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When America sneezes…

Image: US 25th Air Force

Rising food prices were a major contributor to the recession in 2010-11. Climate variation across Eurasia had resulted in a poor grain harvest that produced shortages around the planet.  As Troy Sternberg noted:

“In 2010, the world wheat harvest was affected by changing weather patterns that led to shortages. Production decreased by 32.7 percent in Russia, 19.3 percent in Ukraine, 13.7 percent in Canada, and 8.7 percent in Australia, resulting in reduced global supply and price spikes.  At the same time, China’s wheat production fell 0.5 percent while consumption increased 1.68 percent.

“China, the largest wheat producer and consumer in the world, was hit by drought in the wheat-growing region of eastern China in November 2010. These conditions created market pressure on wheat prices, then exacerbated by a lack of precipitation in China, threatening the 2010–2011 winter wheat crop. China secures 22 percent of its annual harvest from winter wheat. Fear of potential crop failure led the government to make significant wheat purchases to ensure adequate domestic supply; these measures contributed to spikes in global wheat prices.”

While the ensuing increase in global food prices deepened a western recession in economies still reeling from the 2008 banking crash, they caused absolute shortages across the Middle East and North Africa.  Adding fuel to already smouldering discontent, food shortages helped to trigger the series of uprisings that the media christened “The Arab Spring.”

One of industrial civilisation’s greatest weaknesses is we have become increasingly dependent upon just three serials – corn (maize), wheat and rice.  Any failure in any one of these crops in one of the world’s major “bread basket” regions can result in economic problems due to rising prices; and in the worst case can result in widespread shortages.  To make matters worse, in order to feed 7.5bn humans, we have selectively bred a small number of varieties of these three crops that are themselves extremely vulnerable to climatic variation.  That is, in order to make these plants divert their energy into growing grains, we have bred out such things as deep roots (which allow them to survive drought) and strong immune systems.  The result is that the crops are themselves dependent upon artificial (fossil-fuel) fertilisers, pesticides, fungicides and herbicides.  This, however, makes us even more dependent upon a stable climate; as excessively wet conditions can be as devastating to crop yields as excessive drought.  As Elaine Kub at the Progressive Farmer puts it:

“The absence of drought is good; it’s a good thing that people everywhere welcome. However, it’s not the whole picture — there can be too much of a good thing. They say, ‘rain makes grain,’ but that’s only true if the seed is first able to get in the ground…”

Kub is referring to the crisis that is brewing in America’s Midwest grain basket, which has been experiencing severe flooding as a consequence of excessive snow melt and rainfall.  The result is a two-fold problem.  First, large food stockpiles built up in recent years – partly in response to the trade war with China – have been destroyed by the floods.  As Tom Polansek at Reuters reports, millions of bushels of crops have been contaminated by polluted flood water and will have to be destroyed, leaving already struggling US farmers out of pocket and removing an important buffer to global food prices.

Second, and more worryingly, the floods have yet to recede, and we are getting late in the growing season.  As Michael Hirtzer and Dominic Carey at Bloomberg report:

“U.S. corn planting has never been this late after storms battered the Great Plains and Midwest and kept farmers out of their fields.

“As of Sunday, only 49% was in the ground, according to a U.S. Department of Agriculture report released Monday. That’s the slowest pace in records dating back to 1980. Last week, the most widely grown American crop was only the furthest behind in six years.”

Although global prices are beginning to rise, a good growing season may yet allow for a bumper harvest.  And assuming the other global bread baskets also fare well, we will have had a (potentially dangerous) near miss.  If, however, weather conditions across the Midwest continue to create poor growing conditions, we will face some unpleasant economic shocks this winter.  As Canadian analyst Barry Prentice told CBC:

“The U.S. corn crop is so integral to the world markets that, you know, they get a sniffle and we all get pneumonia…”

If America does sneeze, one important difference between today and 2010-11 is that our economies are far less resilient than they were.  Since the world still trades in US dollars, Americans will not suffer shortages because Walmart can buy alternative supplies on the world market.  But if China and Russia are moved to cut exports in order to ensure their domestic supplies, that will leave the rest of the world scrambling to secure a share of what is left; and that is a recipe for eye-watering price increases.  For a European – and particularly British – economy already experiencing growing food poverty and a broader collapse in discretionary purchases, a spike in food prices could prove catastrophic.  Put simply, money diverted into food purchases is money that isn’t available for all of the other transactions that allow complex industrial economies to continue.  Other than air and clean drinking water, people will put food ahead of everything else; even if that means (as it is bound to for several millions in the precariat class) defaulting on utility bills, rent/mortgage payments and other outstanding debts.

We are already witnessing the political impact of declining prosperity in the relatively benign shape of the collapse of neoliberal centrist parties and the rise right wing populists… this at a time of global food abundance and a debt-funded supply of (ultimately ruinous) unconventional energy.  But as the Midwest floods show, the stability that we have taken for granted is coming to an end.  And even if we were to dodge a bullet this time around, climate change models suggest that the climatic conditions that have undermined US agriculture this spring are going to become increasingly common.  Moreover, as the surplus energy available to the wider economy continues to shrink, our vulnerability to the economic impacts of these conditions also grows.  Sooner or later one or more harvests is going to fail; and when it does, it will very likely bring the global economy down with it.

As you made it to the end…

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