Yves here. As much as it is convenient to blame spiraling food prices on pandemic stimulus, the biggest driver is climate-change-induced crop shortages. And that’s even worse because government-policy-induced increases can be remedied (and in fact are by Joe Manchin, on the order of using a Sherman tank to squish a mouse).
Climate change produced food scarcity is a much bigger problem. Yes, we may get period of relief, but the trend is not on our collective side. And some new patterns look to be durable, like sustained drier weather in the US West, including of course the critical growing areas of California, versus wetter in the East.
By Jeff Masters. Originally published at Yale Climate Connections
Aerial view of stranded barges along the Mississippi River in Louisiana, on August 30, 2021, in the wake of category 4 Hurricane Ida. The hurricane significantly disrupted transport of grains and fertilizer in September, contributing to high global food prices. (Image credit: Congressman Garret Graves (R-La), Ranking Member of the House Select Committee on the Climate Crisis)
Global food prices in November rose 1.2% compared to October, and were at their highest level since June 2011 (unadjusted for inflation), the United Nations Food and Agriculture Organization (FAO) said in its monthly report on December 2. After adjusting for inflation, 2021 food prices averaged for the 11 months of 2021 are the highest in 46 years.
The high prices come despite expectations that total global production of grains in 2021 will set an all-time record: 0.7% higher than the previous record set in 2020. But because of higher demand (in part, from an increased amount of wheat and corn used to feed animals), the 2021 harvest is not expected to meet consumption requirements in 2021/2022, resulting in a modest drawdown in global grain stocks by the end of 2022, to their lowest levels since 2015/2016.
The November increase in global food prices was largely the result of a surge in prices of grains and dairy products, with wheat prices a dominant driver. In an interview at fortune.com, Carlos Mera, head of agri commodities market research at Rabobank, blamed much of the increase in wheat prices on drought and high temperatures hitting major wheat producers including the U.S., Canada, and Russia.
Drought and heat in the U.S. caused a 40% decline in the spring wheat crop in 2021, and a 10% decline in the total wheat crop (spring wheat makes up about 25% of total U.S. wheat production). Economic damages to agriculture in the U.S. are expected to exceed $5 billion in 2021, according to Aon (see Tweet below). The highest losses are expected in the Northern Plains, where the spring wheat crop was hit hard by drought and heat. Fortunately, the 2021 U.S. corn crop was estimated to be the second largest on record, 7% larger than in 2020. The 2021 soybean crop was also estimated to be second largest on record, up 5% from 2020.
Drought & heat-related crop insurance payouts now top $2.6B in the United States — and quickly rising. Most losses? Not in the West, but in the Northern Tier.
The overall economic cost expected to exceed $5B. pic.twitter.com/xSFI5z8hVu
— Steve Bowen (@SteveBowenWx) December 1, 2021
Extreme Weather a Key Factor in High Food Prices
Food prices are complex, with weather, biofuel policies, trade policies, grain stocking policies, and fluctuating international financial conditions all important factors. High fuel prices, supply chain disruptions resulting from the pandemic, and high fertilizer prices are all contributing to the current high global food prices.
According to Reuters, global fertilizer prices have increased 80% this year, reaching their highest levels since the 2008-2009 global financial crisis. Primary causes of the current high prices include extreme weather events (particularly the February cold wave in Texas and Hurricane Ida in August), which disrupted U.S. fertilizer production, and the high cost in Europe of natural gas, a key component in producing fertilizer). Fertilizer shortages threaten to reduce grain harvests in 2022, according to CF Industries, a major fertilizer producer.
Carlos Mera of Rabobank pointed out that Russia, a major wheat producer, hiked its export tax on wheat this year to incentivize keeping supplies at home. “That is quite scary,” said Mera. “Events like the French Revolution and the Arab Spring have been blamed on high food prices.” High wheat prices in 2011 (in the wake of export restrictions triggered by the 2010 drought in Russia) helped lead to massive civil unrest and the toppling of multiple governments (the “Arab Spring”).
The current high food prices, combined with the ongoing pandemic, will make the global food supply highly vulnerable to extreme weather shocks in 2022. An upcoming post here will analyze what may be climate change’s greatest threat to society: a food-system shock driven by extreme weather, primarily drought, and causing simultaneous crop failures in multiple key grain-exporting areas.
Bob Henson contributed to this post.
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“Food prices are complex, with weather, biofuel policies, trade policies, grain stocking policies, and fluctuating international financial conditions all important factors.”
