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Earth Policy Institute Press Release
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.
# # #
Eco-Economy Update 2001-3
Copyright Earth Policy
Institute 2001
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