Russian drought impacts global food prices

Alex Clute
September 3, 2010

As wild fires sweep through Russia causing loss of life and property, the heat wave gripping the country is also said to be precipitating a global food shortage. Today, Prime Minister Vladimir Putin announced that Russia would be expanding its ban on grain export until next year and will only be planting winter grains on half the arable land due to the drought. In order to meet domestic consumption levels, Russia requires 80 million tons of grain, but is only expecting 60 million tons. This has caused the price of wheat on the global market to increase by 50%.

Price hikes have also occurred in the meat and dairy sectors. The prices of various meats have reached a twenty year high, while the price of milk is up 16.9% on Fonterra's global dairy trade internet auction. The price of grains is being cited as the primary cause of price increases in these sectors because the price of livestock feed is being driven up by the shortage.

The United Nations Food and Agriculture Organization (FAO) says that the Russian drought has caused international food prices to go up by 5%. On the other hand, the FAO also estimates that the output of grain at the global level will be 2238 million tons, an amount that is the third highest on record and that exceeds the five year average. Other causes for the price inflation are said to be the competition between using farm land to grow crops for biofuels rather than food crops; the rising demand for meat in countries like China, India, and Brazil; and speculation on the commodities markets.

While the economies of core nations like the US, Japan, and Western Europe will experience mild inflation as a result of increases in global food prices, the ones who will endure the brunt of these high prices will be the one billion, mostly residing in poorer nations, that are already barely getting by. There have already been riots in Mozambique over high food costs, and it is likely more violence will erupt if prices are not reined in.

This ought to call into question the wisdom of global interdependence in such a staple of existence as food. The interconnectivity of the global economy has taken a regional problem and amplified its effect to cause problems on a global scale. If poorer nations had independent food production they would not be required to import food, and would not be dependent on wealthier nations for their subsistence. Globalization is not really about interdependence, but rather it is about the dependence of the poorer, peripheral nations on the wealth, core nations. And while it can not be said for sure, the drought in Russia is likely tied to global climate change, which is in turn worsened by the highly consumptive lifestyles and intensive exploitation of resources encouraged by the proponents of Globalization.

BBC News: UN calls meeting on food price concerns
Otago Daily Times: Global dairy prices soar 16.9%
The Independent: Now meat price surge raises fear of food inflation