It’s the end of 2019 and America’s bountiful harvest is in. But President Donald Trump is facing a crisis few contemplated the year before: a food shortage almost everywhere else in the world.
The seeds were sown after an unexpectedly severe El Niño and widespread droughts diminished food production around the world, roiling trade patterns already broken by a tariff war. Hunger was rampant and refugees were on the move.
Attention turned toward North America, where crop yields were ample and supplies plentiful. The U.S. was in a position to help. What would the president decide?
If what you are about to read sounds far-fetched, remember this: All the weather disasters and most of the policy scenarios described here have happened in the past. Just not at once.
A SHIFT IN THE WINDS
The heat El Niño released into the atmosphere helped push up world temperatures, making 2019 the warmest year on record. The disruption it brought to weather patterns unleashed floods and droughts, sparking forest fires, displacing people, creating food shortages and upending energy and commodity markets.
Scorching heat in Australia withered wheat crops. Erratic rains cut rice production across the Pacific Rim, from India to Japan. The rains that would normally fall over Brazil’s agricultural regions gave way to drought, stunting soybean and corn production.
Global stockpiles began to shrink. Buyers waited for the harvest in the main two breadbaskets that hadn’t been crippled by El Niño: the North American nations of the U.S. and Canada, and the Black Sea region of Russia and Ukraine.
Case Study
2011: Brazilian Crop Devastation
“You are always hoping for the best” — João Carlos Jacobsen Rodrigues
João Carlos Jacobsen Rodrigues, a 61-year-old farmer living in the northeast of Brazil, struggled with crop losses for five consecutive years. It cost him almost everything.
First, excess rain in 2011 rotted his cotton fields. Because he didn’t have enough supply to meet delivery commitments, Jacobsen had to buy back sale contracts at a price that had surged by 50 percent.
In the following years, drought wiped out at least 20 percent of his soybean crops. He was relying on new loans to service old borrowings while Brazil headed into a once-in-a-century recession. His debts piled up and eventually could no longer be refinanced.
“You are always hoping for the best, and the conviction that the next year will be better leads you to take the risk again,” Jacobsen said in his modestly decorated, one-story farmhouse in Barreiras, a municipality in Bahia state. “Suddenly the market starts realizing you’re not doing fine. More collateral is required, loan requests take longer to be approved.”
In 2015, he defaulted on about 200 million reais ($53 million) of debt held by banks, trading houses and suppliers. In 2018, Jacobsen asked for court protection to work on a debt restructuring plan, which is still in the works.
“It’s terrible to have to tell someone you won’t be able to pay what you owe. I was educated to always honor commitments. The things you listen to when you face creditors are really hard to stand emotionally. You are sometimes accused of being negligent, of not wanting to fix the problem, when in fact you are scared.”
“We had to cut over 100 employees. Realizing that someone who helped you for years will have to be made redundant is the most painful part.”
“I had never had health issues. Now, I have high blood pressure and hyperglycemia. Everybody in the family was shaken. We avoided going out at night for dinner, wedding ceremonies, birthday parties.”
“We downsized, sold property and returned leased farmland. Back in 2011, we were planting about 25,000 hectares. Now it’s 9,000. We will get back on our feet. It will be step by step. We cannot lose the focus and the hope.”
PUTIN’S MISCALCULATION
Droughts had already curbed harvests around the Black Sea in 2018. That tightened domestic grain markets in Russia and Ukraine and heightened global anxiety over whether Russian President Vladimir Putin would hold his wheat off the global market. He did, arguing that supplies were better used at home. Domestic bread prices immediately fell, while in the rest of the world they rose.
Putin covertly sent more troops into Donbas in eastern Ukraine, stoking conflict in his main wheat rival. At the same time, his sale of missile systems to Turkey at a heavy discount alarmed the U.S. and began to unravel the NATO alliance as President Recep Tayyip Erdogan cut more ties to the West. A naval buildup began in and around the Turkish Straits, the main conduit of Ukrainian grain to the Middle East and Africa.
