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article imageFood prices and shortages getting worse as rice meltdown hits world's poorest

By Paul Wallis     Apr 13, 2008 in World
Food riots are becoming part of the global picture, and the outlook is bleak. According to the FAO, food prices have risen 57% in the last year. In what must be one of the most grotesque events in modern history, a global food crisis is looming.
Rising fuel costs and lagging production are the main commercial culprits, but prices have jumped way out of their previous bandwidth.
As The Washington Times reports:
Analysts say the price increases are across the board, not focused on one crop or market as in past commodity patterns.
A survey released by the Washington-based International Food Policy Research Institute found that the price of staple food has risen by 80 percent since 2005, including a 40 percent surge last year alone. The real price of rice is at a 19-year high and the price of wheat on world markets is at a 28-year high.
"The realities of demography, changing diets, energy prices and biofuels, and climate change suggest that high — and volatile — food prices will be with us for years to come," said study author Joachim von Braun.
The Washington Times goes on to list a series of food-related problems in various countries, including UN aid workers going on strike for more pay to cover their own food and fuel needs.
Fox Business:
Even though world cereal production is expected to increase this year by 2.6% to a record 2.16 billion tons, experts say this is going to have little impact on the prices.
"All indications we have is that this is not a short-term effect ... where the first year you have price increases and the following year there is an increase of supply that brings the prices down," FAO Director-General Jacques Diouf said at a news conference.
Experts say price speculation and market failures will likely reduce the effect of increased production.
Fox Business adds that Pakistan and the Philippines have deployed troops to protect crops and warehouse stores of food
There’s a major potential problem here, in terms of the commercial situation. Many food crops are market commodities, with futures markets attached.
The markets aren’t averse to locking in good prices for futures contracts, and a big lift in demand is a normal sign of price hikes.
In that sense, food and oil are both market commodities. The recent rampage of oil prices is a good indication of how much damage “price speculation” is capable of doing.
Bloomberg:
Rice and wheat futures traded on the Chicago Board of Trade both have doubled in the past year. Corn has risen 62 percent in the past 12 months.
Like oil, the food market is a hostage market.
Added to which, there’s no way that incomes in the poorest countries have any chance of matching price increases. Figures indicate that the worst problems are occurring where people were already spending up to 60% of their incomes on food.
The FAO expects a 2.6% increase in food production, and says the domestic growers could do more with increased availability of fertilizers, etc. That’s a pretty pitiful growth rate. It doesn’t even balance population growth.
The West needn’t feel too secure, either. Exporters tend to ignore domestic markets when the overseas demand is strong and prices are high. That leads to a situation where domestic prices are higher.
Even in Australia, where $20 can still buy you a hernia’s worth of food if you know where to shop, we’ve been seeing a steady increase in prices due to drought, export demand, and freight prices.
Rice is a particularly vulnerable crop at the moment. India has stopped exports, to cover its own domestic needs. Thailand is the largest remaining exporter, since Australia’s rice crop was crippled by drought, and the Thais are in danger of having to stop exports, too, to cover their domestic needs according to this PBS article. (This is a recent article, not yet set up on the webpage. Audio only at the moment, transcript will follow)
There’s also the matter of storage of grain reserves. With demand at these levels, there’s not going to be much in storage. That means, if there are major crop failures, there are no reserves. The big population centres require huge amounts of food, and the Moscow supermarket effect is a genuine possibility.
That will add some incentive to protectionist measures. It’s not at all unlikely that countries like China and India, faced with an impossible situation, will cut food exports. Poorer countries, like African and Asian countries, definitely won’t be able to afford big price hikes, either. They could easily be in a position of paying much more for much less.
Thanks to the Doha trade talks, their chances of boosting their own exports to generate extra money aren’t looking too good, either.
So I’ve invented the perfect food substitute:
50g sidewalk, fine sliced, sautéed in blacktop.
1 or 2 diced agricultural policies
Garnish with Doha Premium Schmuckfest Cartel Essence De Futile.
Add a few pictures of frolicking politicians, for presentation purposes, or chicken feces for social ambience, if you can’t stand the combination of politicians and food for some reason.
Eat, thoughtfully.
More about Food shortages, Fao, Trade
 
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