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Could Rising Food Prices In Poor Countries Trigger Change Among Western Economists?

| Thursday May 15th, 2008 | 5 Comments

shopsemplty.jpgThe ongoing food crises in 36 countries around the globe are a cause of worry for major institutions such as the World Bank because the problems signal profound problems of disbalance in the world economy. The main reasons behind the high food prices in poor countries are the high oil price and market liberalization shocks. Biofuel crops are hardly a factor. Climate change is something that has played a role for as long as everyone can remember and it’s only being recognized now.
In recent months, the world has witnessed various food riots in poor countries around the globe and the general conclusion bankers in their dossy offices have drawn are that some countries apparently really don’t have much of a buffer zone left – hence the upset.


In the 1990s several countries faced hardships meeting their primary needs and there were hardly any protests. So what’s different this time? It might be a case of the cupboard being extremely bare. It’s odd but now that globalization obsessioning has gone out of fashion, its effects are overly tangible and the word proves as elusive as its definition was vague.
Researchers at French Agricultural Centre For Research and Development (CIRAD) recently produced a hugely interesting report analyzing the reasons behind the high food prices. They compiled experiences from experts in several countries and pointed out that it’s easy to find a scapegoat in any of the countries on the brink of starvation, but that the longer term situation is hugely complex.
Firstly the purchasing power of people in emerging countries (Brazil, China, India) has increased in recent decades. In addition, diets changed. People eat more meat now. Calories of animal origin accounted for just 5% of total calorie intake in Asia in 1970. Thirty years later, the figure had more than doubled, to 11.7%.
That’s not negligeable; it takes seven calories of plant origin to make one calorie of animal origin. The phenomenon is also a part of urbanization. “Demand for food is growing faster than population levels and this trend will continue”, the CIRAD researchers predict. “The agricultural production is less surplus than ten years ago. The market is more stressed.”
These trends might have developed over a long time but prices in the shops have shown violent movements in recent months, signalling an immediacy which is fear instilling. In one month, U.S. wheat export prices skyrocketed from $375 to $425 per ton. Prices for Thai rice rose from $365 to $475 per ton. The economic situation is creating the scenario for a very stressed situation. Get bad weather to ruin your crops and riots are easily triggered. The CIRAD researchers also say that several countries were hit by freak weather conditions (drought in Australia, typhoon in Bangladesh, cold winter in China and Vietnam), resulting in poor harvests. This has resulted in more import demands and a fall in supplies from major exporters such as Australia (a big wheat exporter).
Exacerbating this weakness are the actions by speculators cashing in on price expectations on the agricultural commodity futures markets. Given the rising demand for food products and the fall in supplies, there simply is one way only in which a price trend can develop. According to the latest World Bank report, Rising Food Prices: Policy Options and World Bank Response, increases in global wheat prices reached 181 percent over the 36 months leading up to February 2008, and overall global food prices increased by 83 percent. And on top of all that, prices in poor countries also experienced increased volatility due to a lack of market regulation. “As a result of liberalization, governments no longer intervene, and cereal stocks are running very low. We are now firmly in an era of unstable prices, with long-term risks of occasional explosions,” according to CIRAD.
What to make of the biofuel stories and the high oil price? In recent months, strong accusations have been made that biofuel crops are to blame for the lack of food supplies domestically in Third World countries. Farmers were said to prefer growing bio fuel crops over food crops due to higher prices. But actual numbers don’t underpin the scope of the problem as portrayed in some media. The International Energy Agency released figures showing that less than 1% of all cultivated land globally is used for biofuel crops. What is true is that the stories about the cultivation of lucrative biofuel crops add to the scares that liberalized markets bring to local populations.
The very anticipation alone that the lucrative crops will soon outpace the cultivation of food crops would make an already tense bunch of people even more jittery. “It is our anticipation of the rise in demand rather than the actual rise that accounts for the recent price rises,” the CIRAD researchers say, downplaying the severity of the biofuel impact.
