feeding the world

President Bush in an interactive business session had argued that while prosperity in countries like India is good, it triggers increased demand for better nutrition, which in turn leads to higher food prices.The comments came close on the heels of US Secretary of State Condoleezza Rice's controversial statement that 'apparent improvement' in the diets of people in India and China is among the causes of the current global food crisis.

The Truth

Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report

The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil. Senior development sources believe the report, completed in April, has not been published to avoid embarrassing President George Bush. The report confirms a British finding that t the rush to develop biofuels has played a "significant" role in the dramatic rise in global food prices. And an estimates their impact as 20-30% rise .

"Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises," said Robert Bailey, policy adviser at Oxfam.

Production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

"It is clear that some biofuels have huge impacts on food prices," said Dr David King, the government's former chief scientific adviser.

However , the Indian apologists for capitalism should not feel too smug .

More than 1,300,000 tonnes of food grain rotted in storage stock-piles over the last decade in India according to a recent report .

"This amount of food grain could have fed over 10 million people in a year," said activist Dev Ashish Bhattacharya.

The REAL price of food

About 450,000 Cambodian students will become the latest victims of soaring global food prices. But by the end of the month, they will no longer get free breakfast from the U.N. World Food Program. Five local suppliers have defaulted on contracts to provide rice because they can get a higher price elsewhere, program officials say.

In Burundi, Kenya and Zambia, hundreds of thousands of people face cuts in food rations after June.
In Iraq, 500,000 recipients will likely lose food aid.
In Yemen, it's 320,000 households, including children and the sick.

Mercy Corps will likely distribute 20 percent less food to Iraqi refugees in Syria and serve 12 percent fewer Colombian families fleeing violence in the countryside.
World Vision may stop helping 1.5 million people — nearly a quarter of the number it serves — because of rising food prices . At least a third are children.

can't pay , can't eat

GRAIN , an international non-governmental organisation (NGO) which promotes the sustainable management and use of agricultural biodiversity based on people's control over genetic resources and local knowledge reports on the food price crisis .

Farmers across the world produced a record 2.3 billion tons of grain in 2007, up 4% on the previous year. Since 1961 the world’s cereal output has tripled, while the population has doubled. Stocks are at their lowest level in 30 years, it’s true,but the bottom line is that there is enough food produced in the world to feed the population. The problem is that it doesn’t get to all of those who need it. Less than half of the world’s grain production is directly eaten by people. Most goes into animal feed and, increasingly, biofuels – massive inflexible industrial chains.

The price of wheat has gone up by 130% over the last year. Rice has doubled in price in Asia in the first three months of 2008 alone,and just last week it hit record highs on the Chicago futures market.For most of 2007 the spiralling cost of cooking oil, fruit and vegetables, as well as of dairy and meat, led to a fall in the consumption of these items.The UN World Food Programme estimates that recent price hikes have meant that an additional 100 million people can no longer afford to eat adequately

We have allowed food to be transformed from something that nourishes people and provides them with secure livelihoods into a commodity for speculation and bargaining. The perverse logic of this system has come to a head. Today it is staring us in the face that this system puts the profits of investors before the food needs of people.

With wheat, export bans or restrictions in Kazakhstan, Russia, Ukraine and Argentina mean that a third of the global market has now been closed off. The situation with rice is even worse: China, Indonesia, Vietnam, Egypt, India and Cambodia have banned or severely restricted exports, leaving just a few sources of export supply, mainly Thailand and the US. Countries like Bangladesh can’t buy the rice they need now because the prices are so high. For years the World Bank and the IMF have told countries that a liberalised market would provide the most efficient system for producing and distributing food, yet today the world’s poorest countries are forced into an intense bidding war against speculators and traders, who are having a field day. Hedge funds and other sources of hot money are pouring billions of dollars into commodities to escape sliding stock markets and the credit crunch, putting food stocks further out of poor people’s reach. According to some estimates, investment funds now control 50–60% of the wheat traded on the world’s biggest commodity markets. One firm calculates that the amount of speculative money in commodities futures – markets where investors do not buy or sell a physical commodity, like rice or wheat, but merely bet on price movements – has ballooned from US$5 billion in 2000 to US$175 billion to 2007.

