In the course of the second half of the 20th century, the inhabitants of rich countries have accustomed themselves to the notion that cheap foods are as obvious as free education system or subsidised health service. However, it seems that they will have to kick the habit gradually. The situation is much more dramatic in poor countries of the South. According to the World Bank growing food prices will consign to a life of poverty as many as a hundred million people (1). Right the inhabitants of the world’s poorest countries, who spend nearly three quarters of their income on food at present, were affected by global trends the worst. The trends caused the price increase of basic foods by 48 per cent on average during the last year and by more than 80 per cent during the last three years. In the last report on the state of foods in the world, FAO says that 37 countries are imminently endangered by a food crisis (2). In the course of last two months, tension sparked by high prices has stirred up unrests and insurrections in thirty developing countries. Among them was Haiti, where tens of people died, but also Egypt, Morocco, Cameroon, Senegal, Nigeria, Mexico, Philippines, Uzbekistan, Thailand, Bangladesh etc. In Pakistan, the army was summoned to strike against the plunder of fields and shops. The heightened threat of hunger and malnutrition stands for the direct consequence of price increase in these countries.
Nevertheless, everything is just a side effect of present food crisis. Let’s think of its causes and background and let’s ask what the consequences as well as impact of this crisis on further development within world economy and policy may be like.
The causes of the crisis
The concurrent effects of several factors, which are more or less pivotal for the situation in diverse parts of the world, are to blame for the rapid growth of food prices. Some of them were publicly named, the others remained unrevealed. It’s difficult to calculate or determine in another way the degree of influence and impact of the particular factor. Anyway, it’s probable that none of these factors, which act separately and independently of each other, would be able to induce a crisis of such an extent.
The demographic development of the world’s population, or rather, its growth in the developing countries of Asia, Latin America and Africa as well as the high demand for energies, technical equipment and also a larger number of high-quality food is considered by the media, politicians as well as economists to be the primary cause. In several Asian economies, a numerous well earning middle class, which can afford to eat like people in the West now, originated in the course of last years. It means that apart from other things also the demand for meat grows in these countries.
In this connection, several authors, George Monbiot in particular, point out the inefficiency linked with the breeding of animals for meat and its consummation. Monbiot (3) refers to the disproportion between food production on the one hand and their consumption for population nourishment or technical utilisation on the other one. On the basis of Food and Agriculture Organisation data the UN claims that there is enough food in the world, it only doesn’t end up in “right stomachs” (4). Out of 2.13 billion tonnes of grain, which are supposed to be grown this year, only 1.01 billion tonnes will be used for the production of food for people. Annually, as many as 760 million tonnes of vegetal food are used for the feeding of cattle, swine and poultry. For example, cattle consume approximately eight kilograms of vegetal food on every kilogram of meat that the humans obtain from it. Thus it’s ecologically as well as economically the most demanding sort of meat that we eat. ‘Only’ two kilograms of food are spent on one kilogram of poultry. Monbiot proposes to eat less meat as a prevention of further crisis as its production is sustainable just at the expense of agriculturally not self-sufficient countries. This is disputable because decrease in the number of cattle or swine needn’t necessarily mean that an equivalent amount of vegetal food will be grown. Meat industry itself isn’t obviously the main reason for current food crisis.
Besides growing consumption, the lack of food was induced also by bad last year’s harvest in several countries. Owing to bad weather – droughts and subsequent floods – there was a noticeably worse wheat harvest. It means that food crisis is stepped up by extreme weather phenomena and a general degradation of biosphere. According to World Food Program 57 countries of Africa, Asia and Latin America were struck by disastrous floods. To the contrary, South Asia, China, Uruguay, Mozambique, Sudan but also Europe were struck by warm weaves and droughts (5). Another serious problem linked with the degradation of the environment with a heavy impact on world agriculture is the increasing lack of drinking water. While in the 20th century the total number of people rose by three times, the utilisation of water sources rose by six times (6). Thus the volume of available water sources has been shrinking perpetually and moreover, they are often contaminated by pesticides, fertilizers, industrial production or missing sanitary infrastructure. Nowadays, according to the UN around one third of the world’s population live in regions with a lack of water and as many as 1.1 billion people haven’t access to immaculate drinking water. In next decades, the situation is expected to change for the worse. There’s a similar problem with the area of available soil for food production, which has been shrinking at a fast pace predominantly due to expanding urbanisation.
