Global Grain Reserves Diminish, U.S. Stockpiles in Worse Shape

what's up with food besides price?

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What They Don't Tell You About Storable Foods

November 9, 2010 updated
By Holly Deyo

Domestically the price of meat, milk, sugar and eggs is already taking a huge upward jump. If the root cause were a single issue, it might be absorbable or at least less damaging. However, multiple factors are hiking food prices and they are only expected to climb.

What's Happening to Our Food?

Small farmers are losing livestock and dairy cows to the economy because they can't afford the uncertainty and animal upkeep. Less production means the price of beef, milk, cheese and anything using these foods all compete for supplies.

Remember the half-billion egg recall in August? It's forced wholesale egg prices to rise nearly 40%. Nov. 9 another recall was announced involving nearly 300,000 unprocessed eggs from Ohio Fresh Eggs. Consider every food that includes whole eggs and egg products. Snowballs roll downhill and so do price increases from producer to wholesaler to store to consumer.

Another story largely escaping notice is a lack of feed for turkeys. Despite Internet rumors that a turkey shortage exists, it's only their food. However, this Thanksgiving you'll either pay a premium or do without.

Stan and I usually roast a turkey about every 10 days, not just at holiday time. They're easy to fix, leaner than many proteins and cost less per pound. However, that scenario has changed.

In 2009, a surplus of gobblers from the preceding year dropped prices as low as 40 cents/pound. This year wholesalers will pay more than double for this year's Thanksgiving birds and pass the increase onto consumers.

Besides dairy, grains have taken hits globally and the majority of processed foods require these indispensable ingredients. For example, corn syrup (oops, now the P.C. term is corn sugar) is in nearly every product that needs sweetening. From soft drinks to canned fruit to cereal, baked goods and desserts – the majority use corn sugar. Less obvious uses of corns syrup include yogurt fermentation, thickening agent for cottage cheese, yogurt, sour cream plus a ton of sauces like BBQ, teriyaki and tomato-based products; spice enhancer and tomato acidity cutter. It also sneaks into sausages and lunch meats as a stabilizer, binder and flavor enhancer.

Not only are grains consumed directly as cereals and are the backbone of breads, all baked goods, pastas and tortillas, they are a huge filler ingredient in most packaged foods, whether for human or pet consumption. On food labels, corn or wheat usually ranks toward the very top of the list. Animals also directly depend on these crops as feed.

Then there is biofuel usage... Whether you're a champion of biofuel energy or not, the fact remains that this technology gobbles food crops.

All of these factors take a bite out of supplies.

Mother Nature and Other Calamities

Add to these the impact of natural disasters. They can clobber anticipated supplies. Most notably was Russia's monstrous fire season that cut crops by one-third and Pakistan's unprecedented flooding. Pakistan lost an estimated $2.5B worth of crops when heavy monsoons literally washed away fields of grain, sugarcane, rice and cotton. They haven't begun to recover and aid is in short supply.

Brazil, the world's second largest soybean producer slashed output expectations due to lack of rain.

Other countries lost crops to late frost, drought, floods and hail. Either we get too much moisture or not enough, but all have an impact on grain reserves.

Another factor that impacts supplies is the cost of getting crops from field to fork. Fertilizer, specifically potash, has made headlines for two years as a prime cause of escalating food prices. Quite possibly when you saw an article with the word "potash" in it, you gave it a miss, thinking boring. While it may not be riveting reading, it sheds light on more expensive food.

Fuel is beginning to edge up again and with a weakening dollar, farmers and everyone will feel the cost of rising gas and diesel prices. It take $$ to run heavy farm equipment and run trucks that get food to the table. You can monitor gas and fuel prices on this DOE site.

Regarding Russia and Pakistan's crop worries, you might be thinking oh, no big deal, that's over there. But it is a big deal. Russia, usually a large wheat exporter banned selling grain outside their country till sometime in 2011. Instead of being a grain supplier, they've become a grain importer further depleting global reserves.

Increased Demand

Another car on this train wreck is that rightwhen supplies are unusually squeezed more countries demand western-style diets including China, India and Brazil. That's over 3.6 billion people just in those three countries. This demand further drives up the cost of corn, wheat, coffee, cooking oil, chicken, pecans, steak and cotton.

Last week Bloomberg reported that soybean and palm oil stockpiles are the lowest seen in 17 years. Palm and soy are the two most widely used oils as ingredients in mayo, candy, soaps and beauty products.

It's one thing to read that grains are in trouble, but it's clearer to see how the problem stacks up compared to other years.

These figures are straight from the USDA's Foreign Agricultural Service (FAO) and reflect reserves for the three main grain crops: wheat, rice and corn.

FAO keeps yearly trading supply records from October through the following September. After Sept. any further depletion of supplies won't show up until the next year's inventory.

Without knowing this, one would think the U.S. has 69 days of grain reserves. Not so.

The REAL Numbers

Just since September supplies have dwindled both here at home and globally. As of October 8, America's 69-day grain stockpile has shrunk to an unsettling 53 days.

What's interesting to note is that for 2008-09 and 2009-10, grain reserves for the U.S. and the world were nearly equal differing only 31⁄2 to 5%. However this year, America's grain stockpiles have fall much lower than world reserves showing a disparity of nearly 30%.

Despite fires, flood, hurricanes and drought, global grain reserves are in better shape than the U.S. Though world supplies stand at 75 days we are committed for the 2010-2011 year to export 244.2 millions of metric tons in grain.

According to Kansas State University's Grain Market Outlook from two weeks ago, contracts for roughly 800 million bushels corn and wheat have yet to be filled. Soybeans, which aren't included in the "blue" chart have outstanding commitments of 796 million bushels.

Taken together, food supplies are already smaller yet costs are greater and demands are higher. In just a few months, they could be really ugly. Buy what you can now – in quantity. Pack your food for long-term storage. It will save pain and $$ later on.

© Holly Deyo, 2010, redistribution is granted providing ALL links and images, and the article itself is fully reproduced in its entirety, unaltered.