The truth about who profits and who loses from our global food system has never been more obvious. Take the most basic element of food production: soil. The industrial food system is a chemical-fertiliser junkie. It needs more and more of the stuff just to keep alive, eroding soils and their potential to support crop yields in the process. In the current context of tight food supplies, the small clique of corporations that control the world’s fertiliser market can charge what they want – and that’s exactly what they are doing. Profits at Cargill’s Mosaic Corporation, which controls much of the world’s potash and phosphate supply, more than doubled last year. The world’s largest potash producer, Canada’s Potash Corp, made more than US$1 billion in profit, up more than 70% from 2006. Panicking now about future supplies, governments are becoming desperate to boost their harvests, giving these corporations additional leverage. In April 2008, the joint offshore trading arm for Mosaic and Potash hiked the price of its potash by 40% for buyers from Southeast Asia and by 85% for those from Latin American. India had to pay 130% more than last year, and China 227% more.

While big money is being made from fertilisers, it is just a sideline for Cargill. Its biggest profits come from global trading in agricultural commodities, which, together with a few other big traders, it pretty much monopolises. On 14 April 2008, Cargill announced that its profits from commodity trading for the first quarter of 2008 were 86% higher than the same period in 2007. “Demand for food in developing economies and for energy worldwide is boosting demand for agricultural goods, at the same time that investment monies have streamed into commodity markets,” said Greg Page, Cargill’s chairman and chief executive officer. “Prices are setting new highs and markets are extraordinarily volatile. In this environment, Cargill’s team has done an exceptional job measuring and assessing price risk, and managing the large volume of grains, oilseeds and other commodities moving through our supply chains for customers globally.”

Indeed, all of the big grain traders are making record profits. Bunge, another big food trader, saw its profits of the last fiscal quarter of 2007 increase by US$245 million, or 77%, compared with the same period of the previous year. The 2007 profits registered by ADM, the second largest grain trader in the world, rose by 65% to a record US$2.2 billion. Thailand’s Charoen Pokphand Foods, a major player in Asia, is forecasting revenue growth of 237% this year.

The world’s big food processors, some of which are commodity traders themselves, are also cashing in. Nestlé’s global sales grew 7% last year. “We saw this coming, so we hedged by forward-buying raw materials”, says François-Xavier Perroud, Nestlé’s spokesman. UK supermarket Tesco reports profits up 12.3% from last year, a record rise. Other major retailers, such as France’s Carrefour and the US’s Wal-Mart, say that food sales are the main factor sustaining their profit increases. Wal-Mart’s Mexican division, Wal-Mex, which handles a third of overall food sales in Mexico, reported an 11% increase in profits for the first quarter of 2008.(At the same time Mexicans are demonstrating in the streets because they can no longer afford to make tortillas)

It seems that nearly every corporate player in the global food chain is making a killing from the food crisis. The seed and agrochemical companies are doing well too. Monsanto, the world’s largest seed company, reported a 44% increase in overall profits in 2007. DuPont, the second-largest, said that its 2007 profits from seeds increased by 19%, while Syngenta, the top pesticide manufacturer and third-largest company for seeds, saw profits rise 28% in the first quarter of 2008.

Such record profits have nothing to do with any new value that these corporations are producing and they are not one-off windfalls from a sudden shift in supply and demand. Instead, they are a reflection of the extreme power that these middlemen have accrued through the globalisation of the food system. Intimately involved with the shaping of the trade rules that govern today’s food system and tightly in control of markets and the ever more complex financial systems through which global trade operates, these companies are in perfect position to turn food scarcity into immense profits. People have to eat, whatever the cost.

Food - A few quotes

A new face of hunger is emerging: even where food is available on the shelves, there are now more and more people who simply cannot afford it,” said WFP Executive Director Josette Sheeran.

“Resource scarcity is a long-term problem, and is likely to get worse with climate change - which will see reduced productivity, especially in countries where resources such as land, food, income, are ‘captured’ by an elite, and/or where inequalities are particularly bad,” according to social historian Diana Cammack, with the UK Overseas Development Institute.
The riots are about access to food, she points out, “where the poor have a reduced chance compared to the rich of getting to the food that is in the country … famines are often linked not simply to scarcity but to the cost of food and thus access to it”.

