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U.S. drought could have global impact on food prices

Jeff Horwich Jul 20, 2012
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U.S. drought could have global impact on food prices

Jeff Horwich Jul 20, 2012
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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. 

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