14 Aug, 2012

Global Drought Conditions Raise Threat of Next Crises: Rising Food Prices & Water Wars

Imtiaz Muqbil

The long-forecast global water wars are about to become a reality. A 17% shortfall in India’s monsoon rains so far this year is only one indicator of a looming global drought that could trigger ripple-effect problems worldwide. These include increased prices of food crops, speculative activity, growing socio-economic and geopolitical tensions and environmental disasters as multinational agrifood corporations begin to push GMO crops. It will also impact on the aviation industry’s plans to go big on biofuels as alternative sources of energy.

This exclusive Travel Impact Newswire dispatch contains a collection of news items that offer clear indicators of the impending water crisis. These signs of the Wrath of Mother Nature are set to further complicate an already unstable global situation dominated by economic, environmental, financial, social and geopolitical issues. The world does not need any additional man-made problems. Early warning: Those who start any more wars should take full responsibility for their consequences.

The Pacific Asia Travel Association is advertising its Crisis Management Webinars with the question: “Are you ready for the next crisis?” Perhaps PATA can advise on how to prepare for the upcoming water crisis.

Status of Indian Monsoon Rains

Ministry of Earth Science, 13-August, 2012 – The country, so far till 7th August, 2012, has received about 83% (with -17% deficit) of its long term normal quantum of rains with large deficit (-21% to -59% or more) experienced over Nagaland, Manipur, Mizoram, Tripura, Gangetic West Bengal, Bihar, West Uttar Pradesh, Haryana, Chandigarh, Delhi, Punjab, Himachal Pradesh, Jammu & Kashmir, West Rajasthan, East Rajasthan, Gujarat, Saurashtra & Kutch, Madhya Maharashtra, Marathwada, Tamilnadu, Puduchery, North Interior Karnataka, South Interior Karnataka and Kerala.

The deficiency to certain extent is attributed to the delayed onset and advance of monsoon over various parts of the country (in a range of 1-2 weeks). The lower frequency of the formation of principal rain bearing cyclonic weather systems (lows and depressions) over the Bay of Bengal and Arabian Sea during the current season (as against the average frequency of about 6-7, only one low pressure area formed so far) is seen to be the main contributing factor for the deficit rainfall distribution observed over the country.

The sowing of all the kharif crops has affected in different States due to the delay in onset of monsoon rains and deficit rainfall received so far during this kharif season leading to the reduction in quantum of sowing by

i) 18.3 lakh ha than last year in respect of rice owing to much lesser coverage in Haryana, West Bengal, Orissa, Maharashtra, Uttar Pradesh, Jharkhand etc.

ii) 34.4 lakh ha in respect of coarse cereals due to lesser sowing in Rajashtan, Karnataka, Madhya Pradesh, Maharashtra, Gujarat etc. and

iii) 13.6 lakh ha in respect of pulses due to decline in acreage in Rajashtan, Maharashtra, Gujarat, Karnataka etc.

Some area of coarse cereals, jowar, bajra and groundnut are likely to remain unsown in Maharashtra, Gujarat, West Rajasthan and Karnataka.

At the middle of the monsoon season and with deficient rainfall for the country as a whole, the contingency plans are implemented focusing on fodder production, short duration pulses and conservation of moisture for early planting of rabi crops like toria, sorghum and gram etc.

Augmentation of ground water on availability is the only viable option that increases the cost of production for rice over high rainfall deficit regions of Punjab, Haryana and West Uttar Pradesh, where more than 95% of the area is irrigated from the reservoirs where the water levels are significantly low, is likely to be met either from extra allocated power by the Central Government (1000MW allocated) for operating bore wells water lifting devices or through diesel subsidy extended already.

In addition, for the augmentation of the drinking water scheme, the Government of India had already approved assistance of Rs. 424 crore to four most stressed states viz. Karnataka – Rs. 71 crore; Haryana – Rs. 25 crore; Maharashtra – Rs. 200 crore; Rajasthan – Rs. 158 crore. Additionally, a sum of Rs. 38 crore is approved for 3-states viz. Karnataka – Rs. 12 crore; Maharashtra – Rs. 15 crore; Rajasthan – Rs. 11 crore, to deal with the calamity from the National Rural Drinking Water Programme (NRDWP) for augmenting habitation level safe drinking water supplies.

