Fluctuations In Food Supply Increasing

February 13, 1997

The world's supply of basic foods has roughly doubled over the last half century, but it is fluctuating more from year to year, two Stanford researchers warn.

These fluctuations matter more now, because governments are storing less food and consumer demand is changing, say Rosamond Naylor and Walter Falcon, two economists at Stanford's Institute for International Studies.

If the world gets two or three bad grain crop years in a row, they say, the poorest people, who already spend much of their income on food, will get hurt the most. Middle income people will also feel the effects, and governments could face increased unrest.

Naylor and Falcon set out to find out how much the world's major cereal crops varied in quantity from year to year, an analysis that had not been done recently. Most food supply analysts look at long-term trends to keep tabs on whether the world's ability to produce is staying ahead of population growth. The Stanford researchers wanted to know instead if the variability in yields had increased for the three cereals that are dietary staples -- wheat, rice and corn.

"The surprise was that variability was not coming primarily from the developing world where farmers have adopted green revolution technologies more recently, but it was right here at home in the United States," Naylor said.

Specifically, Falcon said, farmers in the Midwestern "corn belt" witness more change in the amount of corn they can harvest from one season to the next than do farmers anywhere else, except the former Soviet Union and Africa.

Africa, for the most part, has not yet had a green revolution and so it plays a small role in the overall world food supply, although certainly an important one for Africans. Yield fluctuations are a partial reason for Africa having the highest incidence of hunger in the world.

Farmers in the former Soviet Union have numerous problems besides weather and pest outbreaks, such as consistently getting the fertilizers, hybrid seeds and the other inputs they need to produce high yields, and problems getting their crops to market.

The United States, however, has the most advanced technology, and its farmers are closest to reaching the yields that are considered the frontier -- the highest yields that are obtained on experimental plots employing the latest technologies.

Globally, the deviation of annual yields from average corn yields has increased from 3 percent in the period from 1950 to 1964 to 7 percent in the period from 1980 to 1994. Most of the recent world-wide variability can be accounted for by a deviation of 14 percent in North America.

Potential causes

Naylor and Falcon did not study the causes of variability, but by comparing regions and timeframes, they were able to point to some potential explanations. Long-term climate change is one potential reason but not the only one, they say. The stage of technology adoption use also is important.

New technology is adopted in phases, Naylor said, and the evidence suggests that as the first farmers in a region begin to adopt new technologies, yield variability is high.

As the technology is consolidated, yields rise rapidly, swamping seasonal variability so that it is difficult for government officials or even individual farmers to notice variability. From their perspectives, the crops are better each year, never dipping below previous years. Most of the irrigated regions of Asia have been in this stage since the mid-1970s, she said.

Farmers in the United States, Canada, much of Europe, Australia and New Zealand are in a third phase of the green revolution. They have so widely adopted the latest technologies that they approach the yield frontiers. At this stage, it may be that technology enhances good agro-climatic conditions more than it helps mitigate against poor ones, and so the variability from year to year is larger, Naylor said.

"Annual weather fluctuations, longer-term climate change, reductions in genetic diversity in the field, more synchronized patterns of planting and policy influences on management are all plausible contributors to a pattern of increased variability" in the more advanced countries, the researchers wrote for the March issue of the journal Population and Development Review.

There is some evidence from other studies that global climate changes may be increasing weather variability. A.A. Tsonis of the University of Wisconsin-Milwaukee, for example, reported last year in Nature that while global mean precipitation has not changed during the past century, "an overall positive trend in precipitation variability has occurred." The National Climatic Data Center reported in January that since the beginning of this century "intense precipitation events have already increased by about 20 percent and cold season precipitation has increased by nearly 10 percent" in the United States, leading to increased flood and drought potential.

Wheat and rice yields are less variable than corn, according to the study. But Naylor and Falcon say the unstable situation with corn might develop with wheat and rice also. "Over time, movements toward the yield frontier may well influence the stability of the irrigated rice and wheat systems of the developing world as several of the largest developing countries, such as China, India and Indonesia, steadily move toward those frontiers," they wrote.

Pantry less full, more meat-eaters

Their study was prompted by a rapid rise in the world price for grains last year. Between mid-1995 and mid-1996, the price of wheat rose 40 percent and the price of corn rose 60 percent, causing some analysts to wonder if the world faced a new production trend. The prices returned to what is considered more normal last summer. "It's too soon to tell if there is a new long-term trend," Falcon said, "but we are saying that even if it is not a new trend, variability from year to year is important to consider."

There are at least two reasons, he said.

"The world food economy is different these days because a number of middle-income countries are growing rapidly, which produces different food demand patterns. And it is different as well because after the Uruguay Round of GATT trade negotiations countries are carrying many fewer stocks of grain."

Consumers in countries with growing incomes indirectly demand more grain by eating more meat, he said. Yellow corn, which is cheaper to feed to livestock than wheat or rice, becomes more important in the overall market. "China suddenly has gone from 10 kilos of meat per person to 40 kilos of meat per year," he said.

Supplies of grain stored by governments have shrunk by about one third between 1992-93 and 1995-96, partly because the last round of GATT negotiations focused on getting countries to reduce subsidies that prompted farmers to produce more grain than the private market was willing to buy at a price above the real costs of producing it.

"The good news is that we have more rational domestic agricultural policies, but one thing that hasn't been talked about very much is that it was through this subsidy process that the public sector acquired stocks," Falcon said. "We've also had some rather poor years recently and so we have drawn down those stocks."

Falcon stressed that he is not suggesting GATT reforms were a mistake, only that "if the public sector is going to carry fewer stocks, then we better think seriously about the implications."

Those implications include the possibility of destabilizing governments or prompting them to make poor economic policy decisions if the world gets two or three bad yield years in a row. "Governments have been thrown out of power based on the price of rice or the price of bread," he said. "A lot of countries in the early and mid-1970s reacted by adding subsidies and controls, trying to become totally self-sufficient in food production." That led to economically inefficient resource allocations that were then tough to withdraw. Increased variability suggests the value of trade over self-sufficiency, he said, because there will be times when one region will have worse yields than the others.

"In the 1973-74 crisis," Naylor said, " a number of countries couldn't import rice at any price for several months. Since rice is so important in the diet in Asia, both in terms of nutrition and culturally, it led to considerable political unrest."

With governments storing less surplus grain, there are investment opportunities for the private sector, she said. "A big question to which no one knows the answer is how well the private sector will come in and take up the role of food stock management."

Variability is not necessarily disastrous, Naylor and Falcon wrote, because adjustments can be made in trade, the number of livestock fed or the grain stored, but these adjustments are "not instantaneous, automatic or costless. Even world food 'optimists' need to worry about the possible effects of two or three successive 'bad' corn crops in the United States."

Stanford University

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