EU food politics must stop if food supply runs short again

There are some thing you can be sure of — such as death, taxes and weather.

In terms of the weather, you can be sure it will average out in the medium term or longer term — probably the thought that is keeping many farmers in Ireland this summer from giving up and turning their backs on the business.

It is a basic rule also for the speculators whose short and long trades total up to the equivalent of 46 times the world’s wheat production every year on the Chicago Mercantile Exchange.

In the longer term, they expect to make money by literally betting on the global weather for farmers averaging out.

That is why they are reasonably confident about milk prices, because they have spotted that New Zealand’s production was boosted by abundant rain, and US yields reached a record after an unusually mild winter — a rare weather scenario that happens once in a long, long time. Due to the increased NZ and US milk production, the speculators knocked 33% off future milk prices in the eight months to last April.

But the clever weather watchers were building up future positions which look like paying off now, as weather trends return towards average.

In the US, that means farmers “paying for” their mild winter with the worst midwest drought in a decade now upsetting cows and parching crops. That has driven prices for dairy feed 33% higher in the past month, and increased the incentive for farmers to cull dairy herds.

Meanwhile, New Zealand is on course for a fall in milk production for the first time in five years, and some of the dairying regions down under are threatened by drought.

The falling production will lift global milk prices, and so will continuing strong demand from China, the world’s biggest buyer of whole-milk powder, and predicted to import 7% more this year because of a Year of the Dragon baby boom of up to 17m, compared with 14m in a normal year.

3m extra babies can be a major market force when, despite recession in the EU and US, the world is only a drought away from a food shortage. And the heatwave wilting crops in the US midwest could be that drought.

It pushed soyabean future prices to a record high this week, and maize to within 2% of their all-time high, bringing fears of global food price inflation.

It’s no surprise to farmers that the weather can be so important, and they may now see it prompting some welcome action at a higher level of decision making, particularly in the EU.

The EU decision makers who are holding up animal feedstuff imports into the EU may have to stop playing politics with food.

High prices and shortages of grain will hopefully clear the way for the 27 EU member countries to approve some of the 69 genetically modified crop varieties widely grown around the world, but banned for animal feed imports in the EU, even though 15 have been cleared by the European Food Safety Authority. Without progress in this area, animal feed price levels could become unsustainable for intensive livestock farmers in Ireland, the Irish Grain and Feed Association has warned.

Elsewhere in the EU, CAP reform negotiations will gather momentum against the background of a deteriorating global food supply situation.

Those who want to cut CAP funding may have to change their tune and instead encourage and incentivise EU farmers to play their part to stave off a food crisis of the kind that caused political and economical instability in 2008.

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