Global food security concerns remain as prices fall

The Food and Agriculture Organization of the United Nations (FAO) released the "Cereal Supply and Demand Briefing" on February 5, which raised the 2014 world cereal production valuation to 2.532 billion tons, an increase of 7 million tons from 2013. This is the second consecutive year of food production valuation. New historical records. Due to the increasing global grain supply, international food prices have fallen to the lowest level since 2010.

Theoretically speaking, the overall supply of food in the world exceeds demand, which will bring about lower food prices, which will benefit food importing countries and help ensure world food security. However, taking into account factors such as the strength of the US dollar, the financial constraints of food-deficit countries and regional imbalances, the decline in food prices cannot simply be equated with food security. In particular, it is necessary to guard against the risk of future food and agriculture production reductions that may be caused by lower food prices.

International food prices fell from the beginning of 2014

the International Grains Council recently raised its forecast for global maize production in 2014. Statistics from the U.S. Department of Agriculture also show that the global wheat harvest in 2014 set a record, and the global rice production was close to the record of the previous year. At the same time, the demand for wheat from the United States, such as Brazil and Nigeria, is declining and is the weakest in nearly 20 years. Affected by this, the international food prices from the beginning of 2014 all the way down.

The FAO Food Price Index averaged 202.1 points in 2014, down 3.7 percent from 2013 and nearly 28 points from its 2011 peak, with the Cereals Price Index alone down 12.5 percent from 2013. In 2015, this trend continues. In the United States, wheat futures suffered their worst start in 40 years, rice futures prices in Chicago hit $10.525 per 100 pounds, the lowest since August 2010, cocoa prices also fell to their lowest point in a year, and futures in New York entered a bear market.

Some analysts pointed out that after the food crisis caused by the soaring food prices in 2007-2008, with the increase of production inputs and the improvement of production efficiency in recent years, the world's food supply as a whole has shown a trend of oversupply. Theoretically speaking, the decline in international food prices will bring benefits to food importing countries to a certain extent and will help ensure world food security. However, considering the current real factors such as the continued strength of the US dollar and the uneven regional development, the world food security situation cannot be overly optimistic.

Abdolreza Abbashian, a senior grain economist at FAO, said in an interview with our reporter that by observing the total number of hungry people in the world, it is not difficult to find that no matter when international food prices have reached their peak in recent years, or when they have been hovering at a low point in the past, the total number of hungry people in the world has not fluctuated significantly.

Food security goes beyond agriculture.

According to FAO statistics, corn stocks in the European Union, the United States and China are still increasing, wheat stocks in the European Union, China, India and Russia are also increasing, and rice stocks in India, Indonesia and Thailand are also at the highest level. However, in sharp contrast, at least 38 countries in the world are still in a situation of food shortage, including 29 African countries. In countries such as Zambia, Senegal, Guinea-Bissau and Central Africa, there is currently a serious food supply crisis.

It can be said that international food prices continue to fall, but the food security situation in Africa has not improved, and food prices have fallen. From the perspective of supply and demand, food production may be suppressed in the future, resulting in a decline in food production.

What is the reason for this contrast? Abbastian analyzed that, in fact, the increase in world grain production means more sufficient raw materials for food processing, and the final price of food is not only reflected in the price of raw materials, but also compared with the cost of processing, transportation, sales and other links. The impact of grain cost price on consumers is not so significant. "For example, the price of wheat has dropped by 10% in the international grain market, the reduction in the price of bread on the market may not even reach 1%".

Since the international food market is mainly denominated in U.S. dollars, "the U.S. dollar has continued to strengthen in the past two years, which is also one of the factors that have lowered international food prices." Abbashian said that for many countries, although international food prices are falling, they are The cost of food imports is still high in the currency of the country. Moreover, for many countries with weak financial resources, even if the international food price falls to US $1/ton, hunger is still a problem that cannot be solved. This is a practical problem faced by many underdeveloped countries. "In fact, from this perspective, the world The issue of food security has gone beyond the scope of agriculture, and the different macroeconomic conditions of various countries must also be considered."

on the other hand, the continued decline in international food prices has objectively weakened the competitiveness of African countries' food production in the international market, "resulting in African food production not making money in the market, and food production has been suppressed". Abbashian believes that food production in African countries is also constrained by factors such as weather, disease and war, "which also makes only a few African countries have the conditions to expand production." low international food prices have frustrated the enthusiasm of African countries, which is not conducive to food self-reliance in these countries in the long run."

be alert to the risks that may arise from oversupply in the market.

Experts pointed out that the current global economy is facing the risk of deflation, and consumers are more inclined to hold their wallets tightly, which may have a negative impact on world food production in the future. What may follow is that agricultural producers will reduce production because they cannot make money. At the same time, the government may also increase storage costs due to excess inventory, and then take the initiative to control the scale of agricultural production. If this happens, small and medium-sized enterprises and individual producers will suffer a fatal blow.

"Falling international food prices will put large agricultural companies in a good position." Abbastian said that the decline in profits will make it difficult for small and medium-sized enterprises and individual producers to continue, while large enterprises will rely on abundant funds to take advantage of this opportunity to occupy more market share, leading to the narrowing of food supply channels.

"The government must play a more important role," Abbastian believes, and policymakers must recognize the immediate reality. "The current international food prices are only relatively low, but they have fallen a bit at a very high position". The FAO Food Price Index clearly shows that although it has experienced three consecutive years of decline, the index is still more than twice that of 2003. "compared with the trend of international food prices, how to maintain the diversity of production channels and ensure the stable operation of the food market is the primary issue that the government needs to pay attention to in order to ensure food security".

(Source: People's Daily, February 7, 2015 Author: Han Bingchen)

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