Grain Production Falls and Prices Surge

In 2006, world grain production dropped to 1,994 million tons—a fall of about 55 million tons, or some 2.7 percent, from the previous year.¹ (See Figure 1.)

Economists, hunger activists, and agricultural researchers track world grain production because people still primarily eat foods made from grain. On average, humans get about 48 percent of their calories from grains, a share that has declined just slightly from 50 percent over the last four decades.² Grains, particularly maize (corn) in conjunction with soybeans, also form the primary feedstock for industrial livestock production.

Global grain production per person dropped from 318 kilograms in 2005 to 305 kilograms in 2006.³ (See Figure 2.) But output per person varies dramatically by region. For instance, it stands at roughly 13,000 calories per day in the United States, most of which is fed to livestock, compared with 2,700 calories in China and just 670 calories in Zimbabwe.⁴ (One kilogram of grain contains about 3,500 calories.)

Production of the three major grain crops— wheat, corn, and rice—all declined in 2006, as the world’s major growing areas suffered poor weather.⁵ Wheat output in 2006 stood at roughly 592 million tons, down almost 33 million tons—5.3 percent—from 2005.⁶ This is the largest reduction since 1994 and was provoked by severe drought and heat across Australia and in Europe’s wheat belt, as well as unseasonably cold dry weather during planting time in North America and the Black Sea region.⁷ Global stocks of wheat declined by 16 percent since 2005, corn stocks were down nearly 20 percent, and total stocks, including rice, dropped by 17 percent.⁸ (See Figure 3.)

Typhoons, drought, flooding, diseases, and insect attacks marred the 2006 rice crop across Asia.⁹ Global production fell to 421 million tons, slightly down from 422 million tons in 2005.¹⁰ In India, the 2006 monsoon season, which ended in September, was erratic; several important rice-producing states, such as Assam, Tamil Nadu, and Uttar Pradesh, received less than the normal amount of precipitation, while rainfall was above average in Orissa.¹¹ Crops in China were also affected by droughts, floods, and disease problems, which kept production nearly the same as in 2005 despite larger plantings.¹² The world corn crop in 2006 was estimated at 694 million tons, 2.2 percent below the previous year, due to smaller crops in Argentina, South Africa, and the United States—which alone is responsible for 40 percent of the global crop.¹³

At the same time, global demand for corn jumped due to the rapid expansion in cornbased ethanol production, primarily in the United States. The amount of corn used for ethanol there has grown from just 6 percent of domestic production in 2000 to an estimated 20 percent in 2006, or roughly 55 million tons, about the same amount as is exported.¹⁴ There are currently 110 ethanol plants operating in 20 states across the country, with 79 additional plants under construction, which will more than double national capacity.¹⁵

By late 2006, rising demand combined with the poor grain harvests in key producing nations to push world grain prices to their highest levels in a decade.¹⁶ In November, the U.S. hard wheat export price averaged $219 a ton, up about one third from the previous year.¹⁷ The U.S. export price for No. 2 yellow maize averaged $164 per ton, up about 70 percent from the previous year.¹⁸

In the case of corn and wheat, these high prices will likely encourage farmers to plant more land in crops in 2007. But most analysts suspect that if the use of corn for ethanol continues to grow at the current pace, it may take more than one good crop season for prices to retreat significantly from their current highs.¹⁹

According to the latest Food Outlook from the U.N. Food and Agriculture Organization, global expenditures on imported foodstuffs in 2006 could reach a historic high of $383 billion, more than 2 percent above the previous year’s level.²⁰ Import bills for developing countries are expected to have been almost 5 percent higher in 2006, mainly as a result of price increases rather than an increase in the actual volume of food imports.²¹ Higher prices will force many countries to cut back on food imports.