Extreme weather pushes food prices higher

Thursday, February 10, 2011
By Paul Martin

Crops lost to flooding, drought crimp already-tight grain stocks

By John W. Schoen

Among the economic havoc brought by this winter’s extreme weather, none has been more severe than the impact on the global food supply chain.

Over the past few years, rising global demand for crops and production shortfalls have whittled grain surpluses to historically low levels. As extreme weather continues to cut production, those surpluses have shrunk further and forced prices higher.

Now meteorologists and weather risk analysts are warning that more frequent floods and droughts may continue to crimp production and keep foods supplies tight for years to come. Until surpluses of key grains can be restored to more normal levels, weather-related crop failures will produce more price spikes.

..“If there’s a surplus, you can put it in storage and carry it forward,” said Arthur Small, founder of Venti Risk Management, a weather risk consultant. “But if you have a shortfall, you can’t borrow against the future to bring it backward in time. It only works in one direction.”

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