Why costs are climbing
As food prices surge, starvation looms for millions. Experts call for emergency action but admit there's no quick fix
ERIC REGULY
From Saturday's Globe and Mail April 12, 2008 at 12:13 AM EDT
ROME — Fatal food riots in Haiti. Violent food-price protests in Egypt and Ivory Coast. Rice so valuable it is transported in armoured convoys. Soldiers guarding fields and warehouses. Export bans to keep local populations from starving.
For the first time in decades, the spectre of widespread hunger for millions looms as food prices explode. Two words not in common currency in recent years — famine and starvation — are now being raised as distinct possibilities in the poorest, food-importing countries.
Unlike past food crises, solved largely by throwing aid at hungry stomachs and boosting agricultural productivity, this one won't go away quickly, experts say. Prices are soaring and stand every chance of staying high because this crisis is different.
A swelling global population, soaring energy prices, the clamouring for meat from the rising Asian middle class, competition from biofuels and hot money pouring into the commodity markets are all factors that make this crisis unique and potentially calamitous. Even with concerted global action, such as rushing more land into cultivation, it will take years to fix the problem.
The price increases and food shortages have been nothing short of shocking. In February, stockpiles of wheat hit a 60-year low in the United States as prices soared. Almost all other commodities, from rice and soybeans to sugar and corn, have posted triple-digit price increases in the past year or two.
Yesterday in Rome, Jacques Diouf, director-general of the United Nations Food and Agriculture Organization, said the cereal-import bill for the poorest countries is expected to rise 56 per cent this year, on top of the 37 per cent recorded last year. "There is certainly a risk of [people] dying of starvation" unless urgent action is taken, he said. "I am surprised I have not been summoned to the Security Council to discuss these issues."
...
Other UN officials have been equally blunt. Sir John Holmes, the UN's top humanitarian official and emergency relief co-ordinator, said this week that soaring food prices threaten political stability. The UN and national governments are especially worried about potentially violent situations in Africa's increasingly crowded urban areas. Rioting triggered by absent or unaffordable food could cripple cities. "The security implications should not be underestimated as food riots are being reported across the globe," Mr. Holmes said.
Nigeria's Kanayo Nwanze, vice-president of the UN's International Fund for Agricultural Development, sees no short-term fix. "I wouldn't be surprised if there is an escalation of food riots in the next few months," he said. "It could lead to famine in certain parts of Africa if the international community and local governments do not put emergency actions into place."
And it's not just the UN that thinks so. Independent analysts, economists and agriculture consultants say the term most often used to describe the food prices and shortages — crisis — is not hyperbole.
How did it come to this? Surging food prices, now at 30-year highs, are actually a relatively new phenomenon. In the mid-1970s, prices began to fall as the green revolution around the world made farms dramatically more productive, thanks to improvements in irrigation and the widespread use of fertilizers, mechanized farm equipment and genetically engineered crops.
...
By 2001, the surpluses began to shrink and prices reversed. In the past year or so, the price curve has gone nearly vertical. The UN's food index rose 45 per cent in the past nine months alone, but some prices have climbed even faster. Wheat went up 108 per cent in the past 12 months; corn rose 66 per cent. Rice, the food that feeds half the world, went "from a staple to a delicacy," says Standard Chartered Bank food commodities analyst Abah Ofon.
...
The dramatic price rises have been driven by factors absent in previous food shortages.
They include turning food into fuel, climate change, high oil and natural gas prices (which boost trucking and fertilizer costs), greater consumption of meat and dairy products as incomes rise (which raises the demand for animal feedstuffs), and investment funds, whose billions of dollars of firepower can magnify price increases.
Driven by fears of global warming, biofuel has become big business in the U.S., Canada and the European Union. The incentive to produce the fuels is overwhelming because they are subsidized by taxpayers and, depending on the country or the region, come with content mandates.
