan during the Northern Hemisphere summer of 2010. Over the eastern Pacific Ocean, cooler waters lead to less moisture along the coasts of North and South America. So as more rain pounds some parts of the globe, La Niña conditions can deepen drought in others. NASA Earth Observatory

The International Grains Council released its monthly Grain Market Report on 2010 September 23. In this report the IGC said that global grain prices advanced again in September, those for wheat having returned to the peaks reached in early August. While the initial trigger for the steep upturn in wheat and barley values in recent months was the fast deteriorating outlook for these crops in the Black Sea region, much of the more recent bullishness is attributed to concerns about smaller than anticipated US maize (corn) yields, as well as substantial new grain buying activity by importers.

The market commentary of the report said: “Another feature is the difficult harvest weather in some countries, affecting milling wheat and malting barley quality. US soyabean prices partly mirrored the upturn in maize, but were also supported by concerns about South American crop prospects and continued heavy buying by China. Asian rice prices moved higher, largely because of the impact of the flood emergency in Pakistan. The recent surge in world grain prices, while not on the same scale as in 2007-08, again prompted concerns about its impact on global food prices as well as the increased volatility in the major commodity exchanges. One measure of such volatility is the day-to-day change in futures values which, even allowing for the events of three years ago, is significantly greater than earlier in the decade. Given the generally adequate supply situation for wheat and other grains, despite recent crop concerns, many have expressed surprise at the ferocity of recent market responses.”

Grains outlook for 2010-11 – This year’s sharply reduced crops in the CIS and Europe will contribute to a fall of 1.2% in global grain supplies, reversing three successive years of stock building. World production in 2010-11 is forecast at 1,741m. tons, (1,787m.), 4m. below the previous month’s projection. This follows downward revisions, for maize in the US and wheat in the CIS region, more than offsetting improved prospects in Australia. Significant reductions in wheat and barley output will outweigh another rise in maize, although prospects for the latter crop are downgraded slightly. The difficult growing and harvesting conditions in parts of North America, Europe and the CIS have affected supplies of high-quality milling wheat and malting barley.

Grain consumption in 2010-11 is projected to increase by 0.6%, to 1,780m. tons, but this represents a marked slowing compared with previous years as the overall rate of expansion in industrial use, especially for ethanol in the US, is scaled back. In the animal feed sector, maize use is expected to be boosted, while that of wheat will likely hold steady, but this will be more than offset by reductions in barley and other grains. With global grains consumption expected to exceed output after three surplus years, global carryover stocks in 2010-11 are projected to fall by 39m. tons, to 353m., mostly because of declines in the world’s exporters, notably Russia and the US. However, the total carryover will remain significantly above the lows seen earlier in the past decade.

International Grains Council Grain Market Report 2010 September 23

International Grains Council wheat and maize export prices

Global trade in grains is expected to fall in 2010-11, mainly because of reduced wheat shipments. At 237m. tons (239m.), the total is 5m. above the August forecast, following upward revisions for the EU, Russia and sub-Saharan Africa. Export forecasts for several countries, including Australia, Canada and the US, have been lifted, with total availabilities still seen as ample in a year which will see a huge shift in trade away from the drought-afflicted Black Sea region. In all, wheat and coarse grains shipments from Kazakhstan, Russia and Ukraine will fall by 27m. tons compared with 2009-10, with around half of this shortfall likely to be sourced in the United States.

The US Department of Agriculture’s ‘Grain: World Markets and Trade’ September 2010 report is also out. It noted wheat trade changes in 2010-11 in this way:

Selected Exporters: Australia is down 500,000 tons to 15.5 million based on logistical constraints. Canada is boosted 2.0 million tons to 17.5 million due to larger exportable supplies. EU is lowered 3.0 million tons to 21.0 million on reduced exportable supplies and quality concerns, particularly for German wheat. Iran is raised 450,000 tons to 500,000 due to greater exportable supplies and opportunities opened by reduced supplies in Russia. Kazakhstan is up 500,000 tons to 6.5 million on higher Russian import demand. Russia is raised 500,000 tons to 3.5 million based on exports shipped before the ban. United States is boosted 1.0 million tons to 34.0 million on strong demand, particularly for higher quality wheat.

International Grains Council Grain Market Report 2010 September 23

International Grains Council rice and soyabean export prices

Selected Importers: Nigeria is up 400,000 tons to 4.0 million due to expected consumption growth. Russia is raised 1.4 million tons to 2.0 million due to increased demand for milling wheat caused by drought-reduced production.

The USDA report recorded trade changes in 2009-10 as “large late-season adjustments reflect reported shipments”. These are – Selected Exporters: Canada is up 500,000 tons to 19.0 million. The United Arab Emirates is raised 450,000 tons to 950,000. Selected Importers: Indonesia is down 450,000 tons to 5.4 million. Iran is up 600,000 tons to 3.6 million. Turkey is lowered 300,000 tons to 3.2 million.

Rice world markets and trade – Despite weather problems in China and Pakistan, global crop prospects remain excellent said the USDA report. Record world production is expected to not only meet rising demand but also maintain global stocks at the highest level since 2004.

