Drought Update

June 22, 2015 6:00 AM

I did two posts last week on the plausibility of North Korea’s dubious proclamation of a “100 year drought” claim. But whatever the motivations, it has continued to capture attention and I provide an additional update here.

Randy Ireson has a nice summary at 38th North; my only quibble is that peak rainfall is in July so we are even further away from knowing how bad things may be than what Randy allows.

Last week the FAO put out an updated analysis that has been spun in the press in various directions. The report addresses two issues: the impact of the drought on the early spring harvest and the drought's potential impact on the larger main harvest in the fall. The spring harvest is small, accounting for about 8 percent of total supply. By definition we should have better information on the drought’s impact on this harvest since it has been completed, but because of North Korea’s unwillingness to allow the agency unimpeded access, even the quality of this information is imperfect. So for what it’s worth, the FAO estimates that spring production of potatoes could be down 24 percent and wheat and barley down 26 percent. To reiterate, the FAO is working off of information provided by the North Korean government which has a history of politicizing these issues, exaggerating distress once the decision has been made to seek aid and exaggerating accomplishments otherwise. Given the context, taking this down to single digit percentage losses surely conveys a spurious sense of precision. That said the spring harvest while not large in aggregate terms is important in terms of food security helping the populace get through the “lean season” until the fall harvest, and as I observed in a previous post, the food security situation is not good going in.

By definition, the agency’s estimates of future losses associated with the main harvest are even more speculative. But for what it’s worth, the FAO thinks that the rice harvest may be down 12 percent over last year, or 326,000 MT. To get a sense of the financial scale of this shortfall, according the IMF commodity price data, last month rice was $382.4 MT. Ignoring post-harvest losses, distinctions between hulled and unhulled, and differences in quality, in a simpleminded sense one could cover this loss for less than $125 million.  Last year North Korean licit merchandise exports were roughly $4 billion. (The figure is higher if one includes services exports and revenues from illicit activities.) Another metric: $125 million is less than half the value of luxury goods imports from China. In short, $125 million is not a small sum, but it should be easily financeable. Of course things could turn out worse than the FAO currently envisions.

And whenever the ultimate scale of this shortfall is revealed, the North probably won’t have to finance the whole bill themselves: China has already indicated that it is prepared to send aid, and if it did, the Park Administration would be under considerable pressure to send aid as well.

As I argued in a prior post, it is almost impossible to imagine North Korea experiencing a 1990s-type famine today: the economic shocks are not on the same order of magnitude, the internal economy is more flexible, and for all the informational problems, the rest of the world is vastly better informed and better prepared to act than it was two decades ago. The current situation is not good, and if the rains don’t come, conditions could deteriorate rapidly. But it would take bad luck and mismanagement of epic proportions to turn current conditions into a famine.

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