Friday, 11 April 2008

The dearth of food

A basket of measurements shows that the world is moving towards sharply higher food prices, with serious implications for political stability in some areas. The United Nations dates this upturn to 2002, with a 65 percent rise over that period. The Economist reported last December that its food-price index had reached the highest point since it was begun, in 1845.

The sharpest rises were recorded last year, suggesting that the trend is accelerating; and they were recorded in basic grains that lie at the bottom of the food supply chain, meaning that they will in turn raise the cost of dairy products and meat. Wheat, for instance, doubled in price during 2007, according to the World Economic Forum's annual Global Risks Report, and corn rose by half. The UN reckons dairy prices jumped by 80 percent last year.

The causes are numerous. Josette Sheeran, executive director of the UN's World Food Programme, outlined the four biggest to the European Parliament last month: the economic boom in China and India has so driven up demand for food that they must now import (India banned the export of all rice except high-value Basmati, the Financial Times reported at the beginning of this month); the production of biofuels, particularly palm oil and corn for ethanol, have diverted food production to energy production; the rise in oil prices has pushed up the cost of harvesting, refrigerating and transporting food; and climate change is hurting agricultural production with drought and extreme weather.

All of these problems are driven by an unprecedented global population, set to reach nine billion by mid-century. Humanity is food and energy hungry and, increasingly able to buy both, returns more greenhouse gases to the atmosphere. "This is not a this-year phenomenon," World Bank president Robert Zoellick told journalists earlier this month, echoing a growing consensus. "I think it is going to continue for some time."

Greece and the rest of Europe are not so much threatened by food shortage as an influx of refugees from poverty-stricken or destabilised areas. Sub-Saharan Africa is likely to suffer most, both because it is at risk of drought and because the cost of providing food aid will rise. The UN's World Food Programme (WFP) earlier this year asked donor nations for an extra $600 million just to meet its scheduled food aid purchases.

Still, the WFP has the right idea. It has asked nations to switch from providing food to providing cash, which it can then spend buying food grown nearer to where it's needed. That cuts transport costs and supports farmers in the developing world. The approach demonstrates the value of encouraging food production in the developing world, which European and American agricultural subsidies help to stifle. It is, as The Economist opined, an opportunity for the EU and US to revisit agricultural liberalisation, a major obstacle to completing the so-called Doha round of talks under the World Trade Organisation.

The developed world should also rethink biofuels. As abhorrent as the use of fossil fuels is, biofuels may release as much as 420 times the carbon dioxide they do if one takes into account the expansion of farmland at the expense of forests that they encourage (the estimate was published in the journal Science last January). That is a view echoed by EU Environment Commissioner Stavros Dimas, but he has stuck to his goal of a tenth of transport energy to come from biofuels by 2020.

Some observers take comfort in the fact that the market will inevitably react to demand and invest in food supply, hopefully making the problem go away. That could be a double-edged sword, however, if it leads to reclamation of greater amounts of forestland. The strain on ocean supplies of food mirrors that on land, as our report on declining Aegean fisheries demonstrates (see pages 6-7). The world needs to produce less and consume more equitably. If the increase in population and affluence in China and India demonstrate anything, they surely demonstrate that.

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