Disaster in Japan and conflicts in Middle East could impact agriculture in the Americas in a number of ways

San Jose, Costa Rica, April 4, 2011 (IICA). The domino effect in the Middle East, which has seen political conflicts erupt in countries such as Egypt, Libya, Bahrain and Yemen, could drive up both oil and food prices.

At a recent forum, a number of experts from the Inter-American Institute for Cooperation on Agriculture (IICA) analyzed the possible impact on agriculture in the Americas of the conflicts in the Middle East and the earthquake and tsunami in Japan. They also reported on theAgricultural Outlook Forum 2011, where the United States Department of Agriculture (USDA) presented a prospective analysis of the development of agriculture over the next 20 years.

At present, all eyes are on Libya, where rebels are locked in battle with supporters of President Muammar Gaddafi and oil supplies have been disrupted. However, the Manager of IICA’s Center for Strategic Analysis for Agriculture, Rafael Trejos, pointed out that Libya was not one of the world’s leading oil exporters, so the impact of the crisis had been limited.

“The real concern if this domino effect impacts countries like Saudi Arabia–one of the world’s biggest oil producers–where we are already beginning to see movements demanding political and democratic reforms. If the conflict becomes more serious and oil supplies are disrupted, and demand in Japan increases, the price of crude could reach US$200 a barrel by the end of the year,” Trejos said.

Higher oil prices would inevitably push up the cost of transportation and fertilizers and other agricultural inputs. This, in turn, would have a direct impact on food prices, which are already higher than during the 2008 crisis, according to Miguel García, the Manager of IICA’s Agribusiness and Commercialization Program.

Not surprisingly, biofuels are once again being touted as the solution, to prevent higher oil prices from affecting importing countries.

While biofuel production would allow countries to become energy independent, it would also drive up the prices of crops such as corn and sugarcane, which are used both for human consumption and to produce fuels. Therefore, it was recommended that biofuel policies be analyzed in terms of their possible impact on food security.

The Japanese domino

IICA’s experts concur that the main impact on agriculture of the disasters that occurred in Japan on March 11 has been to create uncertainty, which affects food prices.

Joaquín Arias, an IICA specialist in Policies and Trade Negotiations, explained that uncertainty impacts investment, which in turn affects agricultural production. This translates into a decline in food stocks and hikes in food prices.

Although the tsunami did not have a serious effect on Japan’s rice production, an increase in rice imports cannot be ruled out, and the same is true of oil and gas imports. Such a development would benefit the countries that produce those goods.

On the other hand, the financial pressures created by the need to rebuild the country could have a negative effect on imports of other crops, such as soybeans, corn, and meat, with serious consequences for producer nations. Japan is the world’s biggest importer of soybeans and third largest importer of corn.

Japan specializes in fish and seafood products, and the nuclear disaster poses a threat to its exports. Should the situation spiral out of control, Japan’s neighbors who depend on that production would also be affected. Furthermore, radioactive contamination of food and drinking water would create the need for more imports.

Other possible consequences of the recent disasters in Japan are the pollution of water sources and the deforestation that could occur if the country decides to rebuild its traditional-style wooden houses.

For more information, contact 
rafael.trejos@iica.int