U.S. drought could have global impact on food prices
As one of the world's biggest agricultural exporter, the drought in the U.S. could impact food prices worldwide. Some experts say high bread prices, as a result of a low Russian wheat harvest, initiated destabilization of the Middle East during the Arab Spring last year.
Jeff Horwich: The weather forecast offers no relief for weeks across much of the U.S. breadbasket. Corn and soybean prices are at new records today -- wheat is rising too. And when we have this kind of farming weather, the whole world suffers with us.
Rob Bailey is a senior research fellow on energy, environment and resources with the Royal Institute of International Affairs in the UK. Good to talk with you.
Rob Bailey: Hello.
Horwich: We're very focused on how our drought effects us here at home, but how and why does it so quickly spread problems to the rest of the world?
Bailey: Well America is an agricultural superpower as well as a traditional global superpower, so it's the biggest producer of maize in the world, it's the biggest producer of soy beans in the world. So as soon as there's a decrease in U.S. agricultural production, that has massive effects for the global economy. These sorts of price impacts could ripple across economies across borders.
Horwich: And geopolitically, let's just think back a few years when food prices start to rocket in some parts of the world, crazy things can happen.
Bailey: Absolutely, if you think back to 2008 in Haiti the government actually fell as a result of riots connected to food prices. Fast forward a couple more years to 2011, the Arab Spring actually was sparked by initial protests in a number of countries about the price of bread because the price of wheat had gone up in response to export bans following a really bad harvest in Russia and Ukraine after a heat wave and wild fires there.
Horwich: Are there any particular flash points that you are looking at this time around?
Bailey: The situation in the Middle East remains much the same, there is still huge political vulnerability to a spike in wheat prices. The other thing that the U.S. is having a big impact on is soy bean prices. But if we see a very sharp increase soy bean prices, you can expect meat prices to rise and this could actually have implications for China, quite seriously.
Horwich: Rob Bailey with the Royal Institute of International Affairs, thank you very much.
Bailey: You're welcome, thank you.