By Russell Blinch and Brian Love
WASHINGTON/PARIS, March 31 (Reuters) - Food prices are soaring, a wealthier
Around the globe, people are protesting and governments are responding with
often counterproductive controls on prices and exports -- a new politics of
scarcity in which ensuring food supplies is becoming a major challenge for the
21st century.
Plundered by severe weather in producing countries and by a boom in demand from
fast-developing nations, the world's wheat stocks are at 30-year lows. Grain
prices have been on the rise for five years, ending decades of cheap food.
Drought, a declining dollar, a shift of investment money into commodities and
use of farm land to grow fuel have all contributed to food woes. But population
growth and the growing wealth of
World population is set to hit 9 billion by 2050, and most of the extra 2.5
billion people will live in the developing world. It is in these countries that
the population is demanding dairy and meat, which require more land to produce.
"This is an additional setback for the world economy, at a time when we
are already going through major turbulence. But the biggest drama is the impact
of higher food prices on the poor," Angel Gurria, head of the Organization
for Economic Cooperation and Development, or OECD, told Reuters.
In Gurria's native Mexico, tens of thousands took to the streets last year over
the cost of tortillas, a national staple whose price rocketed in tandem with
the price of corn (maize).
Global food prices, based on United Nations records, rose 35 percent in the year
to the end of January, markedly accelerating an upturn that began, gently at
first, in 2002. Since then, prices have risen 65 percent.
In 2007 alone, according to the U.N. Food and Agriculture Organization's world
food index, dairy prices rose nearly 80 percent and grain 42 percent.
"The recent rise in global food commodity prices is more than just a
short-term blip," British think tank Chatham House said in January.
"Society will have to decide the value to be placed on food and how ...
market forces can be reconciled with domestic policy objectives."
Many countries are already facing these choices.
After long opposition, Mexico's government is considering lifting a ban on
genetically modified crops, to allow its farmers to compete with the United States,
where high-yield, genetically modified corn is the norm.
The European Union and parts of Africa have similar bans that could also be
reconsidered.
A number of governments, including Egypt, Argentina, Kazakhstan, and China,
have imposed restrictions to limit grain exports and keep more of their food at
home.
This knee-jerk response to food emergencies can result in farmers producing
less food and threatens to undermine years of effort to open up international
trade.
"If one country after the other adopts a 'starve-your-neighbor' policy,
then eventually you trade smaller shares of total world production of
agricultural products, and that in turn makes the prices more volatile,"
said Joachim von Braun, director general of the International Food Policy
Research Institute in Washington.
In Argentina, a government tax on grain led to a strike by farmers that
disrupted grain exports.
Vietnam and India, both major rice exporters, announced further curbs on
overseas sales on Friday, sending rice higher on U.S. futures markets. Other
food commodities retreated from record highs in recent days but analysts
attributed that less to fundamentals and more to profit-taking by investors.
DISCONTENT
In the next decade, the price of corn could rise 27 percent, oilseeds such as
soybeans by 23 percent and rice 9 percent, according to tentative forecasts in
February by the OECD and the U.N.
Waves of discontent are already starting to be felt. Violent protests hit
Cameroon and Burkina Faso in February. Protesters rallied in Indonesia recently
and media reported deaths by starvation. In the Philippines, fast-food chains
were urged to cut rice portions to counter a surge in prices.
Last year, the central bank of Australia -- where minds were focused by a
two-year drought -- asked whether the surge in commodity prices could be one of
the few really big ones in world history, like those of the mid-1930s or the
1970s.
Real commodity prices remained flat or even fell during the rapid
industrialization of the United States and Germany in the early 20th century.
But the industrialization of China, with 1.3 billion people, is on a totally
different scale, it noted.
"China's population is proportionately much larger than the countries that
industrialized in earlier periods and is almost double that of the current G7
nations combined," the Australian central bank said.
The emergence of China's middle class is adding hugely to demand for not just
basic commodities like corn, soybeans and wheat, but also for meat, milk and
other high-protein foods.
The Chinese, whose rise began in earnest in 2001, ate just 20 kilograms (44
pounds) of meat per capita in 1985. They now eat 50 kilograms (110 pounds) a
year.
Each pound of beef takes about seven pounds of grain to produce, which means
land that could be used to grow food for humans is being diverted to growing
animal feed.
BIOFUEL TROUBLE
As the West seeks to tackle the risk of global warming, a drive towards greener
fuels is compounding the world's food problems.
It is estimated that one in four bushels of corn from this year's U.S. corn
crop will be diverted to make fuel ethanol.
"Turning food into fuel for cars is a major mistake on many fronts."
said Janet Larsen, director of research at the Earth Policy Institute, an
environmental group based in Washington.
"One, we're already seeing higher food prices in the American supermarket.
Two, perhaps more serious from a global perspective, we're seeing higher food
prices in developing countries where it's escalated as far as people rioting in
the streets."
Similarly, palm oil is at record prices because of demand to use it for
biofuel, causing pain for low income families in Indonesia and Malaysia, where
it is a staple.
But despite the rising criticism of biofuels, the U.S. corn-fed ethanol
industry enjoys wide political support because it boosts farmers, who suffered
years of low prices, and that support is likely to continue.
John Bruton, the European Union's Ambassador to the United States, predicts
that the world faces 10 to 15 years of steep rises in food costs. And it is the
poor in Africa and, increasingly, South East Asia, who will be most vulnerable.
The director of the U.N. World Food Program, Josette Sheeran, is on a global
tour in search of donations to fill a $500 million funding gap caused by the
rising prices. America's largest aid program, Food for Peace, has seen its
commodity prices jump 40 percent and may have to curtail donations.
But aid and many policy options available to governments for helping the hungry
distort markets and cause pain elsewhere in their economies, according to
proponents of free markets.
"I was involved in a government that introduced food subsidies in Ireland
and we had the devil's own job to get rid of them," said Bruton, who was
Prime Minister of Ireland from 1994 to 1997.
Others trust that better fertilizers and higher-yielding crops -- some of them
genetically modified -- will keep production in line with demand.
Bruce Babcock, an economist at Iowa State University, said the rising markets
are a signal to farmers that they need to raise production.
"It's actually the greatest time in the world to be a farmer around the
world," Babcock said. "We are going to see fairly substantial
increases in production because farmers have never had such a large incentive
to increase production."
But others note that expensive seeds and fertilizers are out of reach of
farmers in poor countries.
Around the beginning of the 19th Century, British political economist Thomas
Malthus said population had the potential to grow much faster than food supply,
a prediction that efficient farming consistently proved wrong. Now, at the
beginning of the 21st century, some are revisiting his predictions. (Reporting
by Russell Blinch and Brian Love; Additional reporting by Ayesha Rascoe and
Missy Ryan in Washington, Alistair Thomson in Dakar and Ho Binh Minh in Hanoi;
Editing by Eddie Evans)