The global food crisis

Zulfiquer Ahmed AMIN

WITH empty shelves in Caracas, food riots in West Bengal, Mexico, Morocco, Mauritania, Senegal and Yemen, warnings of hunger in Jamaica, Nepal, the Philippines and sub-Saharan Africa, soaring prices of basic foods all around the globe have brought into light a looming global food crisis.

In the recent past, Argentines boycotted tomatoes when the vegetable became more expensive than meat; and in Italy, shoppers organised a one-day boycott of pasta to protest rising prices; the Russian government, hoping to ease tensions, announced a price freeze for milk, bread and other foods.

In this backdrop, Bangladesh is passing through a desperate time, when the devastating cyclone Sidr in November, on the heel of two successive floods, caused widespread damage to standing rice crops and winter vegetables and wreaked havoc on the government’s demand and supply mechanism.

Nearly every region of the world has recently experienced drastic food price inflation. Retail prices are up 18% in China, 17% in Sri Lanka and 10% or more throughout Latin America and Russia.

Zimbabwe tops the chart with a more than 25% increase. Double-digit price hikes for almost every basic foodstuff have driven that inflation over the past year. Dairy products are as much as 200% more expensive since last year in some countries.

Maize prices hit a 10-year high in February 2007, while wheat is up 50%, rice up 16% and poultry nearly 10%. The price of any commodity rises only when its supply dwindles or becomes uncertain, and that is exactly what happened with rice, wheat and a number food and milk products.

Prices on the global commodity markets have been in turmoil as a series of poor harvests especially in Australia which have led to lower supplies of wheat. This has been combined with surging demand from India and China.

The combination of falling supply and rising demand has led to soaring grain prices, which, in turn, increased the cost of meat and dairy products as farmers seek to recoup the money they have had to pay for feed that is more expensive.

On the demand side, one of the key issues is bio-fuels. Since virtually all the crops we currently grow for food can also be converted into fuel, either in ethanol distilleries or in bio-diesel refineries, high oil prices will open a vast new market for farm products.

Those buying commodities for fuel producers are competing directly with food processors for supplies of wheat, corn, soybean, sugarcane, and other key crops. Thus, the price of oil is setting the price of food simply because, if the fuel value of a commodity exceeds its value as food, it will be converted into fuel.The scale of the change is mind boggling.

The Indian government says it wants to plant 140,000 sq km acres of bio-fuel crops, and Brazil as much as 1.2m sq km acres. South Africa is being touted as the future Middle East of bio-fuels, with as much as 4m sq km acres of land ready to be converted to crops for fuel.

Indonesia has said it intends to overtake Malaysia and increase its palm oil production, from 64,000 sq km acres now to 260,000 sq km acres in 2025, for energy. A year or two ago, almost all the land where maize is now being grown to make ethanol in the US was being farmed for human or animal food.

As of today, since America exports most of the world’s maize, its conversion to fuel is resulting in food scarcity with price hike. The competition for grain between the world’s 800 million motorists, who want to maintain their mobility, and its two billion poorest people, who are simply trying to survive, is emerging as an epic issue.

Demand for grain is increasing with the world population, and more is diverted to feed cattle as the population of upwardly mobile meat-eaters grows. The boom in emerging markets such as China and India has meant increasing wealth.

As a result, in China the population is now consuming expensive food such as beef in greater quantities than ever before consumption of dairy products there has doubled over the past five years.

According to an Australian report on food demand in 12 Asian countries representing more than half the world’s population upto 2020, beef consumption will increase by 50%, pork 30%, chicken meat 40% and dairy 55%. It requires about two kilograms of feed to produce one kilogram of chicken, and the ratio is 4:1 for pork and 7:1 for beef.

It is estimated that the additional demand for feed grain by 2020 will be 350 to 450 million tones a 20 to 30% increase on present global production.At the same time, on the supply side, reserves of cereals are severely depleted.

World wheat stores declined 11 percent in 2007, to the lowest level since 1980. That corresponds to 12 weeks of the world’s total consumption much less than the average of 18 weeks consumption in storage during the period 2000-2005. In seven of the past eight years the world has actually grown less grain than it consumed.

To crown it all, global warming has decreased crop yields in some crucial places. The knock-on is being felt across the world. In rich nations, soaring food price means a few more pence for breakfast cereal in the short term, and a slightly higher cost for toys, clothes and other China-made goods.

However, for the world’s poorest communities, the rises have a potentially devastating effect. In the present food crisis, Bangladesh had to ask for half a million tones of food aid a severe blow to our pride that we had been trying to wean-off international assistance.

The price of cooking oil of which it imports 1.2m tones a year has almost tripled in the past two years because it is now valued as an alternative to diesel oil. More worryingly, our main staple of rice is hard to buy at any price because India, Vietnam and Ukraine have recently cut exports. Among the losers from higher food prices are big importers.

Japan, Mexico and Saudi Arabia will have to spend more to buy their food, which they can easily afford. More worryingly, some of the poorest places in Asia (Bangladesh and Nepal), Africa (Benin and Niger) and other developing countries as a whole will spend over $50 billion to import cereals this year, 10% more than last year, which will have lasting impacts on their future development.

As Gary Becker, a Nobel laureate in economics, points out, if food prices rise by one-third, they will reduce living standards in rich countries by about 3%, but by over 20% in very poor ones.

Back to back floods and a cyclone have heavily damaged crops in Bangladesh, and the ensuing food scarcity and mad rush out of panic to hoard grains at household level have further deepened the imbalance between demand and supply.

Presently, we have a reasonable inflow of grains especially rice, but the reserved stock, because it was bought at higher prices with a hope of selling in the future for better return, is failing to bring down the price.

It is not a short-term menace, and is forecasted to continue and spread in 2008, remaining a key global issue. Until that time, to ensure our survival, all of our steps need to be highly calculative, with our vision extended to the future.

Against this backdrop, aid in the form of cash will worsen the situation. Increased flow of cash will increase purchasing power without effective rise in supply. The demand for food will rise, and further increase the price due to shortfall in supply.

On short-term basis, aid in the form of food grain will raise supply, alleviate scarcity, lower prices, and enhance accessibility.

However, the main emphasis should be on the production side, on input factors for food production with improved technologies and knowledge, and appropriate incentive to producers.

Again, food aid should not be prolonged, because it will act as a disincentive to the poor farmers. There will come a time when aid will be unable to feed us, unless we learn to feed ourselves.

The writer is a Bangladeshi physician, and specialist in Public Health Administration and Health Economics.