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Environment

Wheat prices soar but global supply remains stable, expert says

A spate of natural disasters in the last year caused food prices to increase and experts to fear another food crisis like that of 2008. So what has been done to prevent another crisis and ensure world food security?

Wheat field

Wheat prices have increased by 40 per cent in the last twelve months

After the price of wheat, one of the world's most basic food staples, increased by 40 percent in the last year, and natural disasters strike the world's largest food crop exporters, many in the international community fear a repeat of the 2008 food crisis.

Flooding in northeastern Australia has devastated the region's wheat crops, which could increase world food prices further. Deutsche Welle spoke with agricultural economist Michael Bruentrup, of the German Development Institute, to find out what this all means to the global poor.

DW: Wheat prices are up 40 percent and flooding in Australia, the fourth biggest exporter of wheat, is causing massive damage to crops. How will that impact on the prices for wheat and the world food situation?

Michael Bruentrup: Australia exports about 10 percent of the total wheat exports on the world market, which is about 11 to 15 million tons. Predictions for the total volume haven't decreased due to the flood in Queensland, but it is the quality of wheat which is the problem. It has to be downgraded and maybe up to 8 to 9 million tons won't be available on the world market as food but as feed, which doesn't serve human consumption. There is quite a substantial risk that this might aggravate the already precarious situation on the world market.

An entire suburb is underwater in Queensland, Australia

Flood damage in Australia will impact on crop exports

In 2008, we had a serious food crisis and it seems we could be facing another. Why is the situation on the world market again becoming so difficult?

The United Nations Food and Agriculture Organization (FAO) says that this won't be another crisis like the 2008 crisis because the total amount of food production has tremendously increased. In about three years it has increased by about 60 million tons, so I think it is still the third highest world harvest ever. What is particular to this situation is that it is the major exporters who are affected now.

Russia, the third largest producer, was hit by recent fires and extreme drought. Australia is being hit by floods. And Canada has also been affected by drought. Also there are some fears that in the US the harsh winter conditions will affect the winter crop.

The FAO doesn't think this food crisis will be as bad as the last one, because the prices may be soaring, but demand may be not as acute in many of the food importing countries. That is our hope but of course the prices still indicate that there is major unmet demand.

But in any case prices for wheat, but also for other food crops have increased. What does this mean for poor people?

It is a little bit tricky because prices on the world market do not automatically trickle down to national markets. For example, in the last crisis there were countries with very open trade regime and no stocks and they had a depression of prices. But in other cases they can experience this dramatic price increase of 30 to 40 percent.

Now, food purchases for the World Food Program for instance are extremely expensive and the same money that has been contributed to feed, lets say 50 million people, now will maybe suffice to feed only 20 to 30 million. This is a real problem because they purchase direct on the market, which means they don't have the buffers.

Does that mean the World Food Program, which nourishes millions of people who are in refugee camps, will have more problems feeding the people it cares for?

This is a typical situation where you don't have your own buffers. If they have long-term contracts then they can survive for some months and they won't feel the full affects for a few months. Hopefully until that time, prices will have been depressed already but nobody can foresee that now. I suspect the next bad news from a large exporter like the US will definitely drive prices through the roof.

Dr. Michael Bruentrup from the German Development Institute

Dr. Michael Bruentrup from the German Development Institute

A lot of criticism has been directed at speculations about food crops on the world market. What has been done since 2008 to ensure food price security?

Yes there's a lot of criticism with these speculations, especially in the US with future markets. Unfortunately, researchers do not agree on to what degree speculation has really contributed to the crisis. Some have shown a coincidence between the amount of speculation of investment of futures and prices, but the direct link between the future market and the spot market, the physical market, is not clear. There's no clear evidence. For instance, India stopped future markets ín the last crisis and it hasn't had any affect on prices there.

French President Nicolas Sarkozy is going to the US this week with a European campaign for greater global food price and currency stability. How much can the EU do to enhance greater stability world wide, as far as food prices are concerned?

The EU is one of the big actors in the food markets without doubt. That is why the French president brings the issue to the G20 in which you have all the big producers and importers, so that is the right level of cooperation but of course you would have to cut into markets. I think the goal is very honorable but how to get there I think is still a major question of consultation. It's very honorable to do this now because I'd say that every expert believes that this vulnerability of markets will increase with climate change, and climate change increasingly affects production and trade.

Interview: Anke Rasper/ sp

Editor: Sean Sinico

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