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The global food fight

From : ISN

The biofuel craze, commodity speculation, growing demand in emerging economies and soaring energy prices coalesce to boost food prices, with mass hunger and political instability looming, Simon Roughneen writes for ISN Security Watch.

By Simon Roughneen for ISN Security Watch (14/04/08)

"A hungry man is an angry man" - this was Brenda Barton's (the World Food Programme Deputy Director for Communications) apposite summing-up to ISN Security Watch last week.

Jacques Diouf, Head of the UN Food and Agriculture Organisation (FAO), took this further, wondering aloud to the world's press why he had not been asked to brief the UN Security Council about a looming crisis that leaves 37 countries without enough affordable food.

In recent weeks protests have taken place in Indonesia, Peru, Mauritania, Yemen, Burkina Faso, Bolivia and Uzbekistan. In Egypt and Haiti riots turned deadly, with seven and four people killed, respectively, in both countries in the past 10 days, while over 40 died in Cameroon's February food unrest.

Even as far back as August 2007, the quashed Saffron Revolution in Burma was sparked in the first instance by the junta's overnight doubling of essential food and fuel prices.

Despite government attempts to shelter domestic food from soaring global cereal prices, essentials such as bread, rice, maize products, milk and soybean have continued to become more expensive, all over the world.

The facts are stark: The global price of wheat has risen by 130 percent in the past year, and dairy prices have doubled since 2005. A combination of factors is making basic food and fuel too expensive for people in poorer countries - even as projected world cereal production for 2008 is a record 2,164 million tonnes, up almost 3 percent from last year.

But with across-the-board world food price rises averaging at over 80 percent during the last 24 months, this volatility could acquire a dangerous political counterpart, in countries where 60-75 percent of people's income is spent on food.

On Saturday, 12 April, 20,000 Bangladeshis took to the streets - angered over low wages and high food costs - wrecking vehicles and attacking police, after last years rice crop was ruined by another of that country's periodic floods.

A changing world
Growing demand for more food - in terms of quality and quantity - as well as general rising living standards in India, Brazil, Russia and China, where vast new middle classes are emerging, has part-prompted the price increases.

In both countries, oil demands are up, contributing to the US$100+ per barrel costs, as more people can afford to own a car, which in turn fuels the food price ramp-up by increasing transport costs and making fertilizer more expensive.

Thomas Friedman's flat-world thesis seems relevant here - with consumers in emerging economies seeking to match western affluence. This means more cars, more meat and more high calorie, high protein foods - all of which puts pressure on oil supplies and prices, not least as more meat equals more fuel consumption for cooking, as well as increased demand for the grain feed for livestock and chickens.

Such changes are not irreversible, however.

Dominique Strauss-Kahn, the chief of the International Monetary Fund (IMF), got no demurral from the 24 finance ministers on his steering committee when he warned on 12 April that ongoing price inflation could undermine much of the recent pro-poor development gains in many countries.

This echoed fears outlined in a World Bank policy paper Rising Food Prices - Policy Options and World Bank Response - released on 9 April. Group President Robert B Zoellick was quoted as saying: "In some countries, hard-won gains in overcoming poverty may now be reversed."

'The Politics of the Belly'
Jean Francois Bayart's above-named treatise took its title as a metaphor for the corrupt and patronage-addled nature of post-colonial African politics. But there seems to be a more literal application these days.

Politics has at least partly caused the food price increases, with corrupt administrations unwilling to maximize food-production potential, and other developing economies unable as yet to improve yields - with the worst performers squandering their thriving agriculture systems.

More directly, producer governments are restricting exports - notably rice - to meet domestic demand, but leaving neighboring importers in a quandary.

C Peter Timmer, visiting professor at Stanford University's Food Security and Environment Institute, gave ISN Security Watch access to his work-in-progress analysis of the current food price situation. He wrote, "The newly elected populist government in Thailand did not want consumer prices for rice to go up, so they started talking about export restrictions [...]. On March 28 rice prices in Thailand jumped US$75 per metric tonne. They have risen another US$200 per metric tonne since. This is the stuff of panics [...]."

David King is secretary-general of the International Federation of Agricultural Producers. He told ISN Security Watch that "for example, only one-quarter of the irrigation potential along the Niger river valley is being exploited" and that "yields in Africa are very low compared with other regions, but there is massive potential for improvement."

In 1998, food price increases brought people onto Zimbabwe's streets, accelerating Robert Mugabe's turn to demagoguery as a diversion from his regime's frailties, and sparking his ruthless suppression of any political opposition. Zimbabwe was once called "the breadbasket of Africa," but now cannot feed its own people, much less function as a swing supplier, helping meet demand and reduce prices.

Burma was once the world's biggest rice exporter, now many of its people hunger under the quixotic and brutal dictatorship ensconced in its jungle hideaway-fortress capital in Napyidaw.

Politically expedient choices made by governments - donors and recipients alike - contribute to the structural issues undermining food supply in vulnerable locations.

As David King puts it, "it is much easier for developed countries to send their food surpluses as aid to somewhere like Ethiopia, than it is to make focused long-term investments in water management technology to reduce that country's drought vulnerability. It is also easier for any recipients to divert attention from their own administration to external factors - such as food aid - when things go wrong."

Eaten bread is soon forgotten
The impact of food price increases could well be serious instability in many countries.

