Food Commodities, Empty Stomachs and 2011 Production

Rice St. Martin'sOne of my goals in life is to alleviate hunger.  I’m not talking about the hunger we have as farmers for little extras at the dinner table.  In fact, most of us are just like any other North American eating too much because food is so ubiquitous and cheap.  I’ve spent quite a bit of time in Bangladesh and the poverty theme park there is overwhelming.  When I see hungry people I feel for them.

It just so happens that with the run up an agricultural commodity prices, wheat and rice are getting a little bit more publicity.  Wheat and rice are agricultural commodities but they are more like food commodities because they are much closer to the dinner plate than corn or soybeans. So as the prices for these commodities have risen there is much angst in the poorer communities of this world.  When they start selling bread by the slice instead of the loaf in places like Africa, I think we even have some farmers who feel guilty.

I have never thought of it that way.  For instance, on twitter this morning I was tweeting about agricultural commodities and price movement.  That is a very common thing for me to do as I find twitter to be a very valuable resource to network with other professionals in the commodity space.  The chatter on twitter this morning was all about how wheat prices and rice prices had risen so highly that we have food riots in parts of the developing world.  Of course I chimed in that my colleague in Bangladesh recently told me that rice prices have tripled there.   Poor people with empty stomachs couldn’t afford it and I can envision myself on those Dhaka streets looking hunger right in the eye.

It is pretty clear looking forward that our world faces an agricultural commodity constriction.  As agricultural producers we are enjoying very high prices, only surpassed by what happened in 2008.  At that time it was a brief respite into high-priced territory after an extended period of low prices.  The great demand driven market for corn made for some high prices.  The difference in 2011 is that almost every agricultural commodity that we talk about in North America has hit the supply wall.  The great demand driven market of the last few years has finally hit a short crop year with tenuous results.  If we don’t hit it right in this production year the world is going to fall short of food.  Those empty stomachs will simply be emptier.

Some of you might say that we’ve been here before.  However, if that’s what you believe I disagree.  We all have seen short supply years before but I don’t believe in my career I have seen it where the market wants 8 to 10 million more acres into production for the 2011 crop year.  In the past corn stole it from soybeans or soybeans stole it from cotton.  In 2011 no crop can afford to steal it from anybody and that’s the difference.  In my mind I cannot see where it is going to come from.  At a certain point the law of averages should take over and we get big production everywhere.  This is the year the world needs it to happen.

I said it last week in Edmonton Alberta.  In fact I told the 600 people in the audience that Western Canada needed to hit the production bull’s-eye in 2011.  It’s true everywhere but of course the question has to be asked, what about if it doesn’t happen?

It’s pretty obvious to me.  If we don’t hit the production bull’s-eye in 2011, we’ll see prices continue to be buoyant, in fact they surely will challenge record levels.  As agricultural producers we will definitely be in the front lines and most likely find a way to profit.  The darker story will be on the streets of places like Dhaka Bangladesh where poor people will gather begging for food.  We won’t have enough of it and we’ll have even more empty stomachs.

Of course as farmers we know we can produce agricultural commodities in abundance.  We’ve all been there and some of us have been there many, many times.  In Ontario, I don’t think we can even come close to the production year we had in 2010, in 2011.   Last year we broke records and it was not even close.  In 2011, it’s likely we’ll have a more normal year.

Needless to say, going forward in 2011 it’s all about food prices and empty stomachs.  The first one I can’t do much about except produce as much as I can.  The empty stomachs will happen regardless of what I do.   As food producers and as farmers we’ve got a job to do.  In 2011 it may have never been so important.

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