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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Long era of cheap food is over
  • Date: Wed, 04 Jun 2008 14:09:57 -0600


Long era of cheap food is over
http://news.bbc.co.uk/2/hi/business/7425078.stm
By David Loyn
International development correspondent, BBC News

Peering just a few months ahead to estimate food prices has been a tough game
recently.

Biofuel protesters in Parliament Square in London
As food costs rise, there is debate over whether biofuels should be encouraged

Peering 10 years ahead might seem impossible, especially when some of the
assumptions made for the new UN Food and Agriculture Organisation report
already look questionable.

For example, one key assumption made is that crude oil prices will peak at
$104 a barrel by 2017, within variations along the way.

The price is already well above that, and some reputable analysts are now
predicting oil will go to $200 a barrel.

High oil prices push up costs for farmers in the developed world.

Fertiliser needs oil for its manufacture, while shipping costs have risen
substantially.

But it is the poorest in the world who face the bleakest future - 800 million
people who did not have enough to eat on a daily basis even before the recent
huge rise in prices.

The report emphasises the need for humanitarian aid to fill the gap in the
short term, and the World Bank has now announced major support to help
developing countries.

Farewell, cheap food

Poor people in cities, who can spend half of their income on food, are the
most vulnerable.

Governments across the world - particularly in a belt of countries across
North Africa, from Mauritania to Egypt - are looking nervously at rising food
prices and wondering about the political impact if things do not ease soon.

The main conclusion of the report, that prices will fall from the high spike
seen at the end of 2007, will console them.


Oilseed rape field

UN warns about rising food costs

But there is a sting in the tail: prices will level off at a far higher
average level than seen before the crisis erupted. The long era of cheap food
is over.

There is an opportunity here, too. The higher prices mean that investment in
agriculture will become more attractive, although the report emphasises the
need for spending in training, education and infrastructure to exploit the
available talent.

But the increased interest in agriculture also has a downside, as
"non-commercial traders" - speculators in normal language - have come into
the agricultural commodity market.

Apart from drought, speculation was the other factor named in the report as
being responsible for the record highs and the recent volatility in markets.

>From 17% in 2005, their share of the futures market rose to 43%. And the FAO
>report says they could leave as fast as they came.

Biofuel battles

The report is a glimpse into a new world of trading relationships. There has
been a lot of notice taken of China's new involvement in Africa, but less
attention paid to its equally intense interest in Latin America.

By 2017, China will have become the world's second-largest oilseed and
vegetable oil importer, and Brazil will be easily the largest exporter,
outstripping the US.

Biodiesel production (mostly from soybeans) is entirely dependent on
government subsidy, since the report emphasises that its production cost will
remain higher than the cost of conventional diesel production.

So the political battles will increase over whether biofuels should be
encouraged.

Biofuels are here to stay, with or without state support. Again, Brazil is
the main engine of growth here, both in terms of production and consumption
of biofuels.

But the US is catching up, with as astonishing 40% of US maize production
predicted to go on biofuels by 2017.




  • [Livingontheland] Long era of cheap food is over, Tradingpost, 06/04/2008

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