"Governments don't generally worry overmuch for the fate of poor people most affected by dearth - until the protests mount," said John Walton, who teaches sociology at the University of California, and is co-author of Free Trade and Food Riots.

Marc Cohen, research fellow at the US-based International Food Policy Research Institute (IFPRI). “Governments have tended to provide them [urban residents] with subsidies to prevent them from becoming discontent.” Subsidies are not a sustainable solution, according to Cohen. “A case in point is the urban population in Egypt, which has enjoyed subsidies for many decades. Should subsidies be removed, things can get very violent - but subsidies are increasingly unaffordable.”
Matein Khalid, an analyst, wrote in the Dubai-based newspaper, Khaleej Times, that bread has been subsidised by the rulers of Egypt since Pharaonic times. “… food price surges are more of a threat to regime stability than Dr Zawahiri’s Al Qaeda terrorists. Bread queues turn violent, a recurrent theme in Egyptian history …”

Now we read of clashes breaking out between police and protesters in the Nile Delta textile town of Mahalla el-Kubra for the second straight day on Monday and the protesters set fire to several shops .Clashes started on Sunday when the day shift ended at a giant textile mill where the workers had planned to go on strike for higher wages and protest against high prices.

In Haiti deaths of four people in two days of rioting last week over rising food prices.

In addition to Haiti and Egypt, Burkina Faso, Cameroon, Indonesia, Cote d’Ivoire, Mauritania, Mozambique and Senegal have also experienced unrest in recent weeks related to soaring food and fuel prices.

Some 20 countries -- including Russia, Kazakhstan, and China -- have introduced price controls on staple items such as bread, milk, and cooking oil, while many countries have introduced export curbs.

"There has never been an acute shortage of food in India, not even during the infamous famine in Bengal in 1943 in which more than 1.5 million people are estimated to have died of starvation. The problem then - and now - is entitlement or access to food at affordable prices. " explains Paranjoy Guha Thakurta Indian economy analyst

Rice prices rises

I have previous linked to stories of the food crisis that is engulfing the world here and also at the African blog Socialist Banner , but as it is indeed a world wide phenonomen . India is restricting the export of rice .

But in Bangladesh the rising prices are now effecting those of the "middle classes" .

It is reported , Government-run outlets selling subsidised rice and other basic commodities are now being besieged by members of the middle class as food prices continue to rise.
In Dhaka people are queing up for hours a day in the midday sun to buy 5kg of rice per head under the government’s Open Market Sale scheme - established whenever a potential food crisis is perceived. The authorities have opened over 2,500 such outlets nationwide, with an additional 3,800 set to open in the coming days. Other food essentials, including pulses, flour, oil, onions and sugar are also rising after remaining relatively stable for the last two weeks, increasing by nearly 50 percent in the last six months, with the prices of chickens, eggs and fish also going up.

“Middle class people can neither stand in the long queues to buy cheap rice and pulses, nor have the money to buy those from the market. We are the sufferers of the present price hikes,” Mansur Ali, a senior clerk in a government office “I am the lone earner in my family. My two children are very young and my wife is pregnant with the third. She needs extra nutrition, but I can’t even buy food for the family,” he said." No one in my family has ever stood in an OMS queue. These are meant for the poor,” said Ali, whose 10-year-old son waited for four hours in such a queue to buy rice.

Earning just under US$100 a month, Ali now supplements his income by providing private tutoring in the evenings, earning another $7.5 a month to cope. However, that too may not be enough. According to the Bangladesh Institute of Development Studies , purchasing power declined by around four percent due to higher inflation in 2007, propelled by 16 percent food inflation in December alone - and this in a country where about 40 percent of families at or just below the poverty line of $1 a day are already spending around 70 percent of their income on food

The Future is Famine , Part 2

Further to this earlier post

"This is the new face of hunger," Sheeran , the head of the UN's World Food Programme (WFP).said. "There is food on shelves but people are priced out of the market. There is vulnerability in urban areas we have not seen before. There are food riots in countries where we have not seen them before."