The above information was given by the Minister of State in the Ministry of Planning, Science & Technology and Earth Sciences Dr. Ashwani Kumar in a written reply in the Lok Sabha today.

Water Level in Major Indian Reservoirs

Ministry of Water Resources, 13-August, 2012 — As informed by Central Water Commission (CWC) which monitors the live storage status of 84 important reservoirs spread across the country on weekly basis, the live storage in these reservoirs as on 02.08.2012 was 30% of their total live storage capacity and 46% during the corresponding period in the year 2011.

Keeping in view the possibility of low rainfall and low storage in reservoirs, and the need to change cropping pattern in the Kharif season, the States/ Union Territories have been advised to use available water judiciously, give priority to drinking water supply and irrigation and make use of ground water to the extent possible.

This information was given by the Minister of State for Water Resources and Minority Affairs Shri Vincent H. Pala in a written reply to a question in Rajya Sabha.

Indian Government Monitoring Variability of Weather Phenomena and Abnormal Weather Pattern

Ministry of Earth Science, 09-August, 2012 –  The Indian Government is monitoring the variability of the weather phenomena and development of abnormal weather pattern like drought, flood, flash flood, cyclone, rain induced landslides, heat cold wave, etc. on a continuous basis. Records of past weather events show that extreme values in respect of heavy rainfall, maximum and minimum temperatures, seasonal rainfall etc. remained unsurpassed in many cases.

Heavy rain events (>10 cm/day) over central India are found to have increased in the recent decades while weak and moderate events are decreasing. The extreme rain events which are becoming more intense in recent years are localized and could be part of the natural variability of the monsoon system.

Spatial analysis of changes in temperature reveals that most parts of the country show a warming trend, except north-western parts of the country, where a cooling trend is observed. The occurrence of heat wave conditions is found to be more frequent in May than in June, while very few heat waves occur in the months of March and April. The spatial changes in minimum temperature are found to be decreasing in most parts of Western Ghats and increasing in most parts of Himalayan region and certain parts of the north-eastern region and such warming is confined to winter and post-monsoon seasons. No such pattern is discerned in respect of other weather phenomena.

India Meteorological Department (IMD) is enhancing its observational network under the modernization plan by installing a network of Doppler Weather Radars (DWR), Automatic Weather Stations (AWS), Automatic Rain Gauge Stations (ARGS), etc. for monitoring abnormal weather patterns and upgrading its forecasting capabilities, so that advance warning can be provided to National Disaster Management Authority (NDMA), Ministry of Home Affairs, and Ministry of Agriculture to tackle the impacts of the adverse and extreme weather phenomena.

In order to capture the characteristics of the changing weather in real time, state-of-the-art 24X7 monitoring system comprising 14-DWRs, located at Agartala, Chennai, Delhi-Airport, Delhi-Lodi Road, Hyderabad, Jaipur, Kolkata, Machilipatnam, Mumbai, Nagpur, Patna, Visakhapatnam, Lucknow, Patiala and Mohanbari is made functional. Additional DWRs at Bhuj is under commissioning. Current weather information is collected through 675 Nos. of AWS and 775 Nos. of ARGS made functional across the country.

The above information was given by the Minister of State in the Ministry of Planning, Science & Technology and Earth Sciences Dr. Ashwani Kumar in a written reply in the Lok Sabha.

Drought unlikely to trigger Russian grain export embargo

by Han Liang, Igor Serebryne

MOSCOW, Aug. 11 (Xinhua) — Dry winds and severe drought have devastated some regions of Russia, leaving the world’s leading grain exporter facing a lower harvest, heavy losses in agriculture and soaring domestic food prices.

Though the government has lowered its grain export forecast this year, local experts say the bad weather is unlikely to trigger an export embargo similar to that of 2010, as grain output and reserves are enough to offset the damage.