“The UN estimates that the number of people will reach 9 billions by 2050. It would be necessary to grow by 225 million tonnes of grain more than today” (7). Apart from natural factors, which are difficult to influence, also other harmful factors reflecting the interests and policy of wealthy countries are an impediment. The policy is reflected on several levels:
The basic problem is the structural dependence of modern agriculture and food industry on fossil sources. Growing prices of irrecoverable raw materials, particularly oil, influence also the overall price of agricultural production since oil is used as a fuel for agricultural machines and as a material for the production of artificial fertilisers and chemicals. The system of global distribution of inputs and food is completely dependent on oil too. Recently, oil price has grown and so has food price. Owing to the concern over the depletion of world oil supplies, scientists and politicians started to search for alternative renewable energy sources. At the beginning of the new millennium, the so-called biofuels – predominantly oily crops from which ethanol is extracted and used as a substitution of petrol or diesel oil – were presented as the most effective easily renewable source. However, it was not until the oil price exceeded 80 dollars for barrel that the mass production of biofuels turned out to be financially attractive. Growing oil price causes that for farmers it’s still more advantageous to grow and sell crops for biofuel production than for foods for local community or export. Yet in 2004, crops intended for biofuel production were grown solely on 0.31 million hectares of soil in the EU. In 2007, this area increased up to 2.84 million hectares thanks to high subsidies (8). Almost 20 per cent of current corn production in the US are intended for bioethanol production, whereas US share in world exports of corn amounts to 70 per cent and many countries, like Mexico, Japan and Egypt, are dependent on US export. Therefore the expansion of bioethanol production in the US has impact on the availability and price of foods in other countries.
In terms of environmental policy most of states committed themselves to increase the share of biofuels in the overall consumption of fuels. They began to subsidise the production of biofuels to this end. In the US and the European Union, bioethanol should constitute 10 per cent of fuel consumption by 2010. This decision induced automatically expectations of future demand also abroad. In their logical pursuit of earning, farmers prefer the cultivation of corn, soya, oilseed rape, sunflower, sugar cane or other crops for ethanol to the cultivation of wheat for bread. Thus biofuels have become a rival of foods in relation to soil, fertilisers and water. Lester Brown, the Chairperson of Earth Policy Institute, says that soil, which is used for the mass production of biofuels, would sustain almost 250 million people.
Many poor states face the threat of famine and the people exist there solely thanks to emergency food supplies. In Swaziland, for instance, as many as 40 per cent of inhabitants suffer from lack of food because kasavu, applicable in biofuel production – for export (9), is grown on most of soil. Swaziland is not a unique occurrence. Similar political decisions represent one of the aspects of the increasingly sharper criticism of biofuels. Recently, The Guardian has released an article whose author, Jean Ziegler, labels this policy as a new kind of crime against humanity (10). Because “approximately 232 kilograms of grain are needed the production of 50 litres of bioethanol, i.e. an amount that a child could live on one whole year”, said Ziegler. As many as a hundred million tonnes of grains are spent for biofuel production per annum. Besides national governments, Ziegler accuses of this crime also advanced western economies and several international organisations and institutions. The International Monetary Fund, the World Bank and the World Trade Organisation rule the economies of the poorest countries with an iron hand. Today, these economies are directly interlinked with global food market. It means that if food prices keep on growing, these countries will have no possibility to defend themselves economically. UN Special Rapporteur on the Right to Food Olivier de Schutter criticised the International Monetary Fund because its policy has forced the most indebted countries, particularly those in Sub-Saharan Africa, to develop agricultural cultures intended for export and to sell their rights and whale-hunting quotas so that they can fulfil their commitments to the Fund and import food for the population. Owing to the growing food trade liberalisation they have become dependent on the volatility of food prices (11).
Also advanced economies, which back the farmers by means of various subsidies and protect domestic markets via import duties, are to blame for food price growth. Primarily the US and the EU create cheap foods and restrict food import from developing countries in this way. Those ceased to grow rice and wheat for this reason. Ziegler is scathing about the EU: “The European Union supports the export of excessive agricultural products to Africa where it offers these products at one half or even one third of production price ruining thus African agriculture” (12). As many as 37 out of 52 African states are almost exclusively economically dependent on agricultural production. In contrast to the subsidised agricultural sector of rich countries, their export isn’t competitive. In 2006, for example, OECD states granted the farmers subsidies and subventions accounting for more than 350 million dollars. Besides this, the US and the EU have been removing the market barriers of free trade in food and agricultural products in a selective way so that they don’t endanger their own subsidised agricultural production. Thus they have been deforming the functioning of world market.
