Why is FAO's food price index up only 6% ?

In today's NYT, we have a report about a weak monsoon and crop devastation in India:
"Drought has devastated crops around the world this year, including corn and soybeans in the United States, wheat in Russia and Australia and soybeans in Brazil and Argentina. This has contributed to a 6 percent rise in global food prices from June to July, according to United Nations data"
Corn is up about 60 percent since June, wheat and soybeans are up respectively about 25 and 16 percent.  The production weighted average of these three crops usually tracks the FAO index pretty well.  Here's a plot of US prices for these three key staples and FAO's food price index. (I made this graph a little while ago, so it doesn't include last month's spike.)

So why is FAO food price index up just 6% (the implicit reference in the NYT article) given the much larger spikes in corn, soybeans and wheat?

Rice prices--another key staple--remains subdued due to large inventory buildups in India and other places.

Still, I don't get it.

I hope this means the world is dealing with crop shortfalls better than in 2008.  Maybe other relatively minor crops are making up the difference. But I wonder if it's just a matter of time before the FAO index shows a larger spike as well.


  1. Dear Michael,
    I am an academic who writes on the social justice implications of climate change.

    I use your 2009 PNAS article in my public lectures on the issue. In scanning through your posts, I saw that you have briefly touched upon the issue of how much of the destruction of crops was driven by drought and how much by temperature in your post in July “Tracking the Heat and Drought.”

    The question of how much of the reduction in crop yields is due to heat and how much is due to drought is important. The future drought models are very daunting so trying to forecast crop reductions with both temperature and drought would be helpful (if possible). This is especially true considering the fact (at least according to the NYTimes) that only 13% of the corn crop in the US is irrigated.

    Also, in 2011 grain yields dropped 50% in Texas from the drought/heat wave. Do you have any rough estimate how much of the problem was heat related and how much was drought related?

    Thank you for your time,
    Richard Miller, Ph.D.
    Associate Professor Creighton University

  2. Richard: Thanks for your comment and question.

    Differentiating heat from drought is a little subtle, and this is a topic of our current research. At the moment I believe both mainly indicate water stress in plants. When it's hot, especially in most parts of the US, vapor pressure deficit increases, which increases evaporation and evapotranspiration. So, to keep the same amount of soil moisture, more precipitation is needed. But since precipitation and heat tend to be (slightly) negatively correlated, more heat generally means less water, more evaporation, and potentially a lot more stress from lack of water.

    Precipitation is also badly measured, since it can vary widely across space and we only have rain gauges in specific locations. This is probably another reason why extreme heat predicts crop outcomes much better than lack of precipitation does.

    Traditional drought measures simply measure rainfall relative to historic norms. They do not account for evaporation and evapotranspiration. Compare 1988 and 1983, for example. Both were really bad crop years. 1998 was very hot and very dry. 1983 was about average--not a drought year by any conventional measure--but was very hot. Both had very bad yield outcomes. In general, extreme heat is a *much* better predictor of yield outcomes.

    Besides via lack-of-water stress, plants can probably be harmed by extreme heat in other ways. Insects like the heat, so pest problems are typically worse. Flowering and pollination can be harmed be extreme heat. Heat also accelerates the rate at which plants mature, which can shorten the growing season and reduce yield. Based on work in progress right now, I'd guess these factors are small relative to heat-induced water stress. Keep in mind this judgement is tentative.

    Rate of maturation can be adjusted via breeding, so surprises are bad, but we should be able to adapt to longer-run, anticipated changes like that stemming from climate change.

    I'm not at a point where I can confidently attribute any specific outcome to lack of precipitation vs. heat. But I can tell you that once the effects of extreme heat are carefully accounted for, there tends to be little predictive power in the amount of precipitation. What's tricky is how one interprets that fact, since the mechanisms that involve precipitation and heat are so intertwined.

    In environments with very inexpensive and nearly limitless irrigation water, extreme heat is not as bad. But as you say, that really only describes the West where irrigation water is heavily subsidized.

  3. Thank you Michael for your response, I found this line particularly encouraging:

    “Rate of maturation can be adjusted via breeding, so surprises are bad, but we should be able to adapt to longer-run, anticipated changes like that stemming from climate change.”

    I would like to ask you and your fellow researchers two more speculative, but I think important, questions.

    1. If we reduce corn and soy yields so dramatically in the bread basket of the US in a 4 degrees Celsius warmer (relative to preindustrial temperatures) world, as your PNAS study suggests, is there enough fertile soil, etc., to move our crop production North into Canada.?

    2. Do you think we can feed 9 to 10 billion people in a world 4 degrees Celsius warmer (relative to preindustrial temperatures)?

    On why 4 degrees Celsius is a likely outcome see below.

    Let me summarize an excellent analysis from Kevin Anderson and Alice Bows from the Tyndall Centre. (This is from “Beyond ‘dangerous’ climate change: emission scenarios for a new world” BY KEVIN ANDERSON AND ALICE BOWS (Phil. Trans. R. Soc. A 2011 369, 20-44))

    To have a 64% chance (worse odds than Russian Roulette) of holding the 2°C line, developed countries like the US and Europe would have to:
    1. Stop CO2 emissions growth this year
    2. Reduce their emissions approximately 11% per year (i.e.
    2011) towards virtual total decarbonization by 2050.

    Developing countries, including China and India, which are allowed under prior International Climate Agreements to peak their emissions later, would have to
    Stop their emission growth by 2020 and reduce their emission 6% per year to 2050.

    What happens if we take a less radical and more politically palatable emissions reduction path? In this scenario we will put the carbon reduction challenge in context with deforestation and some other non-CO2 emissions.

    Let us start with some optimistic assumptions:

    Deforestation (accounts for 12 -25% of CO2 emissions) : from current levels we will cut these in half by 2040 and close to zero by 2060.

    Greenhouse gas emissions (i.e. nitrous oxide and methane) to feed a growing global population (which cannot be reduced to zero): we will cut the emissions intensity of food production by over 60% over the next four decades

    This path involves:
    Developing countries continue on their current path and peak in 2030 and then reduce their emissions 3% per year

    Developed countries emissions peak in 2016 and are reduced 3% per year

    What is the likely outcome of this approach? Global temperature will increase over preindustrial temperatures by 4 °C

    This analysis from Kevin Anderson at the Tyndall Centre, included some positive feedbacks, but does not include the most dangerous feedback - the melting of the permafrost.

    It is important to recognize that we have never reduced emissions more than 1% per year on a decadal time scale, absent major economic contraction.

    “In the late 1970’s France Invested heavily in nuclear power. Nuclear generation capacity increased 40-fold between 1977 and 2003 and emissions from the electricity and heat sector fell by 6% per year, against a background 125% increase in electricity demand. The reduction in total fossil fuel related emissions over the same period was less significant (.6% per year) because of growth in other sectors.” (Stern Review, p. 231)

    In addition, UK ‘Dash for Gas’- total GHG emissions fell by an average of 1% per year between 1990 and 2000.

    The only time emissions dropped more than 1% per year over a decade was during the economic collapse in the former Soviet Union after the fall of the Berlin Wall in 1989 resulted in a decline in its greenhouse gas emissions of 5.2 % each year for a decade. During this period economic activity more than halved. (Hamilton)

    Thank you for your time,
    Richard Miller

  4. Apparently Argentinian corn production was up. Sugar prices were way down, which helped offset small increases in other parts of the FAO index. Does anyone know what specific quotes go into the FAO index? It seems like a black box.


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