DROUGHT-DRIVEN PRICE HIKES

Local experts estimate the drought will cost Russia’s agricultural business some 33 billion rubles (1 billion U.S. dollars) this year. Vice President Alexander Korbut of the Russian Grain Union told Xinhua this year was “hard enough” for Russian farmers due to unfavorable weather. “In Russia, like everywhere in the world, harvest depends on weather,” he said, adding the drought would naturally lead to a decrease in grain crops.

According to the union’s estimates, the grain harvest will be about 83-84 million tons, less than that of last year but within the average annual range.

Agriculture Minister Nikolai Fyodorov said Russia would lose 14 million tons of grain this year due to the drought. The worst-hit regions include the Southern Federal District, the Urals, Siberia and the Volga area.

The drought is also pushing up grain and food prices in the country.

Official figures show wheat prices hit a record high of 8,900 rubles (270 dollars) per ton in early July, sparking fears of rising fodder and meat prices. Grain Union President Arkady Zlochevsky said Wednesday that prices might rise 5-10 percent this autumn due to surging grain prices.

Meanwhile, Russian’s major food retail chains, together with agricultural producers, were mulling a price increase of up to 20 percent for some food products, local media reported. Their costs were rising partly due to the soaring grain prices driven by poor harvest estimates, producers said.

EXPORT EMBARGO UNDESIRABLE

Though the Agriculture Ministry had lowered its grain export forecast, it seemed unlikely the government would impose export embargoes, as this would cause “undesirable effects,” experts said.

The Grain Union, which has been a principal opponent of export bans, believed there were plenty of tools to solve the problem, Korbut said. The harvest would be lower than that in 2011 but still not bad, he said, citing examples of “good crops” in the black earth regions. “The situation is not as dramatic as it is represented sometimes,” he said.

Deputy Prime Minister Arkady Dvorkovich said Wednesday the government would take “no extra measures,” such as commodity interventions or export regulations, to help the domestic grain market, as prices had begun to stabilize.

The Agriculture Ministry estimated this year’s wheat harvest would reach 45 million tons, while the grain harvest would amount to 75 million to 80 millions tons, 10-15 percent down from that in 2011. The figures showed there would be enough grain for export in addition to carry-over stocks for domestic consumers, Dvorkovich said, adding Russia’s grain export potential for this agricultural year was 10 million to 12 million tons.

However, the official did not rule out possible commodity interventions in the 2012-2013 season.

Korbut said, since Russia had no trouble over any shortage of grain, it would be “irrational” to impose a grain embargo, as producers would make less profits. “If the state is ready to compensate these losses, let them go (with the ban),” he said.

THE GOOD, THE BAD

The UN Food and Agriculture Organization (FAO) warned Thursday that drought in the United States and Russia, the top two grain exporters, as well as lower production prospects were pushing up grain and food prices in the global market.

The FAO Food Price Index climbed to 213 points in July after three months of decline, up 12 points from June. The sharp rebound was mostly driven by a surge in grain and sugar prices, the FAO said.

Korbut said a grain export embargo by Russia would affect the entire global market, which had already been in the shadow of a drought in the U.S. corn belt. “It will affect the markets emotionally, push prices up for the cattle breeding industry, and Russia remains a large importer of meat. So a grain export ban would not help the Russian food market,” he said.

Globally, grain output this year will shrink but still be enough to meet demand, though consumers in developing markets will suffer from price hikes, experts say.

Though food prices went up, they have started to stabilize both in Russia and globally. For example, grain prices growth in Russia has slowed and the general situation will calm down soon, Korbut said.

Rising grain prices would not be a total disaster, experts said. They said higher prices stimulated production as good prices this season would encourage investment in the agricultural sector.

“The situation is not static and it changes all the time. The task for the country and farmers is to follow trends, see dynamics and make use of them in their own interests,” Korbut said.

FAO lowers global rice forecast for 2012 but world production will still increase

Bangkok, Thailand, 6 August 2012 (FAO) – Below normal monsoon rains in India are the chief cause of a 7.8 million tonnes downward revision in the forecast for global rice paddy production in 2012, although world output should still slightly surpass the excellent results achieved in 2011, according to the July 2012 issue of the Rice Market Monitor (http://www.fao.org/economic/est/publications/rice-publications/rice-market-monitor-rmm/en/) released by the Food and Agriculture Organization of the United Nations today.