Let’s pick up on biofuels: apart from the humanitarian aspect, it has been proved that biofuels aren’t as ecological as they might have seemed at the beginning or as they used to be promoted. Critics (13) argue that much water is spent on their production, forests are destroyed owing to high demand for them and some of the crops grown to this end, corn and oilseed rape in particular, produce by 70 per cent more greenhouse gases than fossil fuels.
On 17th October, 2007, even the International Monetary Fund pointed out the negative impacts of biofuels and that the massive utilisation of food for biofuel production “may reduce in the future the area of soil, which is lacking even today, as well as the amount of water throughout the world and induce further food price growth in this way”(14), although the IMF isn’t an institution which would hesitate to sacrifice poor countries for the interests of western supranational corporations.
Brussels, however, is protecting biofuels meanwhile. According to the EU “biofuels have only been made a scapegoat for recent increase in the price of commodities caused by different factors, namely bad worldwide harvest and growing demand for food stirred up by the increasing living standard of people in India and China” (15).
The truth remains that during the last almost thirty years when the prices of basic agricultural commodities were relatively stable, the governments of some countries yielded to satisfaction and didn’t ensure sufficient food supplies. In the past, 20 per cent were considered the optimum share of the world’s final unsold supplies of main products (grains, oilseeds, sugar) in their annual consumption. The decrease of supplies below 20 per cent was a signal of price growth and importers’ nervousness, the increase above 20 per cent augured decrease in demand as well as prices. Gradually, the opinion prevailed that the 20 per cent share of supplies was overvalued when considering the development of transport and the increased ability of international market to react quickly on possible deviations. Thus the share of final supplies in the global consumption of wheat, corn, and main oilseeds has been sinking since 1960 from average 38 per cent to current 18.3 per cent in the case of wheat and from 30 per cent to 13.3 per cent as for corn (16). According to FAO statistics world grain supplies suffice hardly for 57 days, which has been the lowest value in the last 25 years (17). According to the Head of the UN World Food Program J. Sheeran “global food reserves have reached a 30 year minimum” and according to the UN their prices will keep on growing (18).
Big grain or rice producers, for instance Ukraine, Vietnam, China, Pakistan and Cambodia, started to defend themselves against food crisis and undesirable inflation by means of export restrictions and in some cases also a complete ban on exporting agricultural crops in order to secure supplies for own inhabitants. This has contributed to the price growth as well. Moreover, rationing was imposed in several countries. In their quest for rice price reduction, however, these countries contributed through the export restrictions to growing rice deficiency on global markets. Simultaneously, the motivation of merchants to get round governmental provisions and shift partially the rice trade into illegality was encouraged. This manifested itself repeatedly in further price growth and led to an enormous growth of inflation predominantly in the region of western and southern Asia and in countries dependent on rice import. It also instigated recent initiatives to establish a rice cartel similar to OPEC (19) in the region. Samak Sundaravey, the Prime Minister of Thailand – the largest rice producer in the world, was the initiator of this idea. Nevertheless, except India, whose representatives of the project expressed immediately their support, other important rice producers spoke up neither for nor against the proposal. Laos and Cambodia “will weigh up the project seriously” (20).
The economist Tran Tien Khai from Fulbright Economic Training Program in Ho Chi Minh City said for the daily Bangkok Post that to reach an agreement between individual countries would be difficult since the quality of Thai rice is higher than, for example, that of Vietnamese one and Thailand could have asked more for its rice on international markets. In terms of the cartel Vietnamese cheaper rice wouldn’t be able to compete on markets. “Rice is a political commodity. Every country would like to maximise its power,” said the economist.
Among big producers are also India, China and Indonesia. However, these countries consume most of their production at home. Huge importers like Philippines obviously aren’t fond of the price cartel. “Nearly three billion people eat rice. It’s not a good idea, it’s a bad idea. It will create an oligopoly and it’s against humanity,” BBC quoted the Chairperson of Philippine Parliamentary Committee for Agriculture Edgar Angar (21).
Apart from protectionist measures, also the still weaker US dollar, i.e. the currency traded on the majority of commodities exchanges, plays a major role in the intensification of crisis. Therefore the merchants demand logically higher price in dollars so that they obtain the same real sum which they have expected at last. This course leads to further worsening of situation on food market. Speculators have been disposing of falling dollar and instead of it, they have been searching for a new investment the prices of which grow, i.e. foods. They profit from the crisis whereas their speculations drive food prices higher. The lower the state of supplies is and the higher the demand is, the higher the price is. US banks advise their clients to stake on rapidly soaring prices and no arguments concerning the immorality of such a behaviour help. To the contrary, gigantic food concerns and corporations use the crisis in order to push through accelerated transition to genetically modified food. They present it as the ultimate solution to the problem. However, genetically modified organisms (GMO) don’t represent a redemptive solution. They’re expensive as it’s necessary to pay not only for the crop or seeds but also for the patent held usually by supranational concerns. Moreover, it hasn’t been possible to examine reliably the consequences of GMO utilisation so far.
