The Russia-Ukraine conflict will cause a global wheat shortfall. Can Australia pick up the slack?
With the Russia-Ukraine conflict set to spark a food supply crisis, could Australia be the nation that steps up to help feed the world?
Who fills the food gap? The world is about to enter into a food supply crisis. Russia and Ukraine make 30% of the world’s wheat, as this chart shows. Wheat accounts for about 20% of the world’s calories. How do we compensate for the lost supply?
Wheat is a winter crop. Australia’s wheat planting season is about to begin. Could we plant more? Our exports are the pink section in the right of the above graph, representing about 80% of the wheat Australia grows. Can we expand our exports? Can it be Australia that feeds the world?
Lines for bread
The price of wheat has soared, and it is important to remember what this means. It doesn’t mean everyone can get wheat but must pay more. No, when prices rise, it stops some people from buying.
That’s the whole point of rising prices — putting purchase out of reach of some and making others consider alternatives, until the amount demanded equals the amount supplied. Australians will reduce wheat consumption at the margin. But in the poorer parts of the world, higher prices are insurmountable. People will go hungry and die.
That’s awful. I started wondering if Australia could grow more wheat — golden crops waving in every paddock, right up to the edges of the cities, and right out to the desert. Is this realistic? I made some calls. The answer was good news… that is actually bad news.
Grainy reception
Australia’s wheat crop last year was a record high, with a near-record area of land planted and yields at their highest — each paddock produced more than ever before. The odds of us making even more this year are slight.
High prices help farmers sow with confidence, explains Pat O’Shannassy of Grain Traders Australia, but we don’t have a lot more room to expand.
“They are making planting decisions now so they will be looking to plant as much as they can with these high prices,” he said.
“We’ve seen an increase in cropping in the last 10, 15 years, but it starts to get maxed out and you start to end up looking at cropping in more marginal country. And these days with sustainability issues you probably wouldn’t.
“High prices and decent rainfall and we could produce a crop like we did last year, or we have a drought and we end up in trouble.”
Keeping the combine humming isn’t cheap
Fertiliser and fuel are impediments — they keep getting more expensive.
We grow a lot of wheat in Western Australia. WA farmer Barry Large grows plenty of it, and he is also the head of Grain Producers Australia. He is also worried about input costs that might make farming big crops of wheat less profitable.
“Before this crisis, prices for diesel, fertiliser and chemical were already at record high levels, but the continued escalation of these costs is heightening future production risks,” Large said.
“These costs are front and centre right now, with Australian grain producers making critical business decisions about their cropping programs ahead of planting the next crop in coming weeks.”
Elasticity is low
So who will respond to higher prices by producing more? We’ve seen the global economic system respond to challenges recently. The world can ramp up the supply of vaccines and rapid tests and masks. But ramping up supply of food, it turns out, is harder.
A recent study from Iowa State University showed that in the short run, food production doesn’t respond much to prices. If prices double, production of the most price-responsive crop — soybeans — goes up by just 20%. Wheat production goes up by just 3.5%. So it’s not just Australia that can’t ramp up food production on a whim. The earth turns slowly.
If we can’t increase production much, where can we find extra food to stave off famine? Stockpiles?
Like squirrels with nuts
The world keeps big grain stockpiles. Egypt has 4.5 months worth of domestic consumption on hand. India has a decent stockpile too after a lucky run of good seasons. But most of the world’s stockpiled grain — 142 million tonnes of the total 280 million tonnes — is behind one specific border: China’s. And it is not for sale.
What about corn destined for biofuels? Corn is a staple food that can substitute for wheat and in the US millions of bushels (each about 25kg) are sent to refineries to produce ethanol. The problem is that oil has gone up so massively in price and everything we can do to reduce consumption of oil — including adding extra ethanol to petrol — is a worthy goal right now.
Snouts in the trough
There is one other massive source of food — food destined for animals. Global agriculture eats itself. A big share of crops grown go to other farmers to feed animals.
Animals eat grains and beans of many kinds. In Australia animals eat three times as much grain as used to feed people, i.e. about 75% of domestic grain consumption is by farm animals. Reliable global data on what share of crop production is used as an input to animal rearing is not available for every crop, but for soy the figure is almost 80%.
This is a losing process. For every 100 calories you put into a cow, a person gets one calorie out in edible meat. For chickens we get 10 calories out for every 100 calories we put in. It would be far more efficient to divert those calories directly to humans.
Can we divert edible plants from animal mouths to human mouths? Yes, but it will reduce meat supply in the medium run.
If a farmer stops feeding an animal they sell it as meat. Every grain-fed cow and pig might end up with a shorter growing life and be on the meat counter a little sooner thanks to Vladimir Putin. This is called “destocking” and it is an emergency measure by farmers. The good side effect is it increases the supply of some meat just when we need it. Australian farmers did this in the drought — which was a similar circumstance of lower feed availability, albeit for grass-fed animals.
The consequence of destocking is lower supply of meat in a year or two, as the farmers let animals grow older and multiply, a process called restocking.
Globally, pigs are probably the big target. They don’t eat grass like cows. They compete with us for foods (albeit some of their feed inputs are not human quality.) But cows are an opportunity too.
In Australia, up to half of cattle eat grain in the final few months of their lives, a process designed to help them grow faster and get fatter. They enter a “feedlot” and eat barley, wheat and sorghum. The result is called grain-fed beef and is considered high-quality. It has been a booming market.
So if you want a bread roll to eat alongside your steak, it’s time to start eating grass-fed beef. And if you want Weetbix for breakfast the next morning, a sandwich for lunch too, and not to see ads on TV raising money for a famine in Yemen, it may be time to consider eating more tofu.
This article was first published by Crikey.
