Global Food Crisis

Food prices have been rising for a while. In some countries this has resulted in food riots and in the case of Haiti where food prices almost doubled, the Prime Minister was forced out of office. Elsewhere people have been threatened, injured and even killed. The international food crisis now has taken a new dimension with president Bush blaming the new middle class of developing nations like China and India for the shortage (see note below). In an article in the NY Times (May 28th) very aptly titled “The Rich get Hungrier”, Amartya Sen, the Nobel laureate in economics (1998) of Indian descent who now teaches economics and philosophy at Harvard, tries to summarize the global good crisis. He cites many reasons for the present crisis:

  • Drought in recent years in cereal producing countries like Australia, Ukraine and elsewhere.
  • Income disparity in rapidly advancing economies of the developing nations.
  • Misdirected government policies like farm subsidies in rich nations.
  • Diversion of world crops like corn to bio-fuels.
  • Population growth.

And to add one of my own:

  • Diversion of land use to non-productive use

The drought problem isn’t temporary. It is becoming more evident that there is a price to pay for rapid economic growth and industrialization. Draught and famine are projected to increase with global warming. So, this isn’t going away anytime soon.

Income disparity certainly has a role to play in this crisis. But let us not forget the control of agriculture by a small handful of transnational agribusiness concerns to advance their self-interests, i.e., export policies that increase their bottom line instead of benefiting the local producer. Today three companies, Archer Daniels Midland, Cargill, and Bunge control the world’s grain trade. Chemical giant Monsanto controls three-fifths of seed production. Unsurprisingly, in the last quarter of 2007, even as the world food crisis was breaking, Archer Daniels Midland’s profits jumped 20%, Monsanto 45%, and Cargill 60%.

When we discuss the rising prices of food we must also discuss the large amount of farm subsidies that the Government of United States and other wealthier nations give to farmers who then waste their produce in order to continue to receive their compensation. Food wastage also occurs in the farm and processing sectors, the retail sector as well as in households. According to the Organic Consumers Association, half of food in the U.S. and a third of food in the UK goes to waste. In the U.S., this amounts to total losses of up to $100 billion per year. The impact of this waste is not just financial. Environmentally this leads to wasteful use of chemicals such as fertilizers and pesticides not to mention rotting food creating more methane, the harmful greenhouse gas that contributes to climate change.

It is not that there isn’t enough food for the growing population of the world, but the rich nations have created an unequal ‘Free’ Trade system which is in fact not free, but subsidized, where the rich countries subsidize their farmers and the poor countries suffer because they can’t compete on the ‘Free’ market, and food prices double because the rich nations are controlling the supply of food.

Biofuels have come under fire recently for exacerbating the food shortage crisis. In 2005, the United States Congress began to require widespread use of ethanol in motor fuels. This law combined with a subsidy for this use has created a flourishing corn market in the United States, but has also diverted agricultural resources from food to fuel. This makes it even harder for the hungry stomachs to compete. As Amartya Sen rightly points, “Ethanol use does little to prevent global warming and environmental deterioration, and clear-headed policy reforms could be urgently carried out, if American politics would permit it. Ethanol use could be curtailed, rather than being subsidized and enforced”.

Biofuel production takes scarce land out of food production; by some estimates, meeting the biofuel goals in US law will require an amount of farmland equal to the states of Virginia, Maryland, Delaware, and New Jersey. If this land is used to produce food, clearly there would be much more for people to eat.

Biofuel is not the only culprit in diversion of land-use to non-productive use. Others equally to blame are:

  • The tobacco industry
  • Tea and Coffee plantations the world over to be sold to the wealthier countries
  • Floriculture to sell flowers in the wealthier countries
  • Sugar cane growing for sugar exports
  • Beef and fast food industries using up precious resources

When precious arable land use is diverted to non-productive use, the overall costs to society can be considerable.

Meat production is crop, land and water intensive. You need 25 gallons of water to produce a pound of wheat — 2,500 gallons to generate a pound of meat.

The beef industry consumes a considerable number of resources. Excessive promotion of its consumption has led to many health issues as well as environmental problems. Consider the following (taken from Richard Robbins book “Global Problems and the Culture of Capitalism”):

  • More than one third of the world’s grain harvest is used to feed livestock.
  • The total cattle population for the world is approximately 1.3 billion occupying some 24% of the land of the planet.
  • Some 70 to 80% of grain produced in the United States is fed to livestock.
  • Half the water consumed in the U.S. is used to grow grain for cattle feed.
  • A gallon of gasoline is required to produce a pound of grain-fed beef.

So you can imagine the repercussions of doubling meat intake!

Now, back to the food crisis. Is the crisis really sudden and not foreseen? Is the growing world population really the culprit for sudden shortage of food crops like rice and wheat?

Food price index data from the UN’s Food and Agriculture Organization (FAO) show sharp rises in recent months for some food types like cereals, oils and fats:

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And the BBC’s food price statistics shows sharp rise in basic cereals:

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But was the crisis sudden? Certainly not as data from UN’s FAO proves. Prices have been rising for quite some time now, and perhaps earlier warning signs were missed or ignored?

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And now to put Bush’s statement in perspective, the following says it all:

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Note: At an interactive session on economy in Missouri (May 2nd), Bush said, “Worldwide there is increasing demand. There turns out to be prosperity in developing world, which is good .…. it also, however, increases demand. So, for example, just as an interesting thought for you, there are 350 million people in India who are classified as middle class. That’s bigger than America. Their middle class is larger than our entire population. And when you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.”

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