Roots of food crisis run deep

Good harvests currently in the fields means world food prices are likely to come down from their recent record levels, but not by much. Pressures of constantly growing world population and squeezes on production and farmland will keep prices of wheat, corn, sugar, edible oils, meats and fish and other staples at or near record prices for the near future.

'Higher food prices and volatility in commodity markets are here to stay', is the message of last week's joint report from the Organisation for Economic Co-operation and Development and the United Nations Food and Agriculture Organisation (FOA) that looks at agricultural prospects for the next 10 years. 'Over the coming decade real prices for cereals could average as much as 20 per cent higher and those for meats as much as 30 per cent higher, compared to 2001-2010,' the report says

For prosperous, self-centred Hong Kong, rises in prices of wheat or sugar may seem a distant matter of little concern. So what if nearly a billion people are hungry every day, they are all far away and powerless, may be the immediate response. But this is shortsighted. Higher food prices help to increase the rate of inflation, which puts pressure especially on the poorest consumers, of whom there are several hundred million in China.

Evidence of popular uprisings in North Africa and the Middle East suggests that higher food prices were one key ingredient in the unrest. Beijing has also shown its concern about the dangers of higher food prices cascading into inflation and popular unrest. Global agricultural production will grow at 1.7 per cent annually in the decade ahead, the report says, slower than the 2.6 per cent of the previous decade. Growth in livestock production will stay close to recent trends. Fisheries production, covered for the first time, will grow by a slower rate of 1.3 per cent, and acquaculture - or farming of fish, in which China is the world leader with 60 per cent of global production - will account for 45 per cent of total fishery production including non-food uses by 2020.

The good news is that if the report is right, total food production per capita will continue to rise by 0.7 per cent annually. The less good news is that that is a slender margin in the face of continuing price volatility, which creates uncertainty and risk for producers, traders, consumers and governments alike.

Volatility is here to stay, and its manifold factors are not easy to predict or control. They include: weather and climate change, on which the report says limply, 'Climate change is altering weather patterns, but its impact on extreme weather events is not clear'; stock levels, which when they are low, as they currently are for coarse grains, may increase price volatility; energy prices, which have both a direct effect on prices through costs of fertilisers and transport, and an indirect impact by driving demand to feedstock for biofuels; exchange rates; growing demand; resource pressures; trade restrictions; and speculation.

The report does not offer definitive answers to the most pressing problems, although it warns that resorting to restrictions on exports or imports does more harm than good since they 'amplify price volatility in international markets'. It urges greater productivity growth, especially by smaller producers, but this is more easily said than done.

It suggests that governments could use social safety nets to assist small producers and vulnerable consumers through difficult times; but these groups have hitherto been lacking the political clout to make their plight understood. Riots on the streets may get government attention, but policies drawn up in haste and under duress may not provide sensible answers. One of the problems is that even though the report has a 10-year perspective, this is merely a snapshot in relation to longer-term issues of feeding a growing global population. By the end of the year, the world will have 7.7 billion people, a number expected to grow to 9 billion or more by 2050.

But this is an increasingly difficult dynamic, not merely because of the huge gaps between the haves and the have-nots, but because of the complicated pressures of change. The poorest 2 billion people in the world spend between 50 and 70 per cent of their income on food, which means that a sharp price rise will mean two or one meal a day rather than three. Populations are growing most in some of the poorest countries, notable Pakistan and large parts of Africa.

At the same time, about 3 billion increasingly prosperous people, particularly in China and East Asia, are moving up the food chain, wanting to eat more meat, milk and eggs, which increases the demand for grain to feed livestock, not people. Until a decade ago the much-maligned US had either surplus supplies or idle farmland that could be brought into production to meet a global grain deficit. But today the surplus has gone and the US is shifting grain production from human consumption to fuel for motor vehicles.

Global warming, falling water tables, mismanaged soils and shortages of cropland in heavily populated countries have led some countries, notably Saudi Arabia, South Korea and China, to buy land abroad.

What is lacking in the joint report is any indication countries have an international perspective, let alone can co-operate to seek global solutions. The next and scary wars may involve food supplies - if the struggle for water resources does not flare up first.

219,000

The number of additional people to feed at the dinner table every day. The world population is expected to grow to 9 billion by 2050.