Bad weather isn't the only risk to crop supplies.
Sure, it is a big relief to prospects for world food
supplies that the decline in estimates for South American harvests has,
broadly, plateaued out as dryness in Argentina and southern Brazil has retreated.
Drought looks on the back foot, but not floored, in the US
too following recent storms
But better weather, and even strong harvests, are not a
guarantee of ample food supplies.
There is the problem of getting food to where it is needed,
a challenge Brazil is demonstrating in spades.
The South American country's farmers have, by setting course
for a record harvest, set Brazil up to overtake the US as top soybean exporter
(having already taken the crown of top corn shipper, if you twiddle the figures
But that outcome looks in jeopardy unless Brazil gets its
act together on shipping the crop. Queues of vessels waiting to load up with
soybeans are now said to be 60 days' long.
And it may not get better for a while. In 60 days, Brazil
will be well into the start of the new cane crushing season, bringing yet more agricultural
commodity volumes to be squeezed through port bottlenecks at the likes of
Santos – assuming the government has averted dockworkers' strike.
States of unease
Then there is the re-emergence of political risk, which could
play either way for now.
The Arab spring is proving more than a one-season affair, as
Syria's civil war attests to, besides the growing economic and political unease
in Egypt, which could quell demand from the world's top wheat importer.
Importantly, there is a big threat to a big exporting
country too, Argentina.
The country is in a financial mess. It faces the risk of its
second default in 11 years, depending on how a court case in New York turns
And the administration of President Cristina Fernandez de Kirchner,
facing mid-term elections in October, is looking to agriculture, a major source
of export earnings and foreign currency, to keep a lid on the crisis.
The government is pressing farmers to clear out silos -
rather than hoard as they have been doing, seeing crops as a hedge against inflation
which is already running at some 30%.
It is also said to be considering the reinstatement of the
National Grain Board as the sole buyer of Argentine harvests a factor causing
deep unease among farmer groups such as the Sociedad Rural de Argentina.
In the short-term, it is tricky to know which way this will
play in the markets. Government coercion could unearth a rich cache of crop
But in the long-term, punishing farmers will only undermine
production. In Russia, for instance, one reason winter wheat sowings for 2013 fell
short of forecasts was that farmers feared a ban on exports which would have
driven prices lower.
Indeed, just as it looks like Russia is closing the door on
damaging government intervention in agricultural markets, Argentina seems to be
kicking it back open.
When Argentina is the world's top shipper of barley, soymeal
and soyoil, second biggest of corn (equal with Brazil on US estimates for 2013-14),
and third in soybeans, that is something the world should be worried about.