Behind the Food Crisis: Rising Expenses Only Part of the Problem

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What gives with food prices? I’m tired of paying through the nose for something as basic as an apple.

Many people cite increased transportation costs and farming expenses for the increase.
I buy that argument as a part of the explanation. But rising costs simply don’t account for all the markup. After all, as Tim Hartford points out in an FT column explaining why it’s a good time to be a teenager, “clothes, trainers, computer games, iPods, DVDs and even illegal drugs are all falling in price.”

Trainers are still subject to transportation and materials costs, yet their supply is steady. This NYT article, though it doesn’t address increased worldwide demand and biofuel production as factors, highlights some key issues:

Food prices didn’t rise for years. Now, prices are finally adjusting.

Call it a spastic market adjustment. Since 1980, even as trade in services and in manufactured goods has tripled, adjusting for inflation, trade in food has barely increased. Instead, for decades, food has been a convoluted tangle of restrictive rules, in the form of tariffs, quotas and subsidies.

Only a few countries are still exporting large amounts of food to the rest of the world.

At least 29 countries have sharply curbed food exports in recent months, to ensure that their own people have enough to eat.

India, Vietnam, China and 11 other countries have limited or banned rice exports. Fifteen countries, including Pakistan and Bolivia, have capped or halted wheat exports. More than a dozen have limited corn exports.

With Australia’s farm sector crippled by drought and Argentina suffering a series of strikes and other disruptions, the world is increasingly dependent on a handful of countries like Thailand, Brazil, Canada and the United States that are still exporting large quantities of food.

Past policies discouraged local farming, leading to overreliance on imports.

From Indonesia to West Africa to the Caribbean and Central America, poor countries have frequently cut farm assistance programs and lowered tariffs to balance budgets and avoid charging high prices to urban consumers. But they have found that their farmers cannot compete with imports from rich countries — imports that are heavily subsidized.

As a result, steps that could have taken place decades ago, resulting in more food for the world today, were abandoned. These included changes like irrigation schemes and new crop varieties.

The World Bank and the International Monetary Fund also frequently pressured poor countries in the 1980s and 1990s to lower tariffs and to cut farm support programs, mostly to reduce budget deficits–(leading to) negative effects on farmers in developing countries.

If nobody wants to share their food, we’re all in trouble. Countries for years have been operating off a model of world trade that advocates specializing in a few products and services for export, then importing the rest.

If a few key exporters, such as Thailand, decide to hoard, net importers like Japan feel the burn. In fact, according to the NYT, Japan and Switzerland are leading a group of food-importing nations so alarmed by restrictions that they are seeking an international agreement preventing countries from unilaterally limiting food exports.

Something needs to change in the global food market to avoid further catastrophe
(people living on food aid are already being hit hard. In Haiti, for example, families are surviving on cakes made with mud.) Here are three possible solutions, per the article:

–If Japan and Switzerland get their way, international agencies like the WTO will get teeth, decreasing member sovereignty in return for guaranteeing enough food to eat.
–The NYT authors recommend countries build up better food reserves, but avoid hoarding as a national policy (the way China does with its financial reserves).
–The WTO, now in the seventh year of its Doha negotiations, is discussing slashing farming subsidies.

Increasing farming efficiencies in Africa–where people throw away excess crop yields while people around them starve to death–would be another major windfall to the world’s food supply. Motivating farmers to produce food instead of gas by nixing biofuel subsidies is another answer. Putting more resources towards sustainable farming through world agreements, even if they have teeth, would beat mass starvation.

Then, there’s the private sector. The public can help expediate the process of food security by investing in companies involved in farm redevelopment, non-edible biofuels, and alternative energy. Green isn’t just cute, it’s about having food on the table in ten years.

More solutions are on this CNN page devoted to the food crisis.

That said, I’m going to miss cheap bananas, if things ever get to that point…

  • Food, yes, but clean water, more so! You are correct with regards to the problems with food, but without access to water, there will be no food, expensive or otherwise. Thanks for your thoughts on this subject, Drea. I linked to your piece in my blog post today at the Innovators-Network with hopes of sending more readers your way. I look forward to more of your pieces!

  • Drea

    Anthony, thank you! I’m glad you like the post, and thanks for linking. I agree that water is a BIG problem. And painfully underreported. I’m going to look into that more for a future post.

  • “Countries for years have been operating off a model of world trade that advocates specializing in a few products and services for export, then importing the rest.” Recently we have started to experience the dark side of the trendy “Globalism Model”, which fosters excessive specialization and dependence upon WTO-pressured national trade policy compliance. It should surprise no one that governments are first & foremost concerned with the well-being of their own citizens, and food dependency on the benevolence of the “Global Market” is to no country’s advantage, especially since producers of most essential resources have a history of dampening supply when it suits their political purposes. As industrial farming, propelled by financial profit motives, increases it highly toxic but abundant supply of engineered foods via GMO’s and new generations of pesticides, hungry countries will have little choice but to increase yields via the same environmentally destructive practices. Surging numbers of human beings, forced off their sustainable relationship with land into their unsustainable relationship with urban centers, will become a highly disruptive force within the social unrest that is brewing throughout the world. A lifestyle that restores our balanced relationship with nature may be the path that we need to take in order to pull back from the brink.

  • Please let me know what you find on the water thing. We are possibly at risk.
    your friend,
    Dr. Doc

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