No talk (??) of market inefficiencies in corporate state economies, and/or more general market failure(s) in the sense that “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Both parties to a voluntary exchange transaction have their own interest in the outcome, but neither can obtain what he or she wants without addressing what the other wants. It is this rational self-interest that can lead to economic prosperity.” remains a largely unchallenged myth. How so? When . . . .
“About 2.5 billion metric tons of food is wasted around the world each year, roughly half of which is lost on farms including in Europe and the United States. That’s having a huge impact on the climate. . . . . Food lost on farms amounts to 1.2 billion metric tons, with a further 931 million metric tons wasted by retailers and consumers. The remainder is lost during transport, storage, manufacturing and processing. . . . . The updated figures indicate that 40% of all food produced goes uneaten, according to the study, which attempts to quantify the amount of food wasted on farms for the first time in a decade. . . . . According to the study, food waste accounts for 10% of all greenhouse gas emissions, higher than a previous estimate of 8%.”
“Farms are wasting 1 billion tons of food. That’s a disaster for the climate”
https://www.cnn.com/2021/07/21/business/food-waste-climate-change/index.html
It is interesting to note that the capitalist billionaire class has been and currently is preparing for their own version of economic/political eschatology, a type of futurism that envisions ‘John Galt’ on steroids. they even have their own ‘manifesto’ . . . .
[[[[1) The democratic nation-state basically operates like a criminal cartel, forcing honest citizens to surrender large portions of their wealth to pay for stuff like roads and hospitals and schools.
2) The rise of the internet, and the advent of cryptocurrencies, will make it impossible for governments to intervene in private transactions and to tax incomes, thereby liberating individuals from the political protection racket of democracy.
3) The state will consequently become obsolete as a political entity.
4) Out of this wreckage will emerge a new global dispensation, in which a “cognitive elite” will rise to power and influence, as a class of sovereign individuals “commanding vastly greater resources” who will no longer be subject to the power of nation-states and will redesign governments to suit their ends.}}}}
https://newsnet.scot/news-analysis/end-democracy-hello-plutocracy/
“The most important book you have never heard of, may explain Rees-Mogg love of hard Brexit”
https://alastaircampbell.org/2018/08/the-most-important-book-you-have-never-heard-of-which-helps-understand-rees-mogg-love-of-hard-brexit/
“Privatisation of services heralds ‘the ultimate form of privatisation – the sweeping denationalisation of the individual.’ The Sovereign Individual will not be the asset of any state, nor even a citizen, but a customer of competing jurisdictions. Once sovereignty is commercialised, people will choose their jurisdictions, much as they now choose their insurance companies or their religions. Jurisdictions that fail to deliver will face bankruptcy and liquidation, ‘just as incompetent commercial enterprises or failed religious congregations do.’ The authors’ hatred of welfare could not be clearer. It marks a welfare state up against out and out Communism, but very much down against ‘a genuine laissez-faire enclave like colonial Hong Kong.”
All the more reason for a very large but diverse agricultural industry.
It seems that inflation is a world-wide issue and problem, ie not happening just in the US, but everywhere. This makes perfect sense to me because the pandemic over the last nearly two years now (!!!) caused breaks in people working, the supply chain, etc etc, and then as the world tried to get back to a normal life (before Delta hit) everyone everywhere had demands, and all these people with money chasing limited goods causes inflation. On top of that add drought and floods and it is a perfect storm. When I was in graduate school a half century ago everyone was well aware that agriculture based on fertilizer made from fossil fuels and chemicals in the long run exhausted soils and could not last forever. The “Agricultural revolution” of the 19560s and 1960s depended on cheap oil (for machinery in the fields) and fertilizer, which vastly increased crops. Now, two generations later, there isn’t much said about how all these fertilizers may have degraded soils, caused issues with the soil microbiology, so in a sense on top of all the issues stated in the article above we have the impact of a chemical, non renewable, non organic (ie not manure and human night soil) fertilizer system now under stress and not working as well. Further, I haven’t seen very much written about the impact of the worldwide efforts to build dams for power and irrigation in arid areas, during the period say 1900-1980. In the United States these dams went up mostly before World War 2 and created a miracle of crop production, but only with water stored and piped to fields which otherwise could not grow much of anything at all. These dams, some of them, are now a century old, and in many cases their construction created ecological disasters (killing off salmon runs or impoverishing downstream alluvial soils of annual flooding and replenishment). Some might say we are now at the place where the bill comes due, at least in regards to the limits of industrial farming based on chemical fertilizers and irrigation systems. “Susan the other” comment above is right – a diverse agricultural industry can produce much more food, especially on some of the rich land now used to grow corn to make ethanol. But such a system is labor intensive, very, and will vary region to region, and then the issue of getting that food to where all the people in urban centers lives must be faced.
