Healthy soil and sustainable growing

["TradingPostPaul" <tradingpost@riseup.net>]

Why the era of cheap food is over
Corn, milk, bread, and other farm products hit record high prices in 2006
– and will likely keep rising in 2008.

from the December 31, 2007 edition
http://www.csmonitor.com/2007/1231/p13s01-wogi.html
Part 1: Why the era of cheap food is over
The rise and rise of world food prices

Food prices worldwide hit record highs in 2006, and all the signs are that
they will go on rising this year, and for the foreseeable future. The era
of cheap food, the experts say, is over and we are going to have to get
used to it. This is easier said than done for millions around the world, as
evidenced by protests in Mexico over the cost of corn tortillas, and in
Italy last September about the price of (wheat) pasta. Staff writer Peter
Ford looks at why.

What is behind the increases in food prices?

Certainly not bad harvests. Although a drought hit the traditionally
bountiful Australian wheat harvest this past year, world cereal harvests
hit 2.1 billion metric tons, a record production level, according to the UN
Food and Agriculture Organization (FAO).

Two major trends have been pushing prices up faster than they have risen
for more than 30 years. One is that increasingly prosperous consumers in
India and China are not only eating more food but eating more meat. Animals
have to be fed (grains, usually) before they are butchered. The other is
that more and more crops – from corn to palm nuts – are being used to
make biofuels instead of feeding people.

At the same time, the world is drawing down its stockpiles of cereal and
dairy products, which makes markets nervous and prices volatile.

The result, says Joachim von Braun, who heads the International Food Policy
Research Institute (IFPRI) in Washington, is that "the world food system is
in trouble. The situation has not been this much of a concern for 15
years."

How big a factor is the biofuels boom?

It is significant enough for the FAO to be warning about the dangers of
turning too much food into fuel, and for the Chinese government, for
example, to ban the construction of new refineries that use corn or other
basic foods. In fact, earlier this month Beijing announced tax breaks and
subsidies to encourage the use of cellulose, sweet sorghum, and cassava
(nonfood crops in China) for biofuels.

Some analysts estimate that as much as 30 percent of the US grain crop will
go toward producing ethanol this year, a doubling from 2006. IFPRI
forecasts that if the world sticks to current biofuel expansion plans, the
price of corn will go up 26 percent by 2020, and the price of oilseeds
(such as soybean, sunflower, rapeseed) by 18 percent. If governments double
efforts to produce this alternative fuel source, corn prices are expected
to go up 72 percent and oilseeds by 44 percent in 12 years' time.

Who gets hit hardest? Does anyone benefit?

As usual, it is the poorest people in the world who suffer most, because
food takes up a bigger share of their daily shopping bill than it does for
richer people. A family in Bangladesh, for example, living on $5 a day,
typically spends $3 of that on food. The 50 percent rise in food prices the
world has seen in recent years takes a $1.50 chunk – nearly 30 percent
– out of the family budget.

Even farmers are not immune. On the whole, small-scale farmers in
developing countries buy more food than they sell, so they, too, are net
losers. Relatively few peasants have holdings large enough to benefit from
price increases.

Big farmers in the rich countries, however, are doing well: US corn farmers
have seen the price their crop fetches jump by 50 percent since 2000. Other
net food exporters, such as India, Australia, and South Africa, will also
do well out of rising prices. Major dairy producers, such as New Zealand,
have done well as consumption of milk, yogurt, and cheese rises in Asia. As
a result, while property values in New Zealand are generally expected to
soften, flat rural land, where cows can graze, is expected to continue to
rise in price, according to a survey by Massey University in New Zealand.

Will market forces correct the situation, as farmers switch to the
high-earning crops?

Not as quickly as you might expect, though the European Union, the largest
food exporter in the world, has suspended a "set-aside" program that had
paid its farmers to leave 10 percent of their land fallow (so as to prevent
oversupply).

Cereal prices are considered "inelastic," meaning that a 10-percent price
increase tends to boost supplies by only one or two percentage points.
While prices are high, they are also very volatile at the moment, which
scares a lot of farmers off making the investments they would need to
switch crops.

At the same time, the food market overlaps with the fuel market. Farmers
can now sell their corn, their palm nuts, or their sugar to biodiesel
refineries. So the price of palm oil, for example, traditionally the
cheapest in Africa, is now set not by the cooking oil market, but by the
fuel market.

It will not help that climate change and the accompanying floods and
droughts will reduce cereal output in more than 40 developing countries,
mainly in Africa, according to recent studies.

Where will food shortages be most acute?

Wherever the underlying trends of rising prices and scarcer supplies are
compounded by special problems. Sometimes they are natural disasters, such
as the cyclone and flooding that hit Bangladesh last November, wiping out
many people's stocks of food. Sometimes they are man-made, as in the
Democratic Republic of Congo, where continuing civil conflict and
mismanagement disrupt the market, or in Zimbabwe, where inflation of more
than 7,000 percent and a crumbling economy are threatening people already
short of food.

"The hot spots of food risks will be where high prices combine with shocks
from the weather or political crises,", says Dr. von Braun. "These are
recipes for disaster."

What effect will high prices have on hunger-prevention programs?

A big one says the World Food Program (WFP), the UN agency in charge of
emergency food aid, which reported last year that food aid flows had
reached their lowest levels since 1973.

Food prices "are an incredible concern for us at the moment" says WFP
spokesman Robin Lodge. "The same dollars don't buy the same amount of food
as they used to," and donations to the agency are flat.

The WFP has been making a big effort to buy food from countries as near as
possible to crisis zones, to cut transport costs, and in 2007 it had 15
million fewer people to feed than in 2006 because there were fewer major
emergencies.

"But we are now about as tight as we can get, so unless donations go up
there is no doubt about it, we will have to reconsider who we are feeding
and the rations" says Mr. Lodge. "There is no other way around it."

Many food aid organizations are trying to buy more food locally. The FAO is
reportedly working on a program to offer poor farmers vouchers for seeds
and fertilizer to help them adapt to changing climate conditions.