There are many reasons for high commodity prices. But recent data from FAO shows a pretty rapid slowdown in productivity growth. The price spike in 2008 occurred in a particularly bad year in which yields declined on a worldwide basis for three of the four largest food commodities. In 2009 all four of the majors saw yield declines, something that hasn't happened since 1974. 2010 couldn't have been much better and was probably worse, given
how bad things were in the U.S, the world's largest producer and exporter (worldwide data for 2010 isn't available yet).
Here's the picture:
The yield slowdown comes at a particularly unfortunate time, with accelerating demand from emerging economies like China and subsidy-driven expansion of ethanol. Keep in mind: we need productivity growth to accelerate considerably to keep up with projected demand growth. FAO says we need 70 percent higher yields by 2050. (Although I'd like to do my own projections, and will one of these days...)
Maybe it's just bad luck with the weather. But I think it just may be a longer run phenomenon.
Yeah, resource scarcity will be in the news for awhile yet.
Update: Lots of interesting commentary over at Mark Thoma's blog. Nice of him to
feature this post! (Thanks Mark!). One question came up about planted area diluting yields through expansion onto marginal lands. There might be some of that. But I think it's mainly a combination of weather and slowing technological progress in breeding. Cutbacks on basic science research do have consequences. And so does climate change, even if it hasn't affected the US, yet.
Anyway, here's the graph for planted area:
there has been record flooding on the mississippi and the ohio rivers, & rainfall for april has set records from southern illinois to ohio (ie, cleveland, columbus & cincinnati set records), leaving most of the fields in the eastern cornbelt saturated and puddled...
ReplyDeleteas of the latest USDA report (the 24th) only 2% of indiana corn was in, compared to 50% same date last year; only 10% of illinois is planted, compared to 67% last year; only 3% of iowa corn is in, compared to a normal 28%, and only 1% of ohio's corn has been planted...my thinking is that even some of what is already planted may rot, as i watched live radar all week, and heavy thunderstorms persisted until thursday, and returned this week...as any corn grower will tell you, total yields decrease the later your corn is planted, so this does not bode well for supplies, with corn stocks 15% already below last years, and 40% of our corn going to ethanol...since the rains have continued, this bears watching, especially in light of the agricultural disasters worldwide last summer...
i have a dozen links on this on my GGO blog, also wrote about it in my notes for the week on MW666...
perhaps this will give credence to the malthusian model?
ReplyDeleteI am a soil scientist in western PA. I can't remember the last time bud brake was so late in the season. In addition, I flew over Texas today - what a mess. All the reports indicate big problems in global agriculture right now. To have Goldman Sachs state that ag commodities are too high to me that someone is twisting their arm and I wonder if its China or the US.
ReplyDeletesee your 'theory' quoted@:
ReplyDeletehttp://ftalphaville.ft.com/blog/2011/05/05/560741/food-prices-and-crop-yields/
Rain? The Rhine (EU) is at its lowest level in 90 years!
ReplyDeletei have a over a dozen links from both this week & last week, but this about sums up what i've discovered:
ReplyDeletehttp://static.seekingalpha.com/uploads/2011/5/5/153859-130460381287373-Michael-Ferrari_origin.png
(corn planted after the first week in may is at risk)
Some evidences from France :
ReplyDeletehttp://www.prodinra.inra.fr/prodinra/pinra/data/2010/09/PROD2010e51d659_20100913024101068.pdf