[url=http://www.theage.com.au/opinion/politics/a-new-food-crisis-is-on-our-plates-20110223-1b4d8.html]A New Food Crisis is On Our Plates[/url]
World food prices in 2008 reached their highest since
1845 in inflation-adjusted terms according to the Economist
magazine’s index before slumping. But last month global food prices actually broke the record according to the experts at the UN’s Food and Agriculture Organisation.
Over the past year the price of corn has risen 52% wheat 49% and soybeans 28%.
Rising food prices have pushed an extra 44 million people into poverty in the past seven months according to the World Bank.
Alarmed at spiking food prices a score of countriesincluding big food suppliers such as Russia and Ukraine have banned food exports to make sure they can feed their own people first.
Thomas Malthus warned in 1798 that growing population would starve humanity. The world population at that time? About 800 million. Two centuries later it’s about 6.9 billion. The world population is now growing at about 210000 a day.
After being proved wrong for so long is Malthus finally about to be vindicated?
Not at all. The world is today already producing enough food to feed 12 billion people according to the FAO. There are only problems of price supply and distribution.
If there is so much food available why are prices soaring and why is one-sixth of humanity permanently hungry?
There are old and new problems. The most glaring of the old include protectionism in the richest countries. The European Union spends about $365 billion every year subsidising uneconomic farmers and shutting out food exports. The US and Japan are almost as bad.
Then there is poverty: 1 billion people who subsist on $1 a day cannot afford to buy food.
There are three new problems. One is the “financialisation” of
food. Big investors have come to treat the major traded commodities – including food – as instruments of portfolio investment and speculation.
In 2003 index funds had $13 billion invested in commodities in US markets. By 2008 this had reached $317 billion.
The UN’s Commission on Trade and Development reported in 2009 that commodity prices on traded markets moved in sync with speculative flows in other asset classes and traders paid “little attention to fundamental supply and demand”.
Professor Jayati Ghosh of the Centre for Economic Studies and Planning at Jawaharlal Nehru University in Delhi compared food staples traded on futures markets with staples that were not. Guess what? Foods that were not open to futures trading rose only a fraction as much as those that were.
Another new problem is biofuels. Some 40 per cent of the US corn crop enough to feed 350 million people goes to make fuel for cars.
A third new problem – or perhaps just a recurring one – is extreme weather. If this is just cyclical it will pass. If it’s climate change it will not.