Comment - Beer - Crop Circles

Summer is upon us, and the harvest is starting to come in. But, for Simon Jackson, executive director of the Institute of Brewing & Distilling, the reaping and sowing is not at the level that it needs to be: And, that's not going to change any time soon.

This is the time of year for crop circles. Well, certainly in the UK. But it also seems that the circle of cereal pricing has once more turned.

The US has been warning for months that corn yields will be severely impacted by the drought and heat in the central growing areas. Russia has also sounded alarm bells on its wheat yields. Forward pricing on cereals has again shot up in response, so once more we find ourselves in a supply-driven price hike as the world market again fails to create stable supply.

That sounds a bit harsh: How can the market factor in weather? Well, it should, through intervention stocks and other mechanics to smooth supply and demand. But, the problem is that, as demand continues to grow rapidly, there is simply too little contingency in the system.

Commentators have been very clear about the need for a root-and-branch review of cereal supply for many years, and yet we have no structured, organised global solution.

The drivers of increased demand are now well-known; a burgeoning global population, a move to high-protein diets in emerging economies (animal protein requires huge amounts of cereal to feed cattle and chickens), government targets on the use of green fuel, and climate change.

There was a respite last year, as supply grew through increased acreage and better yields – but it was transitory rather than a trend to recovery.

Governments are moving towards some solutions. Increasingly, we are seeing more robust support of work being conducted to accelerate plant breeding through all scientific methods that we have to hand. Recently the Bill Gates Foundation announced some high-profile support for a team of British Scientists to accelerate improvements in yield and drought tolerance of crops grown in Africa.

There are plenty of experts now upping the tone of their commentary that we are doing too little, too slowly and that urgent, co-ordinated efforts are needed to improve supply and reduce demand for non-essential needs. It is likely to be an emergency item on the next G20 summit – the French have indicated that another sudden increase in the pricing of commodity food (such as bread) will lead to further social unrest as seen during the last pricing spike.

Surely one outcome of the G20 should be an agreed approach regarding communication to the ‘man-on-the-street’ that clearly lays out the challenges and the options for solving those challenges. This will require leadership and firm decision-making; if we don’t see that soon, we will fall further behind the curve, and that does not seem a palatable option just now.

If the politicians work on the basis that the world will just sneak through the 2012 supply situation and take no longer-term action, then we will stay locked in a circle of short-termism rather than breaking into long-term structural and scientific solutions. A key to global economic recovery will be a global reduction in inflation – an increase in food prices at this juncture of the so-far muted recovery of the global economy makes no sense – so let’s encourage our governments to focus on the basics.