Wednesday, April 09, 2008

Global Hunger: The Next Stage of Globalization

The march of interconnected global forces does not cease.... global trade, global finance, global village, global terror, global war on terror, global corporations, global warming, global travel, global citizens, sub-prime crisis, global energy crisis, etc.... And now Global Food Crisis!

...it seems only yesterday, that one heard people talking about the benefits of globalisation, and how now there is plenty of food to feed the world... And given time (and "good" governance) it will all trickle down.

In any case, here is a slice of news headlines from global press:

  • Who Caused the World Food Crisis?
    Financial Post (April 8, 2008)
    ..."We are now by all accounts in the midst of a global food crisis: key grain prices were up 40% to 130% in the last year, people are protesting and hardship is mounting. But it could soon be worse. Governments and agencies all over the world are gearing up for a global "New Deal" on agriculture policy to solve the food crisis, which means the people who brought us the food crisis are the same people who now want to fix it.

    The World Bank reports that prices of staples have jumped 80% since 2005. The price of rice hit a 19-year high last month, and wheat rose to a 28-year high, twice the average price of the last 25 years. Factors behind the surge in prices are varied, including bad weather in some regions, soaring demand from growing populations, and US$100-a-barrel oil".



  • The Looming Food Crisis
    The Guardian (August 29, 2007)
    ..."As the US, Europe, China, Japan and other countries commit themselves to using 10% or more alternative automobile fuels, farmers everywhere are rushing to grow maize, sugar cane, palm oil and oil seed rape, all of which can be turned into ethanol or other biofuels for automobiles. But that means getting out of other crops.

    The scale of the change is boggling. The Indian government says it wants to plant 35m acres (140,000 sq km) of biofuel crops, Brazil as much as 300m acres (1.2m sq km). Southern Africa is being touted as the future Middle East of biofuels, with as much as 1bn acres (4m sq km) of land ready to be converted to crops such as Jatropha curcas (physic nut), a tough shrub that can be grown on poor land. Indonesia has said it intends to overtake Malaysia and increase its palm oil production from 16m acres (64,000 sq km) now to 65m acres (260,000 sq km) in 2025."



  • Fear of Rice Riots as Surge in Demand Hits Nations across the Far East
    The Times - Online (April 8, 2008)
    ..."The US Department of Agriculture believes that the world will suffer a 29 million tonne discrepancy this year between what it needs to feed itself and what it can actually produce. Markets have been quick to recognise this and the traditional Asian staples of soyabeans, palm oil and pork have all soared.

    Many grain and edible oil markets have also been squeezed by what some observers believe is an unsustainable conflict between cars and stomachs. Land that might previously have been used to feed people is increasingly planted with crops designed for conversion to biofuels, forcing unexpected rises in the prices of everything from tofu to instant noodles."



  • Food Prices Rising across the World
    CNN (March 25, 2008)
    ..."From subsistence farmers eating rice in Ecuador to gourmets feasting on escargot in France, consumers worldwide face rising food prices in what analysts call a perfect storm of conditions. Freak weather is a factor. But so are dramatic changes in the global economy, including higher oil prices, lower food reserves and growing consumer demand in China and India...

    ...Clashes over bread in Egypt killed at least two people last week, and similar food riots broke out in Burkina Faso and Cameroon this month.

    But food protests now crop up even in Italy. And while the price of spaghetti has doubled in Haiti, the cost of miso is packing a hit in Japan...

    ...Among the driving forces are petroleum prices, which increase the cost of everything from fertilizers to transport to food processing. Rising demand for meat and dairy in rapidly developing countries such as China and India is sending up the cost of grain, used for cattle feed, as is the demand for raw materials to make biofuels.

    What's rare is that the spikes are hitting all major foods in most countries at once. Food prices rose 4 percent in the U.S. last year, the highest rise since 1990, and are expected to climb as much again this year, according to the U.S. Department of Agriculture.

    As of December, 37 countries faced food crises, and 20 had imposed some sort of food-price controls"....



  • Stuffed and Starved: As Food Riots Break Out Across the Globe...
    Democracy Now! (April 8, 2008)
    ..."Global food prices have risen dramatically, adding a new level of danger to the crisis of world hunger. In Africa, food riots have swept across the continent, with recent protests in Burkina Faso, Cameroon, Ivory Coast, Mauritania and Senegal. In most of West Africa, the price of food has risen by 50 percent——in Sierra Leone, 300 percent. In the United States there has been a 41 percent surge in prices for wheat, corn, rice and other cereals over the past six months".