The United Nations warned yesterday that it no longer has enough money to keep global malnutrition at bay this year in the face of a dramatic upward surge in world commodity prices . the WFP feeds 73 million people in 78 countries, less than a 10th of the total number of the world's undernourished. But with annual food price increases around the world of up to 40% and dramatic hikes in fuel costs, its budget is no longer enough even to maintain current food deliveries. The shortfall is all the more worrying as it comes at a time when populations, many in urban areas, who had thought themselves secure in their food supply are now unable to afford basic foodstuffs. Afghanistan has recently added an extra 2.5 million people to the number it says are at risk of malnutrition.

The increases in the global price of basic foods is being caused by a "perfect storm" of factors: a rise in demand for animal feed from increasingly prosperous populations in India and China, the use of more land and agricultural produce for biofuels, and climate change.
Much of the blame has been put on the transfer of land and grains to the production of biofuel. But its impact has been outweighed by the sharp growth in demand from a new middle class in China and India for meat and other foods, which were previously viewed as luxuries.
"The fundamental cause is high income growth," said Joachim von Braun, the head of the International Food Policy Research Institute. "I estimate this is half the story. The biofuels is another 30%. Then there are weather-induced erratic changes which caused irritation in world food markets. These things have eaten into world levels of grain storage.The lower the reserves, the more nervous the markets become, and the increased volatility is particularly detrimental to the poor who have small assets."
The impact of climate change will amplify that already dangerous volatility. Record flooding in west Africa, a prolonged drought in Australia and unusually severe snowstorms in China have all had an impact on food production.
"The climate change factor is so far small but it is bound to get bigger," Von Braun said. "That is the long-term worry and the markets are trying to internalise it."

A growing taste for meat and dairy in newly prosperous parts of the world is one important factor. When it takes 10 kilos of feed to make one of beef, farming animals swallows land that might otherwise be feeding people. But the new middle classes of Beijing and Shanghai will not easily be persuaded that eating meat is a bad idea, especially if the persuasion comes from western countries that are far from vegan. Meanwhile, subsidies to biofuels, particularly in the US, are distorting global farming. The 60m tonnes of American maize being burned each year represents more than twice the UK's entire cereal crop. The world wants cheaper food, and it wants more food - without the environmental consequences. The overriding priority must be ensuring that the hungry are not made even hungrier - but with the capitalist system it will be the drive for profits that takes priority .

The impact has been felt around the world. Food riots have broken out in Morocco, Yemen, Mexico, Guinea, Mauritania, Senegal and Uzbekistan. Pakistan has reintroduced rationing for the first time in two decades. Russia has frozen the price of milk, bread, eggs and cooking oil for six months. Thailand is also planning a freeze on food staples. After protests around Indonesia, Jakarta has increased public food subsidies. India has banned the export of rice except the high-quality basmati variety.

"For us, the main concern is for the poorest countries and the net food buyers," said Frederic Mousseau, a humanitarian policy adviser at Oxfam. "For the poorest populations, 50%-80% of income goes on food purchases. We are concerned now about an immediate increase in malnutrition in these countries, and the landless, the farmworkers there, all those who are living on the edge."

