Sowing the Seeds of Self-Reliance for Forty Years
Global Food Market Tension a Trend?
7 Feb 97
by Geri Guidetti
All contents copyright © 1997, Geri Guidetti. All rights reserved.
________________________________________
Big changes loom on the international food scene, and their future impact on U.S. agriculture, trade and food supply is currently under intense debate. A recent conference sponsored by the Economic Research Service of the U.S. Department of Agriculture entitled, "EU Eastern Enlargement: Feast or Fizzle for U.S. Agriculture?" considered the uncertainty posed by proposed expansion of the European Union (EU) to include 10 Central and Eastern European (CEE) countries. Now, if your response to this news is a big yawn, go grab a cup of coffee and bear with me. This IS important stuff.
The ten CEE countries—Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia—have applied for EU membership and have already signed Association Agreements. Their agricultural productivity is expected to improve over time as they institute EU- required improvements in equipment, technical education, production, quality control and marketing. Membership in the EU will bring these countries unrestricted access to European markets and higher prices for their agricultural products. Their overall economic prosperity is expected to increase.
What does this have to do with U.S. agriculture and food supply? The enlargement of the European market could add up to 100 million new CEE consumers, consumers to whom American growers would like to expand the export of their products. The U.S. already exports wheat and corn to these countries, and these exports are expected to grow in 1996/97 due to an extremely poor harvest this year in most of Eastern Europe. Yet, since 1990, bulk grain purchases by CEEs have declined overall, and increasing U.S. trade with the expanded EU is likely to be met with increased protectionism, stiff competition from current EU countries which are net exporters of grain, and member governments’ intervention to free trade. Agricultural improvements in CEE countries are expected to boost production, reducing the need for imports. In fact, the 10 new EU members could become net exporters themselves in the near future.
Greater in economic importance than grains have been the so-called high value products (HVPs) which include poultry, seeds, oilseed meal, vegetable oil, fruits and vegetables and dairy products. U.S. poultry has been an especially valuable export. Yet, this market, too, may be threatened because the EU expansion is expected to double the number of farmers, including those who raise poultry. The need for U.S. poultry may diminish dramatically over the long term, though the need for corn to feed livestock may increase in the short term.
According to the USDA’s International Agriculture and Trade report, the expansion will have profound effects on U.S. and global agricultural trade. When you add to this uncertain picture the image of a huge, unified European market trading freely among member countries but restricting imports from the U.S. to protect its own members’ profits and market share, you can see the potential for a very difficult time for U.S. agricultural businesses. The U.S. would like to ensure that the proposed expansion will be non-discriminatory against this country and other non-EU exporters. According to the report, "... the United States will defend its access to Central and Eastern European markets, which in many cases took years to develop and foster."
Today’s Wall Street Journal Commodities report may offer a glimpse of the types of difficulties ahead. Yesterday, wheat prices fell to a 21-month low in response to falling global demand for U.S. wheat. You may recall from an earlier Grain Supply Update that there were well substantiated rumors this summer that Egypt would be in the market for 900,000 metric tons of the grain. On Monday, Egypt placed that order – with France – and now there are rumors that the balance of the order would be placed with Australia. The EU, Argentina, Canada and Australia had record crops this year, permitting them to lower their grain prices. The U.S. did not. According to the WSJ, Randy Mittelstaedt, a Merrill Lynch grains analyst, said that the U.S. is facing the worst of two worlds: low grain stocks prevent our fighting for market share and other grain exporters have had record crops, driving prices down.
In our last Grain Supply Update I told you the area seeded to winter wheat in 1997 is down 7% from 1996 and the smallest seeded acreage since 1978. While it would be advantageous to the U.S. to have lower wheat prices that are more competitive in the global market, the already palpable uncertainty over the ’97 crop has begun to firm up contracts for wheat after May, the month that marks the end of the ’96 crop. This may prove to be another difficult year for U.S. wheat supplies and exports.
On the surface, international fretting , dealing and fighting for export markets like the CEEs would appear to be a clear sign that the world is awash in excess food. Before 1990, the politics and economics of food were essentially focused on predictable food surpluses. Much of that same mindset remains today despite clear evidence that food scarcity is evolving as the new norm. Skyrocketing global population, the increased frequency and severity of extreme weather patterns, the productivity limits of food plants, and shrinking land and water resources have all combined to reduce global food stockpiles to historic lows. Organizations formed to control and export surpluses will need to make a major paradigm shift in a marketplace increasingly challenged by scarcity.
During the first half of the ‘90s, production shortfalls were offset literally by raiding the pantry. If we are smart, depletion of the global pantry will serve as an international wake-up call. We need to rethink the production, distribution and business of food. As magnificent as modern agricultural achievements have been the last half of this century, there are substantial dangers to the continuing merging and centralization of food production and distribution systems under ever-larger corporate umbrellas and global government entities. It encourages the politicization of food. It threatens to exaggerate the importance of corporate and government profit, perhaps at the expense of many of the world’s people. Politics and profit rarely dine at the tables of the world’s most hungry....Geri Guidetti, The Ark Institute
________________________________________
E-mail: arkinstitute@aol.com
This article may be reprinted IF my copyright and Sig. File are reprinted intact.
All contents copyright © 1997, Geri Guidetti. All rights reserved.
Revised: 7 Feb 97
Welcome to The Ark Institute ®