  • Grains Gone Wild
    New York Times (April 8, 2008). By Paul Krugman
    ..."These days you hear a lot about the world financial crisis. But there’s another world crisis under way — and it’s hurting a lot more people.

    I’m talking about the food crisis. Over the past few years the prices of wheat, corn, rice and other basic foodstuffs have doubled or tripled, with much of the increase taking place just in the last few months. High food prices dismay even relatively well-off Americans — but they’re truly devastating in poor countries, where food often accounts for more than half a family’s spending.

    There have already been food riots around the world. Food-supplying countries, from Ukraine to Argentina, have been limiting exports in an attempt to protect domestic consumers, leading to angry protests from farmers — and making things even worse in countries that need to import food..."



  • Global Food Crisis Looms as Grain Prices Soar
    Business Day (April 4, 2008)
    ..."World Bank president Robert Zoellick called yesterday for a co-ordinated response to the spiralling prices, which “were exacerbating shortages, hunger and malnutrition around the globe”. He said 33 countries could face social unrest because of higher food and energy prices....

    ....“We need a new deal for global food policy that should focus not only on hunger and malnutrition, access and supply, but also on the interconnections with energy, yields, climate change, investment, the marginalisation of women and others, and economic resilience and growth.""



  • Hunger is set to grow as global food stocks fall
    The Times of India (March 8, 2008)
    ..."Global wheat stocks were down to 107 million MT (metric tonnes) in 2007, compared with over 197 million MT in 2001; rice stocks were just 71 million MT compared with 136 million MT...

    ....In 2007, the world supply of wheat was affected due to drought in Australia, a freeze in US and lower production in Ukraine. The price surge was also fuelled by the new US law saying the use of ethanol for automobiles should be doubled to 15 billion gallons by 2015. Ethanol is made from corn..."



  • The World's Eating Disorder
    The Standard - Hongkong (April 2, 2008)
    ..."Global food prices rose 35 percent in the year to the end of January, according to the United Nations, accelerating an upturn that began in 2002. Since then, prices have risen 65 percent....

    ....The Chinese, who ate just 20 kilograms of meat per capita in 1985, now eat 50kg a year. Each kilogram of beef takes about 7kg of grain to produce, which means land that could be used to grow food for humans is being diverted to growing animal feed.

    As the West seeks to tackle global warming, a drive towards greener fuels is also compounding the problem. It is estimated that one in four bushels of corn from this year's US crop will be diverted to make fuel ethanol.

    Palm oil is also at record prices because of demand to use it for biofuel, causing pain for low-income families in Indonesia and Malaysia, where it is a staple.

    But despite the rising criticism of biofuels, the US corn-fed ethanol industry enjoys wide political support because it helps farmers."


    etc. etc....

    And so we may continue to see an increase in these global trends as have been happening during last few weeks/months... e.g.,

  • Food riots have been reported from Kolkata to Namibia, Zimbabwe, Morocco, Uzbekistan, Austria, Hungary, Mexico, Burkina Faso, Cameroon, Egypt, Indonesia, Ivory Coast, Mauritania, Mozambique and Senegal etc. during last few weeks/months.

  • The Philippine government had asked fast-food chains and restaurants to serve half portions of rice to cut waste,

  • China, Egypt, Vietnam and India, accounting for more than a third of global rice exports, have curbed rice exports.

  • Pakistan sent troops to guard flour mills in January.

  • Inflation in India rose to 7%

  • In Vietnam, where consumer prices rose more than 16 percent year-on-year in the first quarter of 2008, strikes are becoming more frequent.

  • Even in Singapore, one of Asia's wealthiest countries which maintains tight restrictions on public assembly, ten people were detained by police last month after they held a rally, without a permit, to protest rising living costs.

    Etc.

  • 4 comments:

    Madhukar said...

