Global food threats are increasing Ship’s crew

By Agnieszka de Sousa, Flavia Rotondi and Tarso Veloso

(Bloomberg) — As scorching temperatures devastate farms from the United States to China, crops, fruit production and dairy production are coming under pressure. This extreme weather is just one of the threats to the food supply that are increasing again around the world.

This week, top rice exporter India banned some shipments of the commodity – a staple for about half the world’s population – in a bid to keep domestic prices under control. Russia has canceled an agreement that allowed Ukrainian grain to be safely transported across the Black Sea.

Add to this the recent occurrence of the El Niño weather phenomenon, which could cause further damage to agriculture.

All of this is fueling renewed concerns about food safety and food prices, and risks prolonging rampant inflation on supermarket shelves. That would be a fresh blow to consumers who are just beginning to see better news after the prolonged strain on household budgets.

“We’re all still struggling under an inflationary regime,” said Tim Benton, food security expert at Chatham House in London. “And of course, although inflation is falling, that doesn’t mean prices are going down. That means they’re just going up more slowly.”

The extreme heat sweeping across much of Asia, Europe and North America is just the latest challenge in a difficult year for farmers. They have had to contend with extreme weather events, including prolonged droughts, heavy rains and floods.

In the south of Europe it is currently so hot that the cows give less milk and the tomatoes spoil. Grain harvests will also be much smaller after the drought.

In Asia, Chinese rice paddy yields are at risk and US grain-growing conditions in June were the worst in more than three decades before some rain relief in the Midwest. Rice prices in Asia recently hit a two-year high as importers built up inventories.

While the full extent of the damage depends on how long the unfavorable conditions last, there are already clear signs of destruction in fruit and vegetables in southern Europe, which supplies much of the continent.

In Sicily, some tomatoes have menacing-looking black rings, which are the result of what’s known as blossom-end rot, when extreme weather causes a calcium deficiency in the plants.

“They are devastated,” said Paddy Plunkett, head of global sourcing at importer Natoora, who was sent a photo by a grower. “I’ve never seen that before.”

Across Italy, weather-related damage to agriculture will exceed last year’s 6 billion euros ($6.7 billion) in losses, according to farmers’ group Coldiretti.

Temperatures have accelerated ripening or caused heat burns in grapes, melons, apricots and aubergines. Bee activity and pollination has been impaired and wheat production has declined, it said.

“This is not just a normal hot summer,” said Lorenzo Bazzana, agronomist at Coldiretti. “People say plants should adapt to climate change, but we’re talking about cultures that evolved slowly over thousands of years. You cannot adapt to a climate that is constantly changing so rapidly and so dramatically.”

Aside from Europe’s vegetable stalls, the good news is that the grain market – key to the food security of the poorest and import-dependent countries – is still well supplied thanks to bumper soybean and corn harvests in Brazil. Leading wheat exporter Russia is set for another record harvest.

But the uncertainties are piling up. A case in point: the wheat surged throughout the week in response to a spate of news out of the Black Sea.

The surge rose after the export deal collapsed, but then fell again and then rose again when Russia threatened ships calling at Ukrainian ports. He gave way on Friday as Ukraine tried to restore the export deal.

Further concerns stem from India’s moves to ban exports of non-Basmati white rice in a bid to curb inflation.

According to the Ministry of Food, retail rice prices in Delhi have risen by about 15% this year, while the national average price has risen by 9%. The government could extend restrictions to other varieties of rice, Nomura Holdings Inc.

Elsewhere in Asia, Thailand is urging farmers to limit rice planting to just one crop this year due to the threat of drought. In China, high temperatures will likely force the crop to ripen early, affecting yields. President Xi Jinping on Thursday called for greater efforts to ensure grain security, state television reported.

Parts of the US are experiencing similar stresses.

While rainfall levels have improved after hot and dry conditions earlier this year, weather in the Midwest is expected to change again next week and into early August, just as corn and soybean crops are entering critical stages of development, said Arlan Suderman, chief commodity economist at brokerage firm StoneX.

The Ministry of Agriculture forecasts that durum wheat production will fall by 16% this year, while production of other spring varieties will fall by 1%. The market will know just how dire the situation is when crop scouts hit the fields next week for North Dakota’s annual spring wheat tour.

Transportation issues can increase concerns about food security. Water levels on the Mississippi and Ohio rivers are falling for the second straight day, raising the risk of shipping problems on key cargo routes.

“I would be surprised if global food prices didn’t pick up again after more than a year of decline,” he said Caitlin Welsh, food expert at the Center for Strategic and International Studies in Washington. “We are experiencing multiple threats to agricultural markets.”

Back in Europe, droughts have meant grain production in Italy, Spain and Portugal will be up to 60% lower than last year, potentially contributing to the worst grain harvest in the EU in 15 years, according to farm lobby Copa and Cogeca.

The situation is described as “extremely worrying”.

“Prices are always more down than up,” said Tom Halverson, chief executive officer of CoBank, a credit union that works with rural businesses in the United States. “It takes a lot longer and it’s a lot harder to squeeze out inflation.”

-With support from Alessandro Speciale, Michael Hirtzer, Áine Quinn, Jasmine Ng, Hallie Gu, Isis Almeida and Megan Durisin.

© 2023 Bloomberg LP

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