World Grain Harvest - NOT ENOUGH WATER!

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NEWS FROM EARTH POLICY INSTITUTE.

Eco-Economy Update 2001-3

For Immediate Release

Copyright Earth Policy Institute 2001

 

WORLD GRAIN HARVEST FALLING SHORT BY 54 MILLION TONS

Water Shortages Contributing to Shortfall

 

Lester R. Brown

 

While Americans celebrate another bountiful grain harvest, there are signs

that the world harvest is falling short as water shortages translate into

food shortages. In its November world crop survey, the U.S. Department of

Agriculture reports that this year's world grain harvest of 1,841 million

tons will fall 54 million tons short of projected consumption of 1,895

million tons. This comes on the heels of a poor crop last year, when world

output fell short of use by 34 million tons.

 

These two consecutive disappointing harvests have reduced next year's

projected world carryover stocks of grain, the amount in the bin when the

new harvest begins, to 22 percent of annual consumption, the lowest level in

20 years. With stocks at such a low level, all eyes will be on the harvest

in 2002. Another short harvest could lead to rising grain prices and higher

prices for bread, meat, milk, eggs, and other products derived directly or

indirectly from grain.

 

The poor harvests of the last two years were largely due to weak grain

prices, drought, and spreading water shortages. The lowest grain prices in

two decades have discouraged farmers from investing in production-boosting

measures.

 

Prices that are too low to stimulate adequate production can be quickly

remedied as the market responds to tighter supplies. But dealing with the

water shortages that result from drought, aquifer depletion, and the

diversion of scarce water to cities is much more difficult.

 

Water tables are now falling in key food-producing regions--the North China

Plain, the Punjab in India, and the southern Great Plains of the United

States. The North China Plain accounts for a third of China's grain harvest.

The Punjab, a highly productive piece of agricultural real estate, is

India's breadbasket. And the southern Great Plains help make the United

States the world's leading wheat exporter.

 

In an increasingly integrated world economy, water shortages are crossing

national boundaries via the international grain trade. Since it takes 1,000

tons of water to produce 1 ton of grain, the most efficient way for

water-deficit countries to import water is to import grain.

 

The fastest-growing grain import market in the world today is North Africa

and the Middle East, the region with the most serious water shortages.

Virtually every country in this region--stretching from Morocco eastward

across the northern tier of Africa and the Middle East through Iran--is

facing water shortages. With supplies limited, countries satisfy the growing

demand for water in cities and industry by taking it from agriculture. Then

they import grain to offset the loss of production capacity.

 

It is often said that future wars in this region are more likely to be

fought over water than oil. This may be, but it is hard to win a water war.

The competition for water is more likely to take place in world grain

markets.

 

In recent years, grain imports into Iran, a water-short, grain-deficit

country, have eclipsed those of Japan, long the world's leading wheat

importer. Last year, Egypt also moved ahead of Japan. Both Iran and Egypt

now import over 40 percent of the grain they consume. The populations of

both countries are continuing to grow, but their water supplies are not.

 

Grain exporters are, in effect, water exporters. Canada, where water exports

are a politically sensitive issue, is one of the world's leading exporters

of water in the form of grain. The 18 million tons of grain, mostly wheat,

that it ships abroad each year embody 18 billion tons of water. Similarly,

U.S. annual grain exports of 90 million tons of grain represent 90 billion

tons of water, an amount that exceeds the 67-billion-ton annual flow of the

Missouri River.

 

The adequacy of food and water supplies are closely linked. Some 70 percent

of all water that is pumped from underground or diverted from rivers is used

to produce food, while 20 percent is used by industry and 10 percent goes to

residential uses. With 40 percent of the world's grain harvest produced on

irrigated land, anything that reduces the irrigation water supply reduces

the food supply.

 

The wildcard in the world grain market is China. It accounted for 45 million

tons of this year's grain harvest shortfall of 54 million tons. Last year,

China's harvest fell short of consumption by 33 million tons. In two years,

it has reduced grain stocks by nearly 80 million tons.

 

Among the forces shrinking China's grain harvest are severe drought in

northern China during the last two years, spreading irrigation water

shortages as aquifers are depleted and as water is diverted to cities, and a

lowering of support prices. The drought will eventually end, but water

shortages will not. In a country dependent on irrigated land for 80 percent

of its grain, water shortages are fast becoming a security issue. (See

Eco-Economy Update " Worsening Water Shortages Threaten China's Food

Security, " www.earth-policy.org/Updates/Update1.htm.

 

In 1994, in an ambitious and successful effort to be self-sufficient, China

raised grain support prices by 40 percent. Unfortunately the drain on the

treasury was too great, so the support prices were lowered, dropping close

to world market levels. As grain prices have fallen over the last three

years, the area planted to grain has shrunk by 10 percent.

 

China has absorbed the harvest shortfall of the last two years by drawing

down stocks, but there are signs that supplies are now tightening. If this

huge nation has another large harvest shortfall, it will likely have to

import substantial quantities of grain to maintain food price stability.

China, with a population equal to that of India and the United States

combined, has a strong economy and a trade surplus with the United States of

over $80 billion. It would take only $35 billion of that trade surplus to

buy the entire U.S. grain harvest. China can compete not only with the 100

or so countries that import U.S. grain but with U.S. consumers if it needs

to. [!!!!]

 

If the 2002 world grain harvest falls short of consumption when stocks are

at a near-record low, prices will rise. Higher prices will curb demand,

particularly the feeding of grain to livestock, and will encourage

production. Supply and demand will again be in balance, but at a higher

price.

 

If world grain demand continues to grow during this coming year at the

16-million-ton-per-year pace of the last decade, then the harvest will have

to jump by 70 million tons to avoid a further drawdown in stocks. Whether

this can occur, in the face of spreading water shortages, remains to be

seen.

 

As water deficits expand in water-scarce countries, so too will grain

deficits. The new reality is that if the world is facing water shortages, it

is also facing food shortages.

 

A review of the demographic map reveals another troubling reality. Most of

the 80 million people being added to world population each year are being

added in countries that are already experiencing water shortages. Restoring

a balance between water supply and needs worldwide may now depend on

stabilizing population in water-deficit countries.

 

# # #

 

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http://www.earth-policy.org/Updates/Update3.htm or contact

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