Trump praised Putin’s export ban during a summit in Washington, saying it showed how the Russian leader put his people first. By July, the Russian ban and shrinking harvests had pushed inflation-adjusted wheat prices above their 1974 peaks, reached during the Arab oil embargo.
Case Study
2010: Russian Wheat Export Ban
“No one wanted to sell cheaply” — Vladimir Ralko
Vladimir Ralko, 31, says he had to scramble when the government banned export sales of the wheat he grows on his farm in Russia’s south.
A drought in 2010 had slashed the country’s wheat crop to a level barely above consumption. The ban was to ensure the country’s consumers didn’t have to compete with international buyers for the scarce supply. As wheat futures soared on the Chicago Board of Trade, domestic prices in Russia, a top shipper of the grain, slumped.
Ralko, whose 4,500-hectare farm is in the Krasnodar region about 850 miles south of Moscow, was set for a major profit, since his crops had escaped some of the damaging heat. His yield was actually higher than it had been a year earlier.
Instead, he had to put sales on pause, as did many of his neighbors. Domestic wheat prices fell about 20 percent, to below the cost of production.
One trader who had bought Ralko’s wheat a day before the ban called to get his money back.
“He’d bought the wheat for export,” Ralko said as he drove a white Volkswagen Amarok pickup truck around the farm, the winter wheat sprouts creating a carpet of bright green over the black earth. “We didn’t return the money but gave him a deferral to move the grain off of the farm. It took them as long as four months to move it.”
“Farmers had held on to their grain. No one wanted to sell cheaply. Some switched to selling other crops. We sold all the sunflower seeds—making deals as soon as the crop reached the warehouse—because it was more profitable. We sold all our sugar beets. We only sold wheat if we didn’t have enough money for an urgent expense. Some other farmers took out bank loans if they needed money. We simply waited. Eventually a grain shortage developed and prices climbed back.”
Ralko eventually sold all the wheat harvest as the farm had to make storage space for the next crop. He made money, though he had to put off the purchase of a John Deere tractor because the profit wasn’t as big as expected.
He doesn’t think the ban was a success: “We as a country gave a chance to make money to other countries and their farmers because the export ban caused global prices to increase.”
SUFFERING GOES GLOBAL
With global agricultural trade dwindling and crop reserves dramatically lower, some nations buckled. In the Philippines, an inability to procure rice on the world market led to riots in Manila that were brutally put down by President Rodrigo Duterte.
Food-fueled unrest spread in Indonesia and Myanmar, and hungry people began to flee. In East Africa, aid organizations warned of humanitarian catastrophe amid local crop failures.
In Egypt, the world’s biggest wheat importer, government attempts to curb subsidies raised the price of bread, helping trigger deadly riots. Those same concerns about soaring costs, along with grievances about freedom and justice, had blown up into all-out rebellion in 2011.
Case Study
1977: Egyptian Bread Riots
“We’re heading toward very, very, dire times” — Hani Shukralla
Hani Shukralla knew why a reduction of bread subsidies sent his fellow Egyptians into the street in 1977.
“An attack on bread is perceived by Egyptians, especially poor Egyptians, immediately as an attack on their livelihood,” said Shukralla, 68. “You hit them with a hike in the price of bread and they explode.”
In January 1977, President Anwar Sadat slashed subsidies of basic foodstuffs—including bread—to help shore up the economy. The price of flour rose by 67 percent in a country that is the world’s biggest importer of wheat. The word for bread in Arabic is “aish,” meaning life.
Two days of deadly demonstrations erupted in major cities. Sadat would later refer to the protesters as “riffraff,” even though he quickly rolled back the measures.
“He then begins a gradual process: The price of bread doesn’t change for a while, but the size of a loaf of bread keeps shrinking,” said Shukralla, editor of the online journal “Bil Ahmar”—“In Red” in Arabic.
Over the next few decades, protests and the occasional riot over rising living costs arose from time to time. Intertwined with calls for social justice and dignity, the grievances culminated in the January 2011 revolution that ended Hosni Mubarak’s near-30-year rule.