That is not to say that the potential disastrous impact of bio crops is over-estimated. The 2008 World Development Report “Agriculture for Development” provides a compelling example of the food-for-fuel debate: over 240 kilograms (or 528 pounds) of corn – enough to feed one person for a whole year – is required to produce the 26 gallons, or100 liters of ethanol needed to fill the gas tank of a modern sports utility vehicle.
So far, what’s been more damaging than biofuel has been the impact of rising oil prices. Oil is an incremental need in the mechanized agricultural sector and rising oil prices also affect the cost of transport, fertilizers, irrigation by pumping, and agrifood processing. Although developing countries use less fossil energy in their farming systems, [the high oil price] affects local commodity production, processing and marketing costs,” say researchers at CIRAD. “The aim now is to invent a form of agriculture and an agrifood processing and marketing system that is less energy-intensive.”
But it’s not the food producers who are hardest hit by the high oil price. It’s the importers of food that suffer the most. Strangely they’re largely absent in many research analysis reports. But to solve their problems means that you’ve eliminated the largest part of the food problems in most poor countries. So what are the solutions? To find these, it’s important to be aware of the changes at grassroots levels in some countries and the anomalies in local politics. The suppliers of food products in many poor countries have innovated dramatically in recent years to gear up for their more sophisticated domestic market. And with some success. Yet politicians are still dreaming on about exporting, a scenario that’s simply not materializing because the local market now is as valuable or even more lucrative than exporting.
What it would take for food crop production to replace imports is difficult to estimate, because most of the activities thus far are scarcely covered publicly. Boosting productivity with tremendous results is believed to be difficult for all the old reasons. Shaky resources of course are mostly blamed. CIRAD researchers point at poor technical solutions, poor planting material and weak disease controls. Investment in research into these production chains is also far from sufficient. But the food crop sector is not limited to farmers. This fact is often overlooked. It also concerns a large number of other activities that connect producers and the market including agrifood processing (oil extraction, cereal milling, root and tuber crop crushing, fish drying, etc), marketing and distribution, and catering.
The CIRAD researchers come up with a few helpful hints for short term emergency steps that make a long term difference. “Emergency food aid will not solve the problem,” the researchers say. They add that all that it would take to make the commercial food crop sector respond would be to give farmers access to a little more fertilizer, phytosanitary products, good roads, processing facilities, credit, advisory services, insurance and information on prices, and to cut police taxes on roads and the cost of diesel.
Let’s hope this is true. The pan ultimate challenge for our century almost certainly has to do with our senses but we’re simply failing to make out which one. At a time that plant breeders and agronomists are warning that it’s only a matter of a major disease epidemic and farm yields in the world’s major granaries are wiped out, we might do best when we’re in possession of a discerning vision of what it is that’s needed.


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  • Shannon Arvizu

    Well-done analysis on the topic…I wonder to what extent we might begin to see the emergence of small-scale urban food production a la Havana-style when Cuba was hit with the oil embargo.

  • Anonymous

    in the last paragraph, you use the term PAN ULTIMATE. what I think you meant was penultimate, which actually mean second to last

  • Anonymous

    All the solutions that I’ve read focus on short-term attempts to increase food supply. But each time that we increase the food supply, population catches up and we’re back in trouble again.
    A truly comprehensive long-term solution will require a willingness to halt population growth, as well as consume less petroleum, consume less meat, and make better use of water resources.

  • Dominic Amann

    Good subject and important points are being obscured by bad writing. What is “globalization obsessioning”? We have enough words to say what we mean without inventing new ones for the eye to stumble over. It looks the the struggle to appear clever and educated is triumphing over the need for simplicity and clarity.

  • Dominic Amann

    Good subject and important points are being obscured by bad writing. What is “globalization obsessioning”? We have enough words to say what we mean without inventing new ones for the eye to stumble over. It looks the the struggle to appear clever and educated is triumphing over the need for simplicity and clarity.