Food Shocks On the Center Stage of Agriculture

Benjamin Gisin - Publisher, Touch the Soil

Despite humanity's tooling up with agricultural equipment that almost overrides the senses, the world is no more food secure. As final agricultural production statistics come in from the world's 2007 farming efforts, they carry stories of food shocks. Food shocks are large, unexpected situations or events that catch farmers or eaters by surprise. Production problems in the world's largest grain-producing nation's has unfolded a series of food shocks acting in harmony like dominoes.

The first shocks were unprecedented price spikes in wheat, barley and soybeans, breaking all historical records. For example, the price of a bushel of wheat (60 pounds) over the last 10 years has been between $2.75 and $4.00 per bushel. In March 2008, there were spot cash prices being offered for over $20 for a bushel of wheat-that is if the buyer could find it.

With low commodity prices for many years, high grain prices created a shock in the demand for grain equipment as farmers could finally afford to replace old equipment. Take for example John Deere grain combines priced at over $300,000 each. All 2008 models of John Deere grain combines were sold out effective Nov. 20th, 2007. A farmer wanting a new John Deere grain combine will have to wait till late this fall when 2009 models come out. Surprisingly, John Deere sales have skyrocketed overseas.

Tight grain supplies are pushing up food prices around the globe and creating disappointing food shocks among the world's poor, who can little afford higher prices. Global food experts now predict the number of people starving around the globe will increase by 350 million people over the next 17 years. From 850 million starving people today to 1.2 billion starving by 2025.

With grain prices at all-time highs and many grain-exporting nations limiting exports to protect their own food security, pressure has fallen on the United States to export far in excess of its production in 2007, resulting in a draw-down of U.S. wheat stocks to 60-year lows. In fact, a recent Associated Press story reported that there is risk of a wheat shortage in the United States in 2008. Let's hope the prediction is an over reaction.

U.S. beer companies are having difficulty finding enough farmers to raise malt barley-prices are so high in other grains that farmers are going with the highest priced commodity, which may not be malt barley. Heavy competition between crops for farmland will sort this out later this spring.

In 2007, food price inflation in China has hit unprecedented levels, precipitating the Chinese government to implement food price controls. The price of pork, a traditional Chinese staple, raised over 60 percent at the retail level last year.

Contributing to these food shocks was the 2007 crop season, when 14 million acres of other food crops were dropped in favor of corn, most of it for ethanol. A large acreage loser in this migration to corn was soybeans, whose recent "off the chart prices" will have farmers shifting acres back to soybeans. Exactly what food crops will be shorted in 2008 remains to be seen.

Unless 2008 turns out to be a banner agricultural year, the food shocks of 2007 may spill into 2008. While U.S. price shocks at the farm gate are not immediately translated into high food prices at the grocery stores, they will, over time, blend with higher energy costs to stimulate food inflation.

At some point the demand for food must be aligned with the amount of food that can be sustainably produced. Every community must be food-secure for the world to be food-secure. As global food production trembles, communities will be more likely to appreciate local farmland and local food-production talent.

Benjamin (publisher) and Susan Gisin (editor) founded Touch the Soil magazine. Based in Idaho Falls, Idaho, the magazine is in it's fourth year of publishing. Ben's 20-year banking career culminated as senior agricultural approval officer for one of the nation's top 10 agricultural banks. Beginning in 1997, Gisin consulted farmers and ranchers facing credit challenges and published the book Farmers and Ranchers Guide to Credit. Ben and Susan, having visited hundreds of farming enterprises across the nation, have combined their exhaustive research and now lecture nationally about the future of food and the economy. This article is reprinted with permission from the March/April issue of Touch the Soil magazine. For more information visit www.touchthesoil.com