His successor, Abdel Fatah El-Sisi, imposed a variety of measures to secure international financing: He floated the pound, slashed fuel and electricity subsidies and raised public transport prices and taxes—all of which hit the poorest Egyptians.
One reform was off-limits, though: bread prices. The mere rumor of changes to the subsidized bread system—buyers are limited to five loaves per person per day—sends the government scrambling to set the record straight to stave off unrest.
“We’ve come to a stage where you don’t understand how people are managing to survive,” said Shukralla. “We’re heading toward very, very, dire times, where you are pushing millions of people to the brink of starvation.”
BORDER BARRIERS
As millions of hungry refugees began to migrate toward European Union countries, Turkey suspended its deal with the EU to hold them back in exchange for billions of euros. At an emergency summit, European leaders tightened controls around their external borders.
The U.K. crashed out of the EU with no deal in March—and became the envy of the continent. Populists from France to the Czech Republic joined forces to end the bloc’s passport-free zone and Italy talked more seriously about exiting the union itself. Nationalists, all favoring stronger border policing, won a strong minority in European parliamentary elections in May.
In Asia, Australia fended off another wave of boat people, deporting them home as its offshore detention centers filled up. Japan drew upon its large rice surpluses; its airlifts kept thousands of refugees from starving to death without allowing any into the country. Fearful of encouraging hoarding, the country’s leaders kept some supplies on hand.
Case Study
1993: Japanese Rice Crisis
“My daughter was hungry for Japanese rice” — Sadako Ishida
Sadako Ishida, a 66-year-old retiree living in a suburb of Tokyo, vividly remembers the food crisis of 1993.
The coldest-ever summer in many parts of Japan had damaged rice crops. Production was down 26 percent from a year earlier. Japanese consumers needed 2.7 million more tons than was on the market and rice stockpiled in government warehouses was less than 10 percent of that.
To make matters worse, in August there were media reports that harvests were still deteriorating across the nation. Some wholesalers began withholding their stockpiles. Rice prices in supermarkets started climbing. Eventually they would double. Because of hoarding, rice virtually disappeared from store shelves.
“I saw consumers in search for rice paying extraordinarily high prices for the grain in shops,” Ishida said. “But as a daughter of an apple farmer, I understood agricultural production was totally dependent on weather conditions, and consumers must find ways to survive in the time of shortage.”
“What I did to feed my 7-year-old daughter and husband was substitute bread, noodles, and other wheat products for rice. I also bought Thai rice at supermarkets several times, but as the grain tasted so different from Japanese rice, I didn’t buy much. My daughter was hungry for Japanese rice because she loved the staple so much. I felt sorry about feeding her with rice substitutes, but there were no other options.”
“I was surprised to see Japanese consumers falling into such a panic because of the rice shortage. I stayed calm, and never paid crazy prices for local rice. I was happy to eat noodles and bread as alternatives to rice, because they were enough to sustain my life. And my brother, who worked for a food wholesaler at that time, supplied me with some Japanese rice he bought directly from farmers.”
The turmoil lasted until around the middle of the following year, ending when favorable weather raised the prospect of a bumper rice harvest for 1994. Producers, wholesalers and retailers began releasing the grain from stockpiles.
“Then I realized there were people hoarding rice because of anticipation for higher prices, that irritated me.”
“We haven’t had a food crisis since then. And I have no rice stockpiled at home.”
CHINA’S TIPPING POINT
China, which had been relying on Brazilian soybean supplies since mid-2018, was embroiled in an escalating trade war with the U.S. It didn’t help when President Xi Jinping ratcheted up his rhetoric on Taiwan, which China regards as a province. Pirates begin to terrorize the South China Sea, a key trade route, creating an opportunity for a power grab for Xi in the territorially contested areas.
In Singapore, tensions rose with poorer neighbors Malaysia and Indonesia. While the rich island state could afford the uptick in food prices, it faced the risk of having its shipments of water supplies from Malaysia curtailed.
