Decline in grain supplies and predicting the future

From USDA Grain World Markets and Trade FG05/06 May 2006

I just heard a troubling statistic. The supply of grains has dropped from 115 days to 53 days in the past 7 years recording the lowest reserves since the 70’s (we’ve been only keeping track for 47 years.) This means that consumption has outstripped supply for this period. Now the International Grains Council has announced that the grain projection for July 2008 will fall short of demand by 17 million tons.

This brings up to questions to my mind. First, if demand has exceeded supply, why haven’t prices gone up more? Second, if we don’t have surplus grains, why is President Bush pushing so hard for biodiesel?

Darrin Qualman, from Canada’s National Farmers Union, has an interesting thought. He was interviewed on the Podcast Deconstructing Dinner in January of this year. When asked about why high demand has not produced higher prices, he replied:

“… what we point out is that farmers are increasingly embedded in an agri-food chain, a chain of corporate links that stretches from oil and natural gas wells on one end, right through the whole production cycle, to drive-through restaurants at the other. And, we point out that every link in that chain is increasingly dominated by a tiny number of transnationals, and every link in that chain is recording record profits, even at a time when the family farmers are recording record losses. So, partly market power concentration and control determines where the profits are going to land along that chain, and because farmers are not as big and concentrated as the agri-food transnationals, we’re being starved for profit, and that’s reflected in low prices.”

In other words, the end users (Archer Daniels Midlands(ADM), Walmarts and MacDonalds of the world) have formed buying monopolies that can control grain prices. However, as recent grain market futures have suggested, this buying monopoly may have been broken. So this may mean higher food prices for us all.

Now, why biodiesel if we do not have a grain surplus? That is a question I would put to the lobbyists for the ADMs and Monsantos of the world. Just a few companies have control of the traditional farming methods that will be key to the productivity required to make grains produce more calories than is required to grow them. And ADM and Monsanto are already heavily invested in biofuels (biofuel production, GMO seeds for biofuels, fertilizer, pesticides and grain storage and transportation). So, most of the profits of increasing prices will end up in their pockets.

Of course, the demand for increased productivity in grain production will have an impact on the local environment and the health of the Chesapeake Bay. On the bright side, the increase in grain prices may make organically produced grains more competitive.

A lot to think about.

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~ by lindabeekeeper on September 9, 2007.

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