Warning signs on food front

The record rise in the prices of wheat and most other food items coming on top of an unprecedented and unanticipated shift in global food supplies has prompted a sharp warning from the Food and Agriculture Organisation. Its top official said recently that fewer people, especially in the developing world, will be able to get food. FAO’s food price index has gone up by 40 per cent this year compared with 9 per cent the year before, when it was already high. The food bill of the most needy countries rose by 25 per cent to touch $107 million last year. Compared to a year ago, wheat prices are up 52 per cent. Very recently, for the first time ever wheat futures broke the $10-a-bushel mark, which is roughly $370 a tonne and the equivalent of global oil breaching the $100-a-barrel level. The price of not just wheat but the prices of most other cereals, oil seeds, milk, and meat have also gone up. But it is the inflation in wheat prices that has become the reference point and has, in many ways, been responsible for the all-round increase in food prices.

In an ominous parallel development, FAO records show that wheat stocks have declined to their lowest levels since 1980, corresponding to just 12 weeks of the world’s total consumption, which is sharply lower than the average of 18 weeks during 2000-05. An unprecedented drought in Australia for two years in a row and unfavourable weather conditions in Argentina, Ukraine and Southern Russia — all principal wheat producing regions — have sharply reduced global output. Less understood but an obviously potent factor is the effect of global warming. The shift to biofuels, especially in the United States, is an immediate, well-documented cause. Besides, in China, India and some other developing countries, there has been a significant change in the consumption patterns with affluent families taking more of meat, milk and vegetables than cereals. The consequent increased demand for grains as cattle and poultry feed has aggravated the shortage. High global food prices have figured prominently in Indian policy making. When announced in November, the minimum support price for the winter wheat crop at Rs.1,000 a quintal seemed appropriate, balancing the interests of the farmers and the consumers. Evidently the government may have to pay more next April, as private trade is likely to bid up the prices. Even as the government is pinning its hopes on achieving a production target of 75.5 million tonnes of wheat, a great deal of uncertainty remains over the immediate direction of food prices and the impact they will have on inflation and the quantum of food subsidies.

Recommended for you