Global paddy production is expected to total 724.5 million tonnes (483.1 million tonnes on a milled basis), compared with the original forecast in April of 732.3 million tonnes (488.2 million tonnes on a milled basis).  The downward revision was mainly the result of a 22 percent lower-than-average monsoon rainfall in India through mid-July, which is likely to reduce output in the country this season. Production forecasts were also reduced for Cambodia, the Chinese Province of Taiwan, the Democratic People’s Republic of Korea, the Republic of Korea and Nepal, all of which may see a production drop in 2012.

In sharp contrast with trends observed in the maize and wheat markets, rice prices have remained surprisingly stable after gaining 2 percent in May. Amid abundant rice supplies and stocks , the likelihood of a strong price rebound in coming months is minimal, but the future direction of rice prices remains uncertain.

Production gains

Some countries are expected to register production gains, including China (Mainland), Indonesia and Thailand, along with several other countries in Asia. Production in Africa may increase by as much as 3 percent, while Australia’s rice harvest was 32 percent higher than last year. Prospects are also good for the South American nations of Bolivia, Colombia, Guyana, Peru and Venezuela, but poor precipitation and shifts towards more remunerative products in Brazil, Argentina, Paraguay and Uruguay are behind a 7 percent drop of production in Latin America and the Caribbean as a whole.

Asia accounts for the lion’s share of global rice production, and FAO is predicting the region will reap 657 million tonnes in 2012, up 0.4 percent from its strong 2011 performance.

Global rice trade in 2012, however, is expected to decline by 1 million tonnes to 34.2 million tonnes, largely as  a result of reduced import demand from Asian countries. Thailand is expected to face a sharp decline in exports, with Argentina, Brazil, China (Mainland), Myanmar, Uruguay and Viet Nam also shipping less rice.

Global rice inventories at the close of the 2012-2013 marketing years were revised upward by 200 000 tonnes to 164.5 million tonnes (milled basis). This would imply a  9 million tonnes increase from the previous year and mark the eighth consecutive season of stock accumulation. Thailand needs to release its abundant stocks before the October harvest, which could impact prices.

China Reducing Grain Loss

(China Daily) August 09, 2012 – China loses about 25 million tons of grains, nearly 5 percent of its agricultural output, a year because of poor storage. It means that produce from 6.6 million hectares of land is lost even before reaching the market. This is shocking.

If storage facilities and processing technologies can be upgraded to reduce the grain loss rate to, say, 3 percent of output, the average in developed countries, China could save about 10 million tons of grains a year. In other words, it would be an increase of about 2.7 million hectares of arable land, considering that per hectare output is 3,700 kilograms.

In a country with nearly one-fifth of the world’s population and requiring a minimum of 120 million hectares of arable land to ensure food security, reducing the loss of grains is as important as protecting arable land.

That’s why the ministries of agriculture and finance jointly issued a document saying the central government has allocated 500 million yuan ($78.5 million) in special funds to subsidize the upgrade of agricultural products’ processing projects.

More than 50 percent of the grain produced in China is kept by rural households or grain storage cooperatives, which need help to upgrade their technology. The subsidy is good news for villagers because less loss of grain means greater efficiency in agricultural production and higher incomes for them.

However, the efficient use of this money depends on designing an efficient mechanism, which should include experts’ technology guidance to build quality and modern granaries and grain processing facilities. It also depends on tight control on and supervision of the entire process, which will ensure that villagers and cooperatives benefit from the project.

Transparency is of utmost importance. The expenditure on each head, as well as the quality and technological level of the storage and processing facilities should be publicized for public supervision.

Also, regular investigations need to be conducted to see how the facilities work and how the beneficiaries respond. Only then can similar projects be implemented in a more effective way.

Further reading:

Drought in the U.S.

http://droughtmonitor.unl.edu/

US crops tell story of future world food prices

http://www.bbc.co.uk/news/world-us-canada-19188333