The drought raging in the USA in summer 2012 is driving up prices for cereals (except rice) on the world markets. This could mean devastating consequences for the world's poor. But experts are of the opinion that this could also be an opportunity for smallholders in developing countries.
The USA is in the grip of a drought considered to be the worst for more than 50 years. Over 60 per cent of the country's farms are located in the drought stricken areas, which normally produce some 40 per cent of US-America’s wheat and soya and 44 per cent of livestock.
As a result, far lower harvests are expected than in previous years. With it, corn losses of about 20 per cent are anticipated. Should the situation become more acute it could even rise to 30 per cent, reported the International Food Policy Research Institute (IFPRI) at the beginning of August 2012.
As expected, this predicament has lead to a sharp price increase on the world market. Wheat prices rose by about 50 per cent and maize prices by more than 45 per cent from mid-June to end July 2012, according to the World Bank. Soybean prices on the other hand rose by almost 30 per cent from the beginning of June till the end of July 2012, making an increase of almost 60 per cent since the end of last year. Rice prices have remained stable. This is the difference compared to the 2008 food crisis, when the price of all cereals escalated, including rice prices.
Is this an opportunity for farmers in developing countries?
In order to resist this food crisis, the IFPRI recommended in August 2012 that, amongst other measures, cereal production in developing countries should be increased for the next season. This would help developing countries reduce the impacts of the high and volatile prices on their national food security. In the long term, IFPRI signals that "boosts to smallholder productivity, including enhanced access to high-quality/stress-tolerant seeds, fertilizer, new and affordable technologies, and rural infrastructure, must be made top priority”. In this context, the World Bank also points out that in the long term “sustained investments in agriculture in poor countries” are essential.
The Church Development Service (Evangelischer Entwicklungsdienst – EED) considers that this crisis situation offers a real opportunity for farmers in developing countries. Higher world market prices for cereals would make cereal production profitable for them again. Many of these countries are cereal importers, buying chiefly from the USA and the EU. When world market prices are low, domestic farmers are not competitive. "To make a livelihood from farming, men and women smallholder farmers need higher world market prices” says the EED. The World Bank also sees an opportunity for developing-country farmers –”higher prices can bring desperately needed income to poor farmers, enabling them to invest, increase their production and thereby become part of the global food security solution”.
Despite such opportunities, however, the fact remains that high world market prices are first of all a threat to food security for the world's poorest countries, and consequently a threat to social stability.