One final point, which will surely bring forth the trolls – current dogma holds that man made carbon emissions are soon to doom thew earth, and every weather event in the last 25 years that is extreme has been blamed on climate change. Yet, over history, weather events caused catastrophe after catastrophe, killed off civilizations, before industrialization. We are today 10,000 years into the warm Interglacial between the last ice age and the next one, according to the geologic record. There have been over 20 such ice ages in the last two million years. Each time the warm Interglacial is 10,000 to 15,000 years long. The one before the one we are in now, the Eemian, 120,000 years ago, was warmer than today, and sea levels 30-50 feet higher than today. It seems these warm periods end suddenly, according to ice cores from Greenland and elsewhere, maybe as fast as within a decade. It may even be that the warming itself causes the next ice age, in that the flood of fresh melt water from Greenland into the Atlantic causes the Gulf Stream to stop flowing, in turn then chilling the Eurasian land mass. If this happens – if the warm Gulf Stream can no longer moderate Scandanavian and Europe and Russia – what happens? One year the snow falls and in the following summer all the snow does not melt, and the next year all the snows don’t melt, and in ten years the snow has built up and is starting to compress to ice, and in 100 years a glacier, vast in extent, covers the land. Covers all those millions of acres of Ukrainian wheat fields and European fields, while in the US because the snow in Europe hasn’t melted the chillier earth then sees snow not melting in the northern US and Canada, and so the same thing happens – one year the farming is terrible and the second year there is none at all because the snow remains, all throughout the main breadbasket fields to feed the world. If you think a fertilizer shortage is a problem, imagine what one year without grain production will cause. Impossible, readers will say, the earth is cooking. My response is the geological record says we are at the end of the current warm time, and it will get cold again. Maybe the human induced warming will delay things a bit, yes. But nobody is ready for a Black Swan event like a collapse of the northern hemisphere agricultural system. But that is what might happen.
It seems that the competing views out there are between those who believe that inflation is driven by supply chain disruptions (NC) and those who think that we printed too much money (L. Summers and cie)
Time will tell who is right.
To me it looks like a combination of both.
There are many things that are not significantly affected by supply chains and have been going in price sharply. Credit conditions are super easy. Suppose the Fed increases the interest rates to 6%, the current inflation rate, would we still be seeing the same demand for products ? Maybe that will solve the bottlenecks in our ports.
No matter what, this inflation hurts, and its hitting the poor and the savers badly, myself included. And I have no idea how they will address it.
I might also add that from time to time the Earth displays extreme vulcanism,
which has caused mass extinctions. Between AD 900 and 1300 Earth
had the Little Climactic Optimum. When Krakatau blew in 1883, There was a lasting effect on the world’s climate, too: aerosols emitted into the atmosphere by the blast led global air temperatures to drop by as much as 2.2 degrees Fahrenheit (1.2 degrees Celsius). According to a 2006 article in the journal Nature, the volcano caused oceans to cool for as much as a century, offsetting the effect of human activity on ocean temperatures. If the volcano had not erupted, the authors argue, our sea levels might be much higher than they are today.
My point is that the summa of data points needed to make these kinds
of bold predictions is never complete, yours included.
Your hypothetical scenario is literally one of the identified risks of a 3 degree world. James Hansen himself even wrote a book Storms of My Grandchildren about the climate chaos that will occur due to Greenland glacier collapse…that said, if we hit 600+ ppm it shouldn’t create a new ice age, but a few decade period before the heat overwhelms this response.
I never get why people continue to make all these “clever” gotcha counterarguments when climate scientists have literally outlined all this stuff for decades.
Inflation isn’t temporary…
Correct. Think of Japan’s long struggle with deflation!
At the beginning of the pandemic, roughly early March 2020, I was paying 8.99 for 25 lbs of flour at Gorden Food Service. Yesterday the same bag, same size and brand was $12.99. For years I’ve paid around $1.89 for an 18 oz jar of Great Valu preserves. (Walmart store brand/ blackberry or raspberry.) Yesterday those preserves were $4.39.We’re going to be eating a lot of beans and rice going forward.
25 lbs of flour $7.99 at Costco, up from $6.49 pre pandemic.
Is there any big business that is really sustainable, and by sustainable I do not mean free of external support but rather operating within ecological limits?
I personally dont think there are any large firms in the world that would qualify as “ecologically sustainable” and if so what is to be done?
Are we to become malthusians, how many billions can the planet sustain?
If we have reached the limits, will the crisis resolve with a bang through death and destruction or with a whimper through family planning and lower material quality of life?