    Prof left this comment on the previous post:
    ==========
    gaddeswarup has left a new comment on your post "The Economics of Post_Olympics":

    I recently read a few posts on this matter. From:
    http://blogs.odi.org.uk/blogs/main/archive/2008/02/29/5520.aspx
    "First, the International Food Policy Research Institute has prepared two briefs, available here and here: they track the rapid rise and also explain the causes, estimate the impact and predict trends. The website of the US Department of Agriculture also has new ten-year forecasts. A few key points:

    * IFPRI remind us that wheat is up 240% in dollar terms since 2000 and 170% in euro terms. There has been a 40% rise in prices since last June.
    * Forecasts don’t show prices rising much more over the next decade (with the possible exception of rice), but don’t show them falling either. This is from both IFPRI and USDA models. Continued high prices are because slow growth in yields interacts with sharply rising demand associated with Chinese growth, biofuel demand etc . . . ODI has useful material on biofuels."
    There are some more.
    The comments in
    http://rodrik.typepad.com/dani_rodriks_weblog/2008/04/syncretic-zoell.html
    are also interesting.

    Coming from a farming family, I somehow feel that food prices have been kept low and this may be good in the long run for poor farmers. But in the short run, it may be bad for all, particularly the urban poor.

    There is also the speculation that after the recent subprime problems, speculators are entering the commodoties market and that make things quite volatile.

    Madhukar said...

    Prof:

    thnks for links...

    I am not sure is the high prices will benefit the medium, small or marginal farmers. As you mentioned, it is the commodity and futures traders/speculators who make money out of this trend.

    Also, the issues are interconnected - it is not just the agriculture, but also the fuel crisis (which is driving agricultural resources - mostly owned/managed by large agribusinesses - towards biofuel crops), changes in dietary habits (which rely on more fuel-intensive diet), etc...

    I went through the links you suggesed, but I feel they miss out on the interconnections, e.g., if the prices keep high, it will also have impact on the social stability - as it has started happening in some quarters...

    gaddeswarup said...

    Professor Shukla,
    My comments are partly based on on just a few observations and should not be taken too seriously. On a recent trip to coastal Andhra, I spoke to a few dozens of farmers. Some of the observations are:
    1) Among the people I know (most of their fathers were farmers) the only ones still struggling are those who remained in farming. Even those who became bus cunductors and drivers, seemed to have saved some money, baught plots in cities and towns and are relatively wealthy now.
    2) When I was young, a farmer with ten acres of land in our area was considered a man of substance. This does not seem to be the case now. I know one who works part time in a hotel during the off season.
    3)In rice production, the results are still weather dependent. There does not seem to be any insurance or futures. Some have converted rice fields to eucalptus farms since the investment is low and results more certain.
    If the results are more certain, or if the prices are better or if there is some sort of insurance more may turn to rice and other food crops. I was told that tur dal production has gone down and it is now imported on a large scale.
    I do not have any particular figures but my impression is that now many in the middle class spend lesser perecentage os their salaries on food than 30-40 years ago.
    I also met some agricultural labourers who want to lease one or two acres and farm. It seems that at least 10,000 rupees investment is needed for one acre of rice growing land and they have to pay at least 20 percent interest which is taken away first so that they only get 8,000 rupees to start with. Microfinance interests do not seem to be low either and in any case they cannot pay until the crops arrive. If there are no weather problems, the money from the crop will be enough for the lease and loan and whatecer they can make from the secong prop (which is usually black grams or such) is what they get to keep.
    These are more anecdotal type observations over a few days rather than a detailed study; the impression is that they just get by. But what is striking is that some thought it worthwhile to covert rice fields to eucalyptus farms.

    Madhukar said...

    Prof Swarup

    I entirely agree with your observations...that is preceisely what is happening. Farming is no longer a viable occupation for many -specially the medium, small and marginal farmers.

    The reasons are what happened in India post-liberalisation. The rural credit through banks, which had grown from around 4-5% in 1969 (when the banks were nationalised) to about 16-17% of the total credit by 1990. After the "banking reforms", it has continuously fallen. A number of rural bank branches have also closed.... leaving farmers no other recourse than to take loan fromthe local moneylender or MFIs at high interests.

    Moreover, public investment in rural agriculture-related infrastructure and subsidies have gone down. While the cost of production has gone up, the government procurement rates have not kep pace with the cost and inflation. Even when a couple of years back govt allowed private sector to enter the grain market as purchaser, while the farmers got a better price, but the inflation in food commodity items nullifies that. One reason for the current wheat scarcity in India is also that a large amount of wheat which was procured by FMCGs is either lying their godowns/inventory, or is getting converted into biscuits etc...

    The point I was trying to make in my comment was that the gainers in these high prices for farm produce are not the farmers; they are either the middlemen, through whom the private sector procures, or the agri-businesses or the commodity traders.