Pakistan's pivotal parliamentary elections were depicted as a policy-wonkish litmus-test for Muslim democracy and counterterrorism policy. But ordinary people voted for who they thought best able to help them make ends meet. The incumbent coalition led by President-General Pervez Musharraf took a hammering, as voters fused his anti-democratic policies with rising inflation now hitting consumers in the pocket. These days, Pakistani troops are guarding rice warehouses against looting, with similar scenes in the Thailand and Vietnam - the world's number one and three rice exporters, respectively - and in the Philippines and Indonesia, both rice importers.

In Manila, President Gloria Macapagal-Arroyo recently jailed nine coup plotters, but legitimately expressed disaffection with her administration simmers on. She recently admonished rice traders against hoarding - saying that "anyone who steals rice from the people" will be jailed. Arroyo is clearly hoping that rice supply can be maintained on the domestic market, heading off any further price increase or shortage, which could bring people onto the streets. Such "people power" manifestations have twice changed governments in the Philippines, in 1986 and 2001 - the latter bringing the incumbent Mrs Arroyo to power.

But with Thailand, India and Vietnam all more or less ceasing rice exports, and China rebuffing Manila's request for additional wheat, urgent calls were being made over recent days for high-level pan-Asian talks on the food price crisis.

David King's timely warning to ISN Security Watch that "this type of thing can bring down a government in a developing country," was realized on Saturday, 12 April, with Haiti's Senate sacking the prime minister in a deliberate snub to President Rene Preval over his response to Port-au-Prince's deadly food riots.

The most vulnerable: Crumbs from the table
The price spike provoked "tortilla riots" in middle-income Mexico, and wealthy consumer groups in Italy staged a one-day protest at the price of pasta. But it is the world's poor who are feeling the pinch. Most vulnerable could be the aid-dependent in Darfur, Somalia, North Korea and elsewhere.

Brenda Barton told ISN Security Watch that “on 20 March the WFP appealed to donors for an extra half-billion dollars - just to enable us to meet the needs we projected back in June 2007."

"This does not even account for any emergency or contingency funding needed, say, if another Niger-type scenario came about," she added, referring to the August 2005 near-famine in that impoverished Sahelian country, which left over three million people verging on starvation.

But the overall global economic downturn and rising inflation means less money, and with demand elsewhere soaring, food aid might be squeezed - bad news for the 73 million people across 78 countries that need WFP-sourced assistance.

As Barton explains, malnutrition has some serious spin-off effects: "While the food shortages and potential malnutrition are deadly serious in themselves, this issue affects development issues across the board, with at least six MDGs compromised: take education- children cannot learn when hungry, and with money tight, kids get pulled from school so parents can pay for food."

"A slow onset of malnutrition can have a devastating impact: Even as families cut from three to two to one meal per day, economizing on quality as well as quantity, and the very young are worst-affected," she added.

Hot money trumps hot weather?
"Green" subsidies for biofuel crops are diverting agri-output away from food. American farmers have diverted over 30 percent of corn as part of a government-sponsored ethanol production scheme - aiming to reduce oil dependency and offset man-made global warming.

The US was the world's fourth largest rice producer, the knock-on from divestment into corn is lifting rice prices amid greater demand, while reduced US corn-for-food output has put pressure on corn importer countries to diversify into ever more expensive wheat and sorghum, the latter needed to replace corn as animal feed.

Another stark fact: Over 240kg of corn would feed one person for a year. This same amount is required to produce just the 100 liters of ethanol needed to fill a SUV tank.

But on 4 April the BBC reported that no increase in global temperatures has been recorded by the World Meteorological Organisation since 1998, despite growing levels of carbon in the atmosphere, instead linking the 1998 recorded all-time high with El Nino, and the recent cooling with La Nina - two vast Pacific Ocean currents.

With those natural factors seemingly decisive to recent weather, and after bitterly-cold winters in China - its coldest in a century - and in central Asia and across North America - the biofuels gambit thus seems doubly-questionable, as it fuels food price increases more efficiently than its does enviro-friendly automobiles.

Meanwhile, the falling dollar has put pressure on commodities denominated in that currency, especially when import-export deals are signed off months in advance of delivery, with costs based on a now outdated dollar valuation.

More debilitating might be the fall-out from the subprime collapse and slowing global economy. Both have prompted a commodities bubble, with real economy speculation leading farmers to divest into crops they anticipate to reach higher prices, fuelling the supply and demand crisis.

Elsewhere, with the tech bubble a mid-term memory and the real estate downturn still biting hard, return-seeking investment funds have moved money in and out of petroleum and then food commodities, inflating the price of wheat by 70 percent between 2005-2007.

What's on the table now?
The impact on the global economy remains to be seen - but the IMF warned last week that commodity price increases were feeding the inflation beast, curtailing what policy options were available to deal with an overall global slowdown. This too can have political ramification. China's communist rulers, now shaken by Olympic and Tibet protests doubtlessly also recall the inflation-driven unrest culminating in the 1989 Tiananmen Square massacre.

On 10 April, UK Prime Minister Gordon Brown called on his Japanese counterpart and current G-8 chairman Yasuo Fukuda to take the lead on devising an international plan to deal with the food spike.

David King believes that "policymakers should use this [price increase] as a catalyst to develop agriculture, especially in low-yield, high-potential regions," echoing a call from the International Rice Research Institute for "a second Green Revolution," replicating the improvements in the 60s and 70s in agricultural technologies that boosted production across Asia.

But C Peter Timmer concluded on a sober note: "[T]here is already substantial evidence that significant increases in production, if they are attainable at all, will require development of new crop technologies that are not on the shelf or even in the pipeline [...]. The prospect is that very high food prices, perhaps near current levels, will be a market reality for many years."