Possible consequences and further development of the crisis
“The originating world food crisis is less visible than the oil one, however, it may cause real economic and humanitarian tsunami in Africa,” stated the EU Commissioner for Development and Humanitarian Aid Louis Michel (22).
The UN and its organisations have undertaken several steps and emergency measures consisting in the provision of rapid financial assistance to the worst affected areas. It plans to double the volume of credits for African farmers up to 800 million dollars next year. Nonetheless, financial injections don’t stand for a constructive long-term solution. That’s why it’s necessary to suggest new efficient measures.
The stance of the World Bank and the UN is uniform: they appeal to the countries not to hold back food export and not to gather supplies because it leads to food price increase on global markets. It sounds paradoxically and cynically that also the EU Commissioner for Trade Peter Mandelson lambasted such a protectionistic approach. Nevertheless, national governments have only limited possibilities how to ensure enough subsistence for own populations. From among all affected states, India and Philippines might have dealt with the crisis as well as its social impacts the most successfully. They have provided more money on social benefits for the poorest and they divide basic foods subsidised by the government on the basis of rationing.
United Nations Food and Agriculture Organisation claims that in order to meet the growing demand for food in the world, its production must be stepped up by 60 per cent in the course of next twenty years. However, there is not enough soil and water in the world. Therefore we may assume that the demand for foods will exceed the supply following years. The reason is that several countries, which have been struck by the current crisis, will try to stock up for the case of further crisis or the intensification of the present one. That’s why the statement of the Managing Director General of the regional development Bank Asian Development Bank Rajat Naga “the era of cheap foods has come to an end” (23) looks well-founded.
Although the fact remains that contemporary estimates of this year’s crop harvest published by specialised institutions (24) are overwhelmingly positive and that increase in global grain harvest by around 3.8 per cent in comparison with the year 2007 is expected, there’s no reason for exaggerated optimism meanwhile. “Food prices won’t sink to the original level” said the Commissioner for Development Louis Michel on 22nd August at the Plenary Session of the European Parliament in Strasbourg during a discourse upon food crisis. Also the UN economist for nutrition and agriculture Abdolreza Abbassian stated that high food prices wouldn’t sink in the course of following two or three years. UN Food and Agriculture Organisation report estimates that poor states will spend 169 million dollars on food import in 2008, i.e. 40 per cent more than last year. For the very same reason the representatives of the World Food Program of the UN (UN WFP) warned repeatedly during last two months that their organisation hasn’t enough finances for providing food aid. Further 755 million dollars are needed only to cover the costs linked with growing food prices. Donor states and organisations have pledged 475 million so far. However, WFP has only 18 million dollars at its disposal nowadays. It’s not conceivable to satiate hungry people solely by promises. Therefore the UN Food and Agriculture Organisation has appealed to the world to collect means amounting to 1.7 billion dollars in support of an initiative thanks to which poor countries are supposed to gain seeds, fertilisers and other input materials prerequisite for production increase (25).
The Chairperson of the World Trade Organisation Pascal Lamy perceives international trade liberalisation, i.e. prompt conclusion of the Qatar round of negotiations commenced in 2001, to be the solution to the crisis. One of the primary objectives of the Qatar round is the achievement of significant progress in terms of the liberalisation of international trade in agricultural products and foods by means of removing subventions and minimising customs tariffs on import and export of these products or their abolition. However, the conclusion of liberalisation negotiations is out of sight and it’s rather questionable whether the liberalisation may contribute to food crisis solution. Contemporary agricultural market is deformed. It is subsidies and subventions which enabled western states subsidising their agricultural production to flood world markets with cheap goods for many years at the expense of poor countries with insufficiently competitive and underdeveloped agricultural sector. The supply on world food market exceeded the demand for a long time and pushed the prices down. It’s generally assumed that the removal of subventions decreases the supply exerting thus pressure on price growth. From a short-term point of view and without measures moderating this effect, the one-off blanket abolition of budgetary subventions would even intensify the current crisis and endanger backward agricultural regions in the EU and the US. The removal or at least the reduction of biofuel production subsidies would help to step up the volume of available food the next year. From a long-term point of view, the removal of the systems of subventions and subsidies in rich western countries seems inevitable. The present food crisis, however, has fortified the attitude of developed as well as developing countries rejecting further liberalisation of agricultural products and food market. Their goal is not to jeopardise own food security. Since at the request of France, the US and some other countries the current customs and budgetary regime for agriculture should be maintained by 2013, the development of prices in following two or three years will be significantly influenced by the fact whether individual states succeed in finding political will to change something about contemporary system in the next round of negotiations. In opposite case the world may face the threat of famine and political instability according to the Deputy UN Secretary General John Holmes (26). Also the Head of FAO Jacques Diouf warned that the growth of basic food prices may lead to civil wars in some countries (27).
