Wild weather is wreaking havoc on crops around the world, sending their prices skyrocketing.
On wheat farms in the U.S. and Russia, it’s a drought that’s ruining harvests. The soybean fields of Brazil are bone dry too, touched by little more than the occasional shower. In Vietnam, Malaysia and Indonesia, the problem is the exact opposite. Torrential downpours are causing flooding in rice fields and stands of oil palm trees.
The sudden emergence of these supply strains is a big blow to a global economy that has been struggling to regain its footing after the shock of the Covid-19 lockdowns. As prices soar on everything from sugar to cooking oil, millions of working-class families that had already been forced to scale back food purchases in the pandemic are being thrust deeper into financial distress.
What’s more, these increases threaten to push up broader inflation indexes in some countries and could make it harder for central bankers to keep providing monetary stimulus to shore up growth.
The Bloomberg Agriculture Spot Index, a gauge of nine crop prices, has risen 28% since late April to its highest level in more than four years. Wheat earlier this week was the most expensive since 2014.
“The fundamentals have changed dramatically since May,” said Don Roose, president of brokerage U.S. Commodities in Iowa. “The weather is bubbling to the top, and we have demand chugging in a bull market.”
The fallout from the pandemic means that the United Nations was already warning of a worst-case scenario in which about a tenth of the world’s population would go hungry this year. Things could become more dire if grocery costs keep rising and even more people can’t afford to eat.
“It’s looking very bleak,” said David Beasley, executive director at the World Food Programme, the hunger-fighting group that won the 2020 Nobel Peace Prize. Declining currencies in food-importing nations, the threat of more economic shutdowns and struggles for farmers to expand production could all compound the problem, he said.
“You start adding all these things together and you begin to almost run around like, ‘The sky is falling, the sky is falling,’ but it ain’t chicken little,” Beasley said.
Mangled supply chains and a flood of buying already sent food prices higher in many countries earlier this year as Covid-19 lockdowns disrupted global trade. But even then, there was an ample cushion of grain stockpiles and Northern Hemisphere harvests were expected to be bountiful. Then came the dry weather.
Climate scientists have long warned that an increase in unpredictable and extreme weather patterns would be a growing threat to crop production and food security. Now, we are experiencing what it means to be living in a climate-disrupted world as wildfires blaze across the U.S. West, hurricane season grows more ferocious and forecasters say that 2020 could be the world’s hottest year on record.
Antonio Carlos Simoneti, a fourth-generation orange grower in Brazil, is seeing the change firsthand. With drought and heat plaguing his lands in Sao Paulo state, the world’s top region for orange juice production, the river that usually snakes across his property has vanished. That’s the first time that’s happened since his family acquired the farm 36 years ago. Oranges on his 500-hectare (1,236-acre) grove are drying up inside and becoming crystallized, as the trees suck all the water from the fruit to try to survive the parched conditions.