International Grains Council Grain Market Report 2010 September 23

International Grains Council world grain estimates

Prices – though quotes from all origins are up somewhat from last month, Vietnam’s increase is the most dramatic. With 2010 contracts already at a record 6.2 million tons, Vietnam raised the minimum export price of 5% broken to $450 per ton FOB, essentially halting new sales and, for the first time, pushing above higher-quality U.S. #2/4 quotes ($445 per ton FOB). Vietnamese quotes are now only $30 below Thai 100B quotes, a stark departure from the $120 spread just 2 months ago. As sales stall in Vietnam, Thai sales are expected to increase as the government finally releases intervention stocks. U.S. long-grain sales are also expected to pick up on newfound competitiveness and a record crop. By contrast, the medium-grain trade is somewhat on hold as the California crop has yet to be harvested. In addition, many tenders in major markets have yet to be announced.

The USDA report forecast trade changes for 2011. These are – Pakistan’s exports are slashed 750,000 tons to 2.9 million as floods have reduced the crop and damaged infrastructure. Afghanistan’s imports are reduced 100,000 tons to 200,000, as Pakistan is by far the largest supplier due to proximity and relative prices. Iran’s imports are cut 300,000 tons to 1.2 million on the expectation that imports from Pakistan will fall. Thailand’s exports are down 500,000 tons to 9.0 million because the government stock release is happening much later in the year than originally anticipated. Vietnam’s exports are raised 450,000 tons to a record 6.2 million on contracts to date. By contrast, imports are dropped 100,000 tons to 400,000 on a slowdown of border trade with Cambodia. Indonesia’s imports are doubled to 500,000 tons as relatively high domestic prices have caused a surge in trade with neighboring countries. Iran’s imports are dropped 150,000 tons to 1.2 million on the pace of shipments. Nigeria’s imports are lowered 100,000 tons to 1.7 million on slower-than-expected imports from Thailand.

World agri supply and demand estimates, Sep 2010

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Climate change. Image courtesy UNEPThe US Department of Agriculture’s World Agricultural Supply and Demand Estimates (Wasde) report is out, dated 10 September 2010. Here are the highlights of its analysis on global wheat and rice.

Wheat

Global wheat supplies for 2010-11 are projected down 0.7 million tons as higher carry-in mostly offsets a 2.7-million-ton reduction in world output. Much of the offset is explained by Canada, where beginning stocks are increased 1.5 million tons, as reported by Statistics Canada, and production is increased by 2.0 million tons. These changes mostly offset lower production in Russia and the European Union (EU) 27. Production for Russia is lowered 2.5 million tons based on the latest harvest results for the drought-affected central growing areas in the Volga and Urals Federal Districts. EU-27 production is lowered 2.4 million tons with the largest reductions for Hungary and Romania where heavy summer rains reduced yields. Smaller reductions in a number of other member countries also reduce EU-27 production. Although the reduction for Germany is small, persistent and heavy August rains have reduced supplies of high quality milling wheat. Other production changes include a 0.3-million-ton reduction for Belarus and a 0.4-million-ton increase for Morocco.

World wheat trade for 2010-11 is raised with global exports projected 1.4 million tons higher. Export shifts among countries largely reflect availability of supplies and increased competition from North America. Exports are raised 2.0 million tons for Canada and 1.4 million tons for the United States. Exports are also raised 0.5 million tons each for Iran and Kazakhstan. A 0.5-million-ton increase in Russia exports reflects larger-than-expected shipments during early August, before implementation of the export ban on August 15. These increases more than offset a 3.0-million-ton reduction for EU-27 and a 0.5-million-ton reduction for Australia. EU-27 exports are lowered with reduced supplies and increased competition from Canada. Logistical constraints are expected to limit exports from Australia.

Climate change. Image courtesy UNEPWorld wheat imports for 2010-11 are raised with increases for Russia and Nigeria. Imports for Russia are raised 1.4 million tons as imports from regional suppliers support domestic usage, particularly for feeding. World wheat consumption is lowered 3.8 million tons with lower consumption in EU-27, Russia, and Kazakhstan outweighing increases for Pakistan, Canada, and Nigeria. Wheat feeding is lowered 2.0 million tons for EU-27 with imported coarse grains expected to partly replace wheat in livestock and poultry rations. Global ending stocks are projected 3.0 million tons higher with increases for EU-27, Canada, and Australia. Ending stocks are lowered for Pakistan and Russia.

Rice

Projected global 2010-11 rice supplies and use are both lowered from last month. Global rice production is projected at a record 454.6 million tons, down 4.6 million tons from last month’s estimate, mainly due to large declines for several countries including China, Indonesia, and Pakistan.

China’s 2010-11 rice crop is reduced 1.5 million tons to 136.0 million, due mainly to a decrease in the early rice crop. Both area and yield are reduced by early season drought in some areas combined with late-season flooding in other areas. Indonesia’s 2010-11 rice crop is reduced 2.0 million tons to 38.0 million, based in part on a report from the U.S. Agricultural Counselor in Jakarta. Indonesia’s 2009-10 rice crop is also reduced – a reduction of 1.7 million tons to 37.1 million. Indonesia’s yield growth has stagnated due to weather, pests, and disease problems. Pakistan’s 2010-11 rice crop is reduced by 1.2 million tons or 18 percent to 5.3 million as severe flooding lowered both area and average yield.

Global 2010-11 exports are reduced by 0.6 million tons to 31.0 million, mainly due to a reduction for Pakistan. Global consumption is lowered by nearly 2.3 million tons, mainly due to decreases for China (-0.5 million) and Indonesia (-1.35 million). Global ending stocks for 2010-11 are projected at 94.6 million tons, down 3.0 million from last month, but up slightly from 2009-10. Stocks are lowered for China, Indonesia, Vietnam, and Iran, and raised for the United States.