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Food security

Pre-programmed hunger

by Peter Hauff

In brief

"Bread our right"–- a slogan seen on chapatis in Pakistan in September 2007. The Opposition was protesting against exports

Food prices surged yet more at the turn of the year. Experts reckon there could be a repeat of the 2008 crisis in the summer. The core problem is well understood: the increasingly volatile world market is aggravating famines.

In January, the Hamburg Institute of International Economics (HWWI) reported an annual high in commodity prices, which had shot up by 9,4 % in December. Food prices duly followed. “International grain prices are now at an all-time high, even higher than in the crisis year of 2008,” notes Rafael Schneider, who specialises in food security at Welthungerhilfe, a German non-governmental organisation. As soon as the wet season starts in Asia and Africa in the summer, Schneider anticipates the same kind of political crises as three years ago. Food price inflation has already triggered protests in Tunisia and other Arab countries, though the revolution that has swept Tunisia’s dictator from power in January cannot be explained only with surging prices (see comment on page 82).

In many other world regions, Schneider says, things look peaceful at the moment because harvests have just been brought in. But once farmers’ own supplies are used up, people will have to pay world-market prices. Schneider predicts that rural and urban communities in many developing countries will not be able to cope since their purchasing power is too small. Small farmers still produce the bulk of agricultural output (85 %).
According to the NGO expert, there is actually enough food for all of humankind: “The problem is that the world market is currently dealing with contracts for more agricultural commodities than are available.” In times of low interest rates, investors who are looking for a return on their capital increasingly turn to agricultural commodities such as wheat, cocoa and soybeans. Accordingly, prices are rising ever faster, propelled even further by the oil price, which is increasingly linked to biofuels. “We need more transparency in trade in staple foods – and in speculation,” says Schneider.

In September, the European Union proposed to foster more transparency in futures trading and establish a new supervisory authority alongside, or perhaps within, the European Securities and Markets Authority (ESMA). At France's instigation, Commissioner Michel Barnier, who is in charge of the EU’s internal market, is considering to impose limits on wholesalers’ commodity contracts. But that in itself would not suffice to protect poor people from future food crises. Welthungerhilfe also points to the need for improvements in farming methods, storage and transport in the developing world. As much as 50 % of harvests is lost because of poor storage facilities – with the result of world-market dependence. Welthungerhilfe will publish a report on the issue in February.

”The nature of a food crisis is not so much absolute price changes, but the speed of price changes and the degree to which they take consumers, producers, and governments by surprise.” That is the conclusion reached by the International Food Policy Research Institute (IFPRI) in its latest analysis of past food crises. The IFPRI authors find that most food experts and agricultural researchers unfortunately still belong to one of two extremes: they either diligently track recent price developments or predict long-term swings.

“What is needed is an intermediate assessment,” the report states. Under the headline “Reflections on the global food crisis”, it targets scientists rather than politicians. The approach it recommends would base the rigour of a formal price-prediction model on assessments of oil prices, exchange rates, futures market indexes, harvest information and commodity demand.

Nonetheless, the biggest problem the authors see is a political one: "the diversion of crops from food or feed to biofuels." They predict that the availability of rice and cereals will depend increasingly on large agro-industries in China or Brazil. An ominous connection is seen between many developing countries’ dependence on imports and Africa’s fast growing population.

According to the IFPRI, the human right to food is threatened for several reasons. At the top of the list are rising energy prices and demand for biofuel; next come export restrictions and unfavourable climatic factors. To prevent the next disaster, the authors conclude that global reforms are needed to permit “free and safe” trade in agricultural commodities. The IFPRI paper, however, also urges policymakers to make a concerted effort to address climate change and resource degradation, by helping to improve social-security systems in countries that are particularly dependent on imports.

Peter Hauff