Food Outlook 2009 – Understanding the Risks

Sunday, May 24, 2009

Executive Summary

• Global grain stocks at lowest levels in over four decades
• Shockingly low fertilizer sales suggest possibility of a disappointing yield
• Food supply and demand are tightly balanced
• Food distribution networks are cost-efficient but not terribly robust
• Ways you can increase your food security

Introduction

Food is something that many of us take for granted, but it is important to recognize that this luxury is a recent development in human history. It is time to give more thought to this critical staple in our lives.

In March of 2008, food commodity prices hit an all-time high. This coincided with a world-wide food crisis, food riots, and even a few instances of national rice hoarding. Many believe that this was triggered by economic conditions (e.g. a flood of cheap money), not a fundamental or structural shortfall in food production. But I hold the view that both were at fault.

Food demand has grown steadily over the years, as has food supply. However, in recent years the excess margin of supply over demand has tightened and even gone negative several times. Reserve stocks are incredibly tight, resting at levels not seen since the early 1970’s. 

It is easily conceivable that food deliveries could be disrupted within any country, leading to rapid onset of local food shortages. This report will apprise you of several of the challenges that currently exist regarding world food supplies and the possibility that these challenges could lead to a structural shortfall in global food supplies in 2009 or 2010. It also contains specific actions that could greatly enhance your own food security.

Food Security

In western countries, consumer suppliers in most communities and every major city generally maintain about three to five days worth of food on their shelves. This reflects a very cost-efficient, just-in-time food delivery network that balances supply and demand by relying on constant truck traffic bringing in replacement items. But it also has some fundamental weaknesses that can easily cause a disruption in the flow of supply. An understanding of these possibilities is essential if we wish to gain some measure of control over our food security.

Several recent incidents confirm the accuracy of the "three to five days worth of food" estimate:

"In the lorry strike of 2001, we had only three days of food in Totnes."

(Source)

Italy’s truck drivers are blocking traffic on the country’s highways for a second day, causing gas shortages and preventing the delivery of basic foodstuffs.