Only a fundamental change in husbandry may save the world from all these threats and possible ecological disaster. According to the conclusions contained in the recently published IAASTD report, i.e. International Assessment of Agricultural Science and Technology for Development, it’s necessary to reform the way of trading as well as growing. First and foremost it’s pivotal to support local production, confine subsidies to ecological ways of farming and finance efforts to restore biodiversity. According to the report it’s necessary to decline completely the policy on specialisation in several strategic crops as well as present quest for blanket liberalisation which abets mass producers. In the authors’ opinion, the World Bank and the International Monetary Fund could assist primarily with the construction of transport infrastructure as famine brakes out usually in isolated regions of the Third World. However, countries and institutions are quite unlikely to include proposed solutions and conclusions in real policy.
I dare to quote R. Heinberg: “In view of the fact that the amount fossil sources is limited and we’ve been presently facing the problem of global climax of their extraction, we have to adapt the system of food production to this fact so that it will be less dependent on such sources despite the large number of issues which this transformation process brings along. Obviously it’ll take some time which is estimated at several decades. Nevertheless, it has to start as soon as possible and it must encompass a clear and comprehensible plan. Transition to fossilless food industry isn’t a utopian aim of distant future. It’s an inevitable, immediate and immense challenge which calls for an unparalleled creativity on all levels of society” (28).
http://www.worldbank.org(2) The State of Food and Agriculture. FAO, 2007
(3) Monbiot, G.: Credit crunch? The real crisis is global hunger. And if you care, eat less meat. The Guardian, 15.4.2008. http://www.guardian.co.uk/commentisfree/2008/apr/15/food.biofuels
(5) Vidal, J.: Global Food Crisis Looms as Climate Change and Fuel Shortages Bite. The Guardian, 3. 11. 2007.
(6) Agriculture Consuming World´s Water. Geotimes online, June 2007.
(7) Globální potravinová krize. 18. 4. 2008.
(8) The European Commission
(9) Monbiot, G.: Credit crunch? The real crisis is global hunger. And if you care, eat less meat. The Guardian, 15.4.2008. http://www.guardian.co.uk/commentisfree/2008/apr/15/food.biofuels
(10) Ziegler, J.: This is silent mass murder. The Guardian, 21. 4. 2008.
(12) Ziegler, J.: This is silent mass murder. The Guardian, 21. 4. 2008.
(13) For instance, the winner of the Nobel prize for chemistry in 1995 Paul Crutzen.
(14) Biofuel Demand Pushes Up Food Prices. IMF, 17. 10. 2007.
(15) Piebalgs, H., 28. 3. 2008.
(16) International Grains Council
(17) Heinberg, R.: What will we eat as the oil runs out?
(18) OSN velí do boja s potravinovou krízou. Kým je čas. Aktuálne.Centrum.sk, 30. 4. 2008.
(19) Oil Producing and Exporting Countries.
(20) Thajsko volá po rýžovém kartelu ve stylu OPEC. Reuters, 2. 5. 2008.
(21) Slovák, K.: Drahá ryža straší Áziu. TREND, 5. 5. 2008.
(22) Inflácia v Afrike môže spôsobiť humanitárne tsunami. AFP/SITA, 8. 4. 2008.
(23) Éra lacných potravín skončila. EurActiv.sk, 23. 4. 2008.
(24) International Grain Council IGC, March 2008.
(25) Ki-Mun, P.: Potravinová krize – Naděje na obzoru. UNIC Praha, 10. 5. 2008.
(26) Světová potravinová krize se zhoršuje, lidé se bouří. Gnosis9.net, 10. 4. 2008.
(27) Křešnička, J.: FAO představí potravinový výhled. Ekonom, 22. 5. 2008
(28) Heinberg, R.: What will we eat as the oil runs out?