Global food crises are turning out to be far too frequent to be dismissed any longer as a freakish phenomenon — in much the same way as the extreme and erratic weather patterns associated with global warming. A spike in the prices of agricultural commodities is again looming, threatening a repetition of the 2007-2008 global food crisis when international prices skyrocketed to their highest in 30 years. The International Monetary Fund (IMF)’s food price index rose by over 80 per cent between the start of 2007 and mid 2008. Severe drought in the United States, flooding in several parts of Europe, a massive shortfall of rain in Africa and India are feared to lead to huge loss of output and a scramble for markets and supplies.
Meanwhile, steep prices, high production costs and slow global output for the whole decade have been forecast by the Food and Agriculture Organisation (FAO) and the Organisation for Economic Cooperation and Development (OECD). Agricultural output growth is said to average annually at 1.7 per cent over the next 10 years, down from trend rates of over 2 per cent in recent decades. Moreover, with only a slight increase in farmland area expected in the coming decade (with 25 per cent of all agricultural land degraded), production will have to be raised through enhanced productivity, says the 2012 FAO OECD Agricultural Outlook.
Food or fuel?
The trigger behind the current episode is believed to be the severe drought in the U.S., the world’s largest exporter of corn, wheat and soybeans. But drought or no drought, at the core of the current crisis is the pressure to convert grains into fuel by diverting corn (maize and other coarse grains) to the manufacture of ethanol. U.S. oil companies are required to dilute gasoline with increasing amounts of biofuels under the renewable energy programme of the Environment Protection Agency (EPA). This year’s target for biofuels production is some 13.2 billion gallons, almost all of which is said to be from corn.
The situation is reminiscent of the 2007-2008 global food crisis when the U.S. and European biofuels policy of subsidies, tax exemptions and incentives for corn-ethanol production was roundly criticised by multilateral agencies. The IMF in particular, pointed to the policy’s detrimental effects on staple food crop output, citing estimates that U.S. corn-ethanol production accounted for 50 per cent of the increase in the global demand for corn in the preceding three years. Now, U.S. grain, meat and dairy lobbies are concerned that in the current extreme heat and sparse rains, a disproportionate diversion of corn could cause a further spike in prices, hurting livestock and poultry feed and the demand for meat. The crippling effects of the U.S. drought, the worst in 50 years, and an impending crop failure could impact world markets in the absence of corrective steps.
Significantly, explanations for the unprecedented escalation in the prices of grains was also sought in the changing food habits of the rising middle classes in the emerging economies of Asia, while volatile international oil and energy markets exacerbated the situation. But there is ample evidence that points to the role of commodity derivatives in destabilising and driving up food prices around the world. This resulted in food prices becoming unaffordable to poor people in the developing world who rely on imports. Not surprisingly, the World Food Programme reported a cash crunch of millions of dollars in its efforts to feed the world’s hungry, even as the crisis sparked hostile and violent (even fatal) protests around the world, leaving deep scars of social unrest long thereafter.
Impact of exports ban
The other policy shortcoming is the perilous resort to a ban on exports of agricultural products to shore up supplies in some 30 countries during the 2008 crisis. In the wake of the destruction of crops in the Russian Federation in the droughts during 2010, Moscow resorted to restrictions on wheat exports — producing an extremely destabilising effect on agricultural markets. If Russia, Ukraine, Kazakhstan and Egypt clamped restrictions on wheat exports, curbs on rice exports by Indonesia, the Philippines, Vietnam and India have similarly pushed up global prices. The response from poor food importing countries has been either to lease or buy land overseas in order to bolster supplies and stocks.
Rights over land
In the developing world, the rapidly rising demand for food linked to the exponential rise in population and the challenge of alleviating endemic poverty are exerting enormous pressure on conventional forms of rural agriculture. There are two contending models on offer. One is to invite huge agribusinesses to exploit hitherto large unused land via capital and technology-intensive farming methods with a view to promoting the so-called trickle down growth that has been increasingly discredited. Such land acquisitions often impose their own set of choices in crop and cultivation patterns — and the ultimate sacrifice of relinquishing ownership rights over land.
The alternative to this G8-backed proposal is the formula put forward by the Africa Progress Panel. Proponents of this approach advocate raising the productivity of farmers through small holdings of land and technology, with a view to mitigating the widening inequalities that result from the trickle-down model of development. Given the grave implications of dislocation and dispossession of local populations of their land, not to mention loss of livelihoods, models such as the FAO’s International Soaring Food Prices Initiative to help small-holder farmers to grow more food seems a more realistic and sustainable way forward.
Clearly, the international community has yet to formulate an effective and concerted policy response to the underlying causes for the crisis over food prices. People in the developing world are said to spend about 75 per cent of their income on food compared to a meagre 25 per cent by those in the advanced economies, according to the FAO. Thus regulation of financial speculation relating to commodities, reversal of the distorting effects of biofuels policies and according respect and recognition to the rights to land and livelihoods deserve the highest international priority.