Starting next week, Britain will require gasoline and diesel sold at the pumps be mixed with 2.5-per-cent biofuel, rising to 5.75 per cent by 2010 and 10 per cent by 2020, in line with European Union directives. Ontario's ethanol-content mandate is 5 per cent. As the content requirements rise, more and more land is devoted to growing crops for fuel, such as corn-based ethanol. In the EU alone, 15 per cent of the arable land is expected to be devoured by biofuel production by 2020.
That's raising alarm bells, especially given lingering doubts about the effectiveness of ethanol in combatting climate change. British Prime Minister Gordon Brown said this week he's worried that ethanol production is pushing up food prices everywhere, and he called for an urgent review of the issue. Economist Dr. Hazell has said that filling an SUV tank once with ethanol consumes more maize than the typical African eats in a year.
Rising ethanol demand is one of the main reasons why Wall Street securities firm Goldman Sachs predicts high food prices for a long time. "We believe the recent rise in agriculture prices is not a transient spike, but rather represents the beginning of a structural increase in prices, much as has occurred in the energy and metals markets," Jeffrey Currie, Goldman's chief commodities analyst, said in a research note last month
...
While Australia and Canada could bounce back in the next season or the season after, depending on temperatures and rainfall, rising global temperatures do not bode well for agriculture in many parts of the world.
The UN has predicted that climate change could reduce production in developing countries by 9 to 21 per cent by 2080 and that sub-Saharan Africa could lose more than 30 per cent of its main crop, maize. Southern Asia, it said, could see millet, maize and rice production fall by 10 per cent. The challenge is to offset the losses with higher crop yields on arable land less affected by climate change.
...
Cutting back on ethanol production alone would go some way to restoring supply-demand balance in the food markets. "If we decide to do something about it, we can just use less food for fuel," he said.
But everyone — analysts, economists, agriculture experts, the UN — thinks all bets are off in the next two or three years. It's almost impossible to boost production quickly, because of land and water shortages and competition from biofuels.
"I can say with some degree of confidence that if governments and international development agencies do not put in place a concerted effort quickly, then we are looking at a very serious problem," Mr. Nwanze said.
Thanks Al.
As food prices surge, starvation looms for millions. Experts call for emergency action but admit there's no quick fix
ERIC REGULY
From Saturday's Globe and Mail April 12, 2008 at 12:13 AM EDT
ROME — Fatal food riots in Haiti. Violent food-price protests in Egypt and Ivory Coast. Rice so valuable it is transported in armoured convoys. Soldiers guarding fields and warehouses. Export bans to keep local populations from starving.
For the first time in decades, the spectre of widespread hunger for millions looms as food prices explode. Two words not in common currency in recent years — famine and starvation — are now being raised as distinct possibilities in the poorest, food-importing countries.
Unlike past food crises, solved largely by throwing aid at hungry stomachs and boosting agricultural productivity, this one won't go away quickly, experts say. Prices are soaring and stand every chance of staying high because this crisis is different.
A swelling global population, soaring energy prices, the clamouring for meat from the rising Asian middle class, competition from biofuels and hot money pouring into the commodity markets are all factors that make this crisis unique and potentially calamitous. Even with concerted global action, such as rushing more land into cultivation, it will take years to fix the problem.
The price increases and food shortages have been nothing short of shocking. In February, stockpiles of wheat hit a 60-year low in the United States as prices soared. Almost all other commodities, from rice and soybeans to sugar and corn, have posted triple-digit price increases in the past year or two.
Yesterday in Rome, Jacques Diouf, director-general of the United Nations Food and Agriculture Organization, said the cereal-import bill for the poorest countries is expected to rise 56 per cent this year, on top of the 37 per cent recorded last year. "There is certainly a risk of [people] dying of starvation" unless urgent action is taken, he said. "I am surprised I have not been summoned to the Security Council to discuss these issues."
...
Other UN officials have been equally blunt. Sir John Holmes, the UN's top humanitarian official and emergency relief co-ordinator, said this week that soaring food prices threaten political stability. The UN and national governments are especially worried about potentially violent situations in Africa's increasingly crowded urban areas. Rioting triggered by absent or unaffordable food could cripple cities. "The security implications should not be underestimated as food riots are being reported across the globe," Mr. Holmes said.