THE NORTHERN SOLUTION
El Niño-related rains led to record grain harvests in the northern U.S. and the burgeoning Canadian Corn Belt. “America’s farmers are the greatest in the world,” Trump cried at a raucous rally in Des Moines, Iowa, one year ahead of his bid for re-election.
U.S. producers, already sitting on massive soybean inventories, heading toward a record corn surplus and facing a bumper wheat harvest, were ready to resume their long-expected role as sellers of last resort. But many devastated nations couldn’t pay the high world prices.
Canada came to the rescue, in some emergency cases buying up and then giving away the equivalent of billions of dollars of commodities. Justin Trudeau, widely predicted to win a Nobel Peace Prize, was re-elected prime minister in a landslide.
AMERICA’S ANSWER
Inflation was eating at the U.S. economy as high world food prices flowed through to grocery shelves. Many U.S. consumers, especially Trump supporters, considered their harvest a national treasure meant for American stomachs, a point hammered home nightly on Fox News.
While U.S. farmers eyed an export bonanza and its potential for record revenue, Trump’s appeals to patriotism and calls for an “America First” food policy kept them from demanding too much from Washington. Predictions that shuttered exports would cost Trump the farm vote had been proven wrong in the past.
Trump had the power to open markets and feed the world. Or, he could send other nations—ones that had often mocked him and refused to take his blustering seriously—the ultimate put-down. His tweet: “With our NATIONAL SECURITY at stake, I will sign an executive order TODAY putting AMERICA FIRST in food. Our harvest Treasure will remain home. #MAGA2020.”
What he didn’t tweet until the next day: The ban came with an aid package to U.S. farmers of $50 billion, more than three times what they got in 2018, at a time when the federal deficit was already breaking records. Farmers were winners and taxpayers were losers.
Case Study
U.S. 2018: Dave Struthers
“2018, I’ll be happy to get behind me” — Dave Struthers
Iowa farmer Dave Struthers expects losses this year to be the worst in two decades, mainly because of the trade war stirred up by President Trump—whom he voted for two years ago.
Struthers, a sixth-generation U.S. farmer whose ancestors raised oats and milked cows, has experienced more downs than ups in 2018.
Still, he’s not ready to give up on the Republicans. He voted early, mainly for Republican candidates, in the U.S. midterm election but hasn’t decided which way he’ll go in 2020. The escalating tension with China and renegotiation of the North American Free Trade Agreement, combined with a multi-year glut of crops, have pushed down prices of most of the commodities he raises. His family farm about a half hour outside Des Moines produces soybeans, corn and hogs, among other commodities.
U.S. agriculture is feeling the pain of a trade war that largely started with U.S. duties on foreign steel and skirmishes with the Chinese over intellectual property rights, he said. China levied tariffs on U.S. agricultural goods knowing the support rural America gave Trump in 2016, said Struthers, who has visited China. The midterm election gave Democrats control of the House but Republicans still hold the majority in the Senate.
“It’s been a stressful year,” Struthers said on a crisp, clear day in late October with snorting pigs and recently harvested fields surrounding him. “Trade barriers, tariffs that were put on U.S. agricultural goods has been a big part of it.”
The recently signed U.S.-Mexico-Canada Agreement and revamping of the free-trade agreement with South Korea have raised hopes and calls for pacts with other countries such as Japan next year. The trade truce Trump reached with Chinese President Xi Jinping opens the way for more Chinese purchases of soybeans in coming months, as the recent resumption of purchases shows.
Trade is needed to help provide food security and make crops that countries can’t grow available to them. But patents need to be respected and workers should have dignity, Struthers said.
“It’s unfair but it’s not our administration that chose the punishment,” he said. “It was the Chinese that decided we’re going to slap agriculture with tariffs.”
He’s focused on looking ahead. Optimism is a common trait among farmers.
“2018, I will be happy to get behind me,” Struthers said. “I am looking forward to 2019.”