Food prices could rise in 2013 as US drought continues

Updated 04 February 2013
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Food prices could rise in 2013 as US drought continues

Global food prices eased slightly in the second half of 2012. Good harvests in the southern hemisphere, particularly soy and corn in Brazil, together with a drawdown of stocks, partly offset the impact of lower than expected supply from the drought-stricken US.
However, prices remain high and could increase further in 2013, according to analysis by QNB Group. Existing concerns include record temperatures in Australia this month, signs that the US drought may persist for another year and low levels of food stocks. If climatic problems develop in any other key producing areas then prices could reach new record levels.
Global food prices have been both high and extremely volatile in recent years. The situation is particularly serious in regards to grains-such as corn, wheat and rice-which provide the majority of global food calories. Last summer wheat prices, for example, shot up by over 50 percent in the space of 6 weeks when the extent of the US drought became apparent. The grains’ component of the Global Food Price Index, produced by the UN Food and Agriculture Organisation (FAO), remains close to record levels. Meat prices are also close to historic highs, in part because of the cost of grains for animal feed.
Although the FAO’s overall food index in 2012 was on average 7.0 percent below the 2011 level, it was still 5.9 percent above the previous record set in 2008. The easing compared with 2011 was largely due to falls in some items such as sugar, which was down by 17.1 percent on average over the year, and dairy, down 14.5 percent. However, grains were only down 2.4 percent, because of a period of weaker prices first half of the year. In the second half of the year, by contrast, grain prices were 8.8 percent higher than the same period in 2011 and only just below the record average for a six-month period, set in mid-2008.
Food prices are of particular concern to the poorest third of the global population who spend over half of their income on food, and to countries that are highly dependent on food imports, including many Middle East states.
The drought in the US, the most widespread since the devastating Dust Bowl period in the 1930s, began widening and intensifying in June 2012. The proportion of the country (excluding Alaska) that was experiencing drought nearly doubled in the space of a few months, peaking in September.
The area experiencing drought has only fallen slightly to 57.6 percent of the country in late January, compared with an average of 31.3 percent during the 2000s. Moreover, the amount of land undergoing the most exceptional category of drought only peaked a few weeks ago, at 6.8 percent of the land area (nearly seven times the average in the 2000s). This is because winter rains have been more limited than usual in many places. As a result, the winter wheat crop appears to be growing poorly and there are signs that the drought could persist into the spring and summer, damaging other crops.
The US National Weather Service has just released its first forecast for the planting season that runs until the end of April. It expects the drought to persist in most of the currently affected areas, including major agricultural states such as Kansas. On the positive side, some improvement is expected in parts of the critical Corn Belt in the Midwest (where production last year was down by 13 percent). The drought is significant because the US is the world’s largest exporter of food, including of corn, wheat and soy.
Australia, the world’s fourth largest wheat exporter, is also seeing a period of exceptional weather. The last four months have been the hottest since records began a century ago. The heat wave peaked in early January, the height of the southern summer, with a string of days at record breaking temperatures. The heat triggered wildfires across the country’s agricultural belts.
Another factor of concern are global food reserves, which are relatively low. An FAO estimate in October put them at less than 74 days of consumption. Reserves are significantly lower in some countries and for certain food stuffs. US corn stocks, for example, would only last around 24 days, the lowest level on record.
If the climate during the next year or two is favorable in major food production regions then prices should ease somewhat, according to QNB Group. This will happen as farmers invest to plant uncultivated land, motivated by recent years of high prices. However, if the US drought continues to be widespread, and if there are significant droughts or floods in other key countries, then the conditions will be in place for a fresh price spikes.
Even if there is an improvement in the short term, extreme weather conditions and the associated food price spikes are expected to occur frequently in the coming years, as the global climate warms. Pricing pressure could be further exacerbated by a continuing trend towards using food crops as biofuels, speculative activity in agricultural futures market and growing demand driven by increasing affluence in some developing countries.
In this increasing food-insecure world, GCC countries will need to continue their efforts to diversify their food sources to minimize the risk of disruption to supply at times of shortage in specific producing regions. In any case, trends in global food prices will most likely impact inflation in the GCC, as food is the second largest component of consumer price indices in the region.


Toyota captures data goldmine in $1 billion Grab bet

Updated 5 min 36 sec ago
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Toyota captures data goldmine in $1 billion Grab bet

  • Grab already monitors driving behavior through its app to increase ride safety, sending emails about speed and braking, for instance, to its drivers
  • Toyota and Grab will be able to use the data for possible collaboration on data-driven services such as vehicle diagnostics and customized insurance plans based on driver usage

TOKYO/SINGAPORE: By pumping $1 billion into ride-hailing firm Grab, Toyota Motor stands to gain a passenger-side view of tens of thousands of cars across Southeast Asia, tracking how fast they drive, how far they travel and the time they spend stuck in traffic.
The Japanese automaker said it aims to install its TransLog driving recorder devices into Grab’s fleet of lease cars to access the data on driving patterns that will be crucial to its push into the nascent mobility-as-a-service industry.
“Only ride-hailing companies have good, extensive data on usage, so automakers want to be connected with that,” said Egil Juliussen, director of research for automotive infotainment and advanced driver assistance systems at IHS Markit.
Grab already monitors driving behavior through its app to increase ride safety, sending emails about speed and braking, for instance, to its drivers, such as Singapore’s Rennu MaHajjan.
“With this system, it keeps me in check,” said MaHajjan, 57.
It will get even more vehicle data with Toyota, which has been harvesting data through TransLog since 2016 in sales and trials with taxi firms and car-hailing operators including Grab. The data gives Toyota insight into fleet management as it develops services including futuristic concepts such as pay-per-use mobile restaurants.
The latest deal, announced last week, gives Toyota access to a single pool of vehicles which potentially eclipses all others. That will allow it to capture a volume of data that would be difficult to collect from private cars which are only used for under 5 percent of any given day, often on routine commutes.
In return, Grab will be able to expand services such as food delivery and digital payments using Toyota’s $1 billion investment — the biggest by a traditional automaker in a ride-sharing app maker.
The deal reflects how automakers are clamoring for access to ride-hailing firms’ extensive user bases through a spate of partnerships, as they compete with technology companies to develop autonomous cars and next-generation transport services.
Toyota’s vision of such services includes convoys of shuttle bus-sized, self-driving multi-purpose vehicles used, for instance, as pay-per-use mobile restaurants and hotels, which the automaker plans to develop and customize for retail customers.
“There’s data about the car, and then there’s also data about the service — how many customers drivers have, what’s the average mileage, where the rides are concentrated,” said Juliussen. “Having that picture in all the major (Southeast Asian) cities, that becomes very valuable.”
Toyota and Grab will be able to use the data for possible collaboration on data-driven services such as vehicle diagnostics and customized insurance plans based on driver usage.
The data will also help Grab maintain efficiency in fleet maintenance as it expands deeper into Southeast Asia where it operates in over 200 cities. It has said it wants build the region’s largest car rental fleet by the fourth quarter of 2018.
“Vehicle maintenance costs, insurance costs, these are bread-and-butter issues for ride-hailing drivers,” said Chua Kee Lock, chief executive of Vertex Venture Holdings in Singapore, an early Grab investor.
Industry experts said Toyota could expand its data service to more mobility firms such as Didi Chuxing, Uber Technologies Inc. and Amazon.com Inc, with which it has separate partnerships.
“This partnership with Toyota will keep Grab’s platform ‘sticky’ and give drivers less incentive to switch to competitors,” said Chua. “This is Grab’s edge over the long-run.”