Nigeria's Kanayo Nwanze, vice-president of the UN's International Fund for Agricultural Development, sees no short-term fix. "I wouldn't be surprised if there is an escalation of food riots in the next few months," he said. "It could lead to famine in certain parts of Africa if the international community and local governments do not put emergency actions into place."
And it's not just the UN that thinks so. Independent analysts, economists and agriculture consultants say the term most often used to describe the food prices and shortages — crisis — is not hyperbole.
How did it come to this? Surging food prices, now at 30-year highs, are actually a relatively new phenomenon. In the mid-1970s, prices began to fall as the green revolution around the world made farms dramatically more productive, thanks to improvements in irrigation and the widespread use of fertilizers, mechanized farm equipment and genetically engineered crops.
...
By 2001, the surpluses began to shrink and prices reversed. In the past year or so, the price curve has gone nearly vertical. The UN's food index rose 45 per cent in the past nine months alone, but some prices have climbed even faster. Wheat went up 108 per cent in the past 12 months; corn rose 66 per cent. Rice, the food that feeds half the world, went "from a staple to a delicacy," says Standard Chartered Bank food commodities analyst Abah Ofon.
...
The dramatic price rises have been driven by factors absent in previous food shortages.
They include turning food into fuel, climate change, high oil and natural gas prices (which boost trucking and fertilizer costs), greater consumption of meat and dairy products as incomes rise (which raises the demand for animal feedstuffs), and investment funds, whose billions of dollars of firepower can magnify price increases.
Driven by fears of global warming, biofuel has become big business in the U.S., Canada and the European Union. The incentive to produce the fuels is overwhelming because they are subsidized by taxpayers and, depending on the country or the region, come with content mandates.
Starting next week, Britain will require gasoline and diesel sold at the pumps be mixed with 2.5-per-cent biofuel, rising to 5.75 per cent by 2010 and 10 per cent by 2020, in line with European Union directives. Ontario's ethanol-content mandate is 5 per cent. As the content requirements rise, more and more land is devoted to growing crops for fuel, such as corn-based ethanol. In the EU alone, 15 per cent of the arable land is expected to be devoured by biofuel production by 2020.
That's raising alarm bells, especially given lingering doubts about the effectiveness of ethanol in combatting climate change. British Prime Minister Gordon Brown said this week he's worried that ethanol production is pushing up food prices everywhere, and he called for an urgent review of the issue. Economist Dr. Hazell has said that filling an SUV tank once with ethanol consumes more maize than the typical African eats in a year.
Rising ethanol demand is one of the main reasons why Wall Street securities firm Goldman Sachs predicts high food prices for a long time. "We believe the recent rise in agriculture prices is not a transient spike, but rather represents the beginning of a structural increase in prices, much as has occurred in the energy and metals markets," Jeffrey Currie, Goldman's chief commodities analyst, said in a research note last month
...
While Australia and Canada could bounce back in the next season or the season after, depending on temperatures and rainfall, rising global temperatures do not bode well for agriculture in many parts of the world.
The UN has predicted that climate change could reduce production in developing countries by 9 to 21 per cent by 2080 and that sub-Saharan Africa could lose more than 30 per cent of its main crop, maize. Southern Asia, it said, could see millet, maize and rice production fall by 10 per cent. The challenge is to offset the losses with higher crop yields on arable land less affected by climate change.
...
Cutting back on ethanol production alone would go some way to restoring supply-demand balance in the food markets. "If we decide to do something about it, we can just use less food for fuel," he said.
But everyone — analysts, economists, agriculture experts, the UN — thinks all bets are off in the next two or three years. It's almost impossible to boost production quickly, because of land and water shortages and competition from biofuels.
"I can say with some degree of confidence that if governments and international development agencies do not put in place a concerted effort quickly, then we are looking at a very serious problem," Mr. Nwanze said.
Thanks Al.
