Food Crisis and Strategies by New Zealand International Review / Online Encyclopędia Britannica
The world is witnessing a food crisis. Surging food grain prices and worsening world supplies are now bringing the food crisis to the boil. The worst affected are the developing economies and least developed economies of the African continent. Food riots have been reported from Namibia, Zimbabwe, Morocco, Uzbekistan, Austria, Hungary and Mexico. Now a logical question arises: will the food crisis that is menacing the lives of millions worldwide ease or become worse in coming times? The answer may be that both outcomes are possible.

According to the Food and Agricultural Organisation, there are 854 million people who are hungry the world over. This figure may become higher and the situation worse by the end of 2008. (1) Is it true that mankind is peering into an abyss of hunger? The simple and logical answer is that nations have failed to keep population growth in check. On the one hand, the global population has been rising faster than global agricultural output has been increasing; on the other hand, the number of hungry is likely to grow as global food stocks fall. (2)

The recent rise in global food prices (Table I) has largely been caused by temporary problems like drought in Australia, Ukraine and other parts of the world. Though the need for huge rescue operations is urgent, the present acute crisis will eventually end. But underlying it is a basic problem that will only intensify unless we recognise it and try to remedy it. (3)

Table 1 indicates that the global price of wheat has jumped since 2006. The rising trend in prices of wheat is erratic. There has been a decline in the global price of rice compared with that of 1980. The rising trend in the price of rice is much less than the rise in prices of wheat. Wheat prices rose much more than those of rice in 2007.

In 2007, the global supply of wheat was much affected by drought in Australia and Ukraine, along with a freeze in the United States. New US legislation permitting the use of ethanol for automobile fuel to be doubled to 15 billion gallons by 2015 also boosted the price. Ethanol is made out of corn, and accordingly corn prices increased. (4) In addition, the US legislation combined with farm subsidies have not only created a flourishing corn market in the United States but also diverted agricultural resources from food to fuel. This makes it even harder for hungry stomachs to compete.

Ill-conceived policies

According to a leading American agricultural economist, D. Victor of Stanford University, corn prices are rising in large part because a growing fraction of US corn production is going into ethanol biofuels, mainly as a result of ill-conceived energy policies. Since the United States is the largest corn exporter, this affects the world market. In turn, this has some effect on wheat because wheat can be used in feed grain instead of corn. It is estimated that nearly 163 million metric tons of corn is required to make 15 billion gallons of ethanol.

The effect of these developments was immediately felt in the mega grain markets of the world, where grain futures are traded. A future contract means that the specified amount of commodity would be bought or sold at a pre-fixed price at a certain date in future. If supply is likely to be short, future contracts prices may go up. We should, leading grain economist M. Woolverton of Kansas State University suggests, 'think of "futures" prices as barometers of anxiety levels for users'. Where do we go from here? And what would be the impact on developing economies, especially in emerging nations. There is only one way to get out of the existing mess--expand food grain output, and fast.

Food prices are likely to remain high in the next few years. Corn prices hit a fresh high of US$6.73 a bushel--a rise of 48 per cent since January 2008. Soybean prices also moved higher, increasing the cost of food aid in the 2007-08 year. This has jeopardised the prospects for the Millennium Development Goals and the fight against hunger and malnutrition.

Huge rises

Wheat prices went up by 122 per cent between 2000 and 2007, corn prices increased by 86 per cent, and rice prices by 62 per cent. The cost of shipping food also doubled, further impacting on donors' budgets. The cost of major food commodities has doubled over the last couple of years, with rice, corn and wheat at record highs. Some prices have hit their highest levels in 30 years in real terms, provoking protests and riots in developing nations where the people spend more than half of their income on food.

The global consumption of wheat and rice has surpassed the output of these two commodities every year since 2001/02, except 2004/05 (Table 2). Production is growing, but population is growing faster. Each year, a certain portion of global food grains is kept in stock, to be used in the following year. This reserve is now being used to meet excess demand. The world's largest per capita consumption of food grains is in the United States, followed by the European Union and Asia. The lowest has been in African continent.

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