(apols if this is a duplicate – Skynet ate my first attempt, I think for mentioning Z*H by its full name. Replying to Tom Collins above)
I own “The Sovereign Individual” in hardcover, as well as its 1980s predecessors by the same authors: ‘Blood in the Streets’ and ‘The Great Reckoning’. Some interesting ideas (and history) there, and other ideas totally nutty – social contract anyone? – but I suspect Steve Bannon owns copies too and is conversant with much of their philosophy.
The authors also pushed a contrarian investor newsletter, “Strategic Investment”, which ISTR was heavily sketchy mining investments in Africa and LatAm and likely bankrupted anyone who actually followed its advice. So, at bottom, highly literate gold bugs, basically the Z*H of their day….
“Food prices are complex, with weather, biofuel policies, trade policies, grain stocking policies, and fluctuating international financial conditions all important factors. High fuel prices, supply chain disruptions resulting from the pandemic, and high fertilizer prices are all contributing to the current high global food prices.”
Well, yes, but isn’t the problem contained within the model assumed? Living in a medium-sized city at the moment, we shop mostly in local markets, or in shops selling local produce and, where we have to go to a supermarket, choose produce from the same country, if not the same region. In many cases, the supply chain is the farmer digging up potatoes on the Saturday and bringing them to market on Sunday. Food prices do not have to be complex, nor need they be ruled by trade policies and financial conditions.
It is and it isn’t. It’s certainly virtuous to buy local when it comes to food, but at least where I live (Colorado) the farmer’s market is more expensive than the supermarket by a factor of 2 or 3. And it’s easy to see why: economies of scale, to say nothing of tax breaks and other preferential treatment for corporate food producers. As a result, most people don’t buy local, assuming they even can.
If prices for Haber Bosch nitrogen stay high enough for long enough, that factor of 2 to 3 may shrink down some.
And if eco-biofarmed land proves itself to remain productive where petro-chem/ Haber-Bosch land proves itself to grow zero-anything after 2-3 years of extreme brought, enough of the surviving Haber-Bosch farmers may decide to become eco-bio farmers to the point where after several more years, mainstream amounts of eco-bio correct agri-bulk commodity production may enter mainstream distribution channels at a higher-than-now but still affordable price.
Yves said: “As much as it is convenient to blame spiraling food prices on pandemic stimulus, the biggest driver is climate-change-induced crop shortages.”
That may be true on the supply side, but according to the chart the present spike is within the price limits caused by the two Russian droughts of 1972 and 2010. Today both Russia and Canada are ramping-up production of grain precisely because climate change has given them longer growing seasons. There are winners and losers in climate change.
The world has avoided massive starvation for the last 150 years because railroads and steamships have usually been able to move surplus grain to regions of scarcity. The exceptions have been wartime (hunger in Germany in 1918, the Bengali famine in 1942, Biafra in 1968 and the like) and intentional government activity often resulting from locals producing the data their superiors wanted (the Ukraine in the early Soviet era and China’s Great Leap Forward in 1957-8). So far we have been able to keep ahead of the massive increase in world population from 2.5 billion people in 1950 to 7.8 billion today.
That may be ending for two reasons. First, the productive capacity of the earth is limited and we may have reached- or even exceeded- that limit. Second, the recent rapid economic growth of some classes and some regions (the Indian middle class, the oil states, China) have led to the new winners joining the old industrial nations in bidding-up the price of grain, which is often converted from grain into flesh at roughly a rate of 4-8 lbs of grain/1 lbs of meat.
Using the lifeboat metaphor, when production increases faster than population the boat rides higher in the water and can withstand much larger storms without flooding and sinking. But when population grows faster than production the boat rides lower in the water and has a much greater chance of being swamped by even small waves. The half-empty lifeboats from the Titanic heard the cries but didn’t return to the mass of desperate, floating people for fear that too many would grab the gunwales, try to get aboard and swamp the boats.
We prefer to see minor swings caused by the pandemic (which harms everyone) and larger swings caused by climate change (which benefit some places at the expense of others) as the culprit. These are the storms which can sink some overburdened lifeboats and leave the boats riding higher in the water afloat.
Blaming the industrial states and the rich consumers and nations is morally easier for middle class people than assigning blame to the unprecedented population growth, which has made many lifeboats (nation states) very susceptible to even minor changes in storm levels and wave heights. Are we going to be willing to listen to the cries and row back into the middle of the crowd of desperate people who want onto the boat? I doubt it. Just look at the Polish border and the English Channel.
This rip-off pattern has been going on for centuries of recorded human history. Now, we are faced with the additional factor of climate chaos. These waves never end without violent, bloody repercussions. This one, if allowed to fully develop, will dwarf the earlier waves.