TWN Info Service on Finance and Development (Jan11/01)
17 January 2011
Third World Network

Latest food crisis brewing for months
Published in SUNS #7065 dated 13 January 2011

New York, 10 Jan (IPS/Thalif Deen*) -- The United Nations, which is trying to reach out to nearly a billion undernourished people, some living in perpetual hunger, is anticipating another food crisis later this year.

And the signs of impending trouble have been there for some time.

The Rome-based Food and Agriculture Organisation (FAO) warned last week that world market prices for rice, wheat, sugar, barley and meat will remain high or register significant rises in 2011 - perhaps replicating the crisis of 2007-2008.

Rob Vos, director of development policy and analysis at the UN's Department of Economic and Social Affairs (DESA), told IPS that higher food prices are already affecting many developing countries.

He said countries like India and a number of other East and South Asian countries are facing double-digit inflation, mainly caused by higher food prices - alongside higher energy prices.

In Bolivia, the higher prices for food in world markets recently forced the government to reduce consumer subsidies, as these were running up the fiscal deficit too high.

The short-term implications are not only that the poor are especially heavily affected - and that more people could be pushed into poverty - but also that it will hamper the recovery in the countries facing higher inflation as consumers lose purchasing power, he noted.

Some central banks are moving to tighten monetary policy and governments are being forced to tighten fiscal policy, said Vos, who is also the UN's chief economist.

Frederic Mousseau, policy director of the San Francisco-based Oakland Institute, told IPS that as early as last September, Mozambique experienced food riots over high bread prices.

Some 13 people were killed during a protest against the unaffordable price of bread, he told IPS.

"Food riots and civil unrest affected some 30 countries in 2008, and this can be repeated today since the situation has not changed in the last three years," said Mousseau, author of "The High Food Price Challenge: A Review of Responses to Combat Hunger."

The most vulnerable countries are those which are the most dependent on food imports and the least able to handle high prices in international markets through public mechanism and public policy, he noted.

This concerns many of the poorest countries, with fewer resources, institutions and public mechanisms in place to support food production or subsidise the food, Mousseau said.

Late last year, there were protests over high school lunch prices in China and near-riots in Algeria over rising prices of flour, milk and sugar.

Algerians again took the streets last week to protest economic conditions, including food prices, ending with several deaths and hundreds of injuries. Unrest also erupted in neighbouring Tunisia.

According to the FAO price index released last week, the price of a basket of cereals, oil seeds, dairy, meat and sugar has continued to rise for six consecutive months.

Abdolreza Abbassian, an FAO economist, was quoted by a London daily as saying: "We are entering danger territory."

Mousseau pointed out that food prices started increasing in 2010 following poor crops in Russia and Eastern Europe, partly due to the wild fires in the summer.

Now, the severe floods affecting Australia, the fourth-largest wheat exporter, are likely to hamper wheat production there and to push prices up even more, he predicted.

"Any other event, such as another climatic shock in another exporting country or a further increase in oil prices, will without any doubt boost prices up and make the situation worse than in 2008, and thus threaten the livelihoods of billions of people worldwide," he added.

Asked the reasons for the anticipated shortages, Mousseau said: "One cannot use the word shortage if you consider that more than one-third of the cereals produced in the world goes to animal feed and that a growing share of food production is going to agrofuels."

So there is no global shortage today, just as there was no shortage in 2007-2008.

The world actually produced 2,232 million tonnes of cereal in 2008, a historic all-time production record, Mousseau pointed out.

The global production level for 2010-2011 is slightly below the 2008 record, but with higher levels of global stocks.

As opposed to 2008, he said, when rice initially drove the global increase in cereal prices, in 2010-2011, it is wheat prices that first started to increase following poor crops in Russia and Eastern Europe.

Similar to 2008, the rise in food prices is a combination of different factors: a bad harvest in one part of the world brings pressure on the market, which sends signals to speculators, who start then to buy, which leads to further price increases.

The correlation between oil and food prices is once again obvious: as seen in 2008, current high oil prices make agrofuels more profitable and are therefore pushing more food crops into the ethanol and bio-diesel plants, Mousseau said. +

*  This article was written and distributed by IPS news agency.  It was published in SUNS #7065 dated 13 January  2011.  We thank IPS and SUNS  for our re-distributing this article.