Worries continue to gather across India as 11 States now confirm that they are experiencing drought or drought-like conditions. Rainfall deficits in these States range from 30 per cent to a possibly disastrous 76 per cent, and the Prime Minister has been forced to announce that he will “do everything possible” to reduce the inflation of food prices.
It would be wrong, however, to view this situation as being a temporary crisis caused by one poor monsoon. The current situation in India is merely one nation’s experience with a rapidly worsening global problem. Reached at his office in London, Alex Evans of New York University’s Centre for International Cooperation said that the “long term trend is one of rising global food prices,” with what he said could be described as increasingly frequent “crazy swings.” The current price spike is because of a poor monsoon, but higher prices seem likely to become near-permanent.
Even before the news of this year’s poor monsoon, prices remained 13 per cent above where they were two years ago, and worldwide the number of malnourished people had risen since 2007 from 850 million to over a billion. This is because in 2008, after remaining reasonably stable for years, food prices increased by up to 50 per cent over 12 months. This caused riots in over 60 countries and helped push over 175 million people into poverty.
Prices have declined from their peak, but Dr. Suresh Babu, Senior Research Fellow at the office of the International Food Policy Research Institute in New Delhi, said: “The global food economy is still facing a crisis situation threatening the livelihoods of millions of people in developing countries.” Worse, currently high prices are actually being depressed by the recession in the West. Economic recovery in America and Europe will possibly see those prices rising further.
The 2008 crisis was influenced by many factors, but the proximate cause was a rise in the cost of oil. Besides being used to run tractors and to transport food products to the market, oil is used in the production of the fertilizers needed for modern farming. This means that sudden changes in the price of oil can drastically affect input prices, and explains why food prices have fallen this year as the recession pulled down oil prices. Since this increase in price accrues to oil producers, it did not make farmers any better off.
High oil prices have an additional effect on food prices. When oil prices rise above a certain level, it becomes economical for farmers in the United States to use corn to create ethanol, which can be used as a substitute for petrol in cars. U.S. farmers burned 34 per cent of their 2008 corn harvest, helping to raise prices in a bumper year. Ethanol production collapsed this year, but will take off again once higher oil prices make it economical. Faster economic growth in the North, when it returns, will directly harm the livelihoods of millions in the world’s poorer regions by pushing the price of corn beyond the reach of the urban poor in the South.
Changing diets are also putting pressure on food prices. More grain is needed each year, not only because there are more people but because people are becoming richer. India’s consumption of grain and rice has actually fallen (per person) as economic development has increased, as people eat more vegetables and fruits – both of which take more energy and land to produce. Rising consumption of meat in China and elsewhere is pushing up crop prices as it takes 5 tonnes of grain to produce one tonne of pork.
These forces were aggravated by commodity speculation on Wall Street, says Jennifer Clapp, Professor of Environment at the Centre for International Governance Innovation (CIGI) at Canada’s University of Waterloo. The ‘securitisation’ of agricultural commodities sent prices up as investors “poured money” into wheat futures. Such speculation has increased four-fold since 2002, and Dr. Clapp worries that, “Without some sort of regulation on agricultural commodity speculation we are likely to see volatile food prices again in the future… whether and when food price volatility happens again depends in large part on the state of the global economy.”
None of these three factors is going away. High prices do not constitute a failure of the global agricultural system; they are the system. The fact that prices are no longer breaking global records does not mean the situation has stabilised at an acceptable level. With a billion people being hungry seemingly the new normal, another sudden spike could be much worse than the last one. The market remains vulnerable to shocks as global grain stockpiles are at a 30-year low and almost all export production comes from half a dozen suppliers. A situation that looks grim today will be significantly more difficult as the century goes on, as projections estimate that the planet will need 50 per cent more food in 2030. This is during a century in which global warming may drastically reduce crop yields in some regions.
Through a combination of steps including stepping up grain stocks and imposing export restrictions, the Centre has the resources to stabilise the situation this year. Yearly reactive measures, however, will not prevent the situation from getting steadily worse. The solution to this global crisis will not be simple, and if it could fit in one newspaper article it would have been solved long ago. We need innovation on the scale of a second Green Revolution. Governments must cooperate and drastically rethink the current agricultural system. What is critical is that the world does not miss the forest for the trees. If we let ourselves concentrate on transitory price spikes rather than the long-term forces that cause them, we run the risk of sleep-walking into perpetual hunger for an ever-greater number of people.
( John Ashbourne is a student at the Trudeau Centre for Peace and Conflict Studies at the University of Toronto.)