1 United States The last time America's grain silos were so empty was in the early seventies, when the Soviet Union bought much of the harvest. Washington is telling the World Food Programme it is facing a 40% increase in food commodity prices compared with last year, and higher fuel bills to transport it, so the US, the biggest single food aid contributor, will radically cut the amount it gives away.
2 Morocco 34 people jailed this month for taking part in riots over food prices.
3 Egypt The world's largest importer of wheat has been hard hit by the global price rises, and most of the increase will be absorbed in increased subsidies. The government has also had to relax the rules on who is eligible for food aid, adding an extra 10.5 million people.
4 Eritrea It could be one of the states hardest hit in Africa because of its reliance on imports. The price rises will hit urban populations not previously thought vulnerable to a lack of food.
5 Zimbabwe With annual inflation of 100,000% and unemployment at 80%, price increases on staples can only worsen the severe food shortages.
6 Yemen Prices of bread and other staples have nearly doubled in the past four months, sparking riots in which at least a dozen people were killed.
7 Russia The government struck a deal with producers last year to freeze the price of milk, eggs, vegetable oil, bread and kefir (a fermented milk drink). The freeze was due to last until the end of January but was extended for another three months.
8 Afghanistan President Hamid Karzai has asked the WFP to feed an extra 2.5 million people, who are now in danger of malnutrition as a result of a harsh winter and the effect of high world prices in a country that is heavily dependent on imports.
9 Pakistan President Pervez Musharraf announced this month that Pakistan would be going back to ration cards for the first time since the 1980s, after the sharp increase in the price of staples. These will help the poor (nearly half the population) buy subsidised flour, wheat, sugar, pulses and cooking fat from state-owned outlets.
10 India The government will spend 250bn rupees on food security. India is the world's second biggest wheat producer but bought 5.5m tonnes in 2006, and 1.8m tonnes last year, driving up world prices. It has banned the export of all forms of rice other than luxury basmati.
11 China Unusually severe blizzards have dramatically cut agricultural production and sent prices for food staples soaring. The overall food inflation rate is 18.2%. The cost of pork has increased by more than half. The cost of food was rising fast even before the bad weather moved in, as an increasingly prosperous population began to demand as staples agricultural products previously seen as luxuries. The government has increased taxes and imposed quotas on food exports, while removing duties on food imports.
12 Thailand The government is planning to freeze prices of rice, cooking oil and noodles.
13 Malaysia and the Philippines Malaysia is planning strategic stockpiles of the country's staples. Meanwhile the Philippines has made an unusual plea to Vietnam to guarantee its rice supplies. Imports were previously left to the global market.
14 Indonesia Food price rises have triggered protests and the government has had to increase its food subsidies by over a third to contain public anger.

A paper by the International Fund for Agricultural Development (IFAD) commented, "Some nutrition studies show that the number of food-insecure people in the world would rise by more than 16 million for every percentage increase in the real prices of staple foods, meaning that 1.2 billion people could be chronically hungry by 2025; 600 million more than previously predicted."

Mud Pies For Food

With food prices rising, Haiti's poorest can't afford even a daily plate of rice, and some take desperate measures to fill their bellies.

Charlene, 16 , with a 1-month-old son, has come to rely on a traditional Haitian remedy for hunger pangs: cookies made of dried yellow dirt from the country's central plateau.
Cookies made of dirt, salt and vegetable shortening have become a regular meal for her, according to this report .

At the market , two cups of rice now sell for 60 cents, up 10 cents from December and 50 percent from a year ago. Beans, condensed milk and fruit have gone up at a similar rate, and even the price of the edible clay has risen over the past year by almost $1.50. Dirt to make 100 cookies now costs $5, the cookie makers say.
Still, at about 5 cents apiece, the cookies are a bargain compared to food staples. Merchants truck the dirt from the central town of Hinche to the La Saline market, women buy the dirt, then process it into mud cookies , they strain out rocks and clumps on a sheet, and stir in shortening and salt. Then they pat the mixture into mud cookies and leave them to dry under the scorching sun. The finished cookies are carried in buckets to markets or sold on the streets.

"I'm hoping one day I'll have enough food to eat, so I can stop eating these," she said. "I know it's not good for me." said Charlene .

About 80 percent of people in Haiti live on less than $2 a day and a tiny elite controls the economy.

Food Inflation and Food Shortages

According to Sue Fisher, an economics analyst at the Meat and Livestock Commission world food prices, as measured by the UN's Food and Agricultural Organisation, rose by at least one-third in the first nine months of 2007.

Last season resulted in a fall in production of wheat and maize in the UK, Canada and Australia by as much as 60 million tonnes. World stocks are now at the lowest level for almost 40 years . U.S. wheat stocks in 2008 will hit a 60-year low and world barley stocks a 42-year low. Global oilseed stocks are projected down 22 percent in one year.

In 2007, Chicago Board of Trade prices -- world benchmarks for wheat, corn, rice and soybeans -- soared despite big U.S. harvests. Wheat prices rose 90 percent, soybeans 80 percent, corn 20 percent. U.S. prices are key because America is still the world's breadbasket, the single biggest grain exporter.

"The fact we're having higher commodity prices here will have an impact around the world on food prices," Lapp , president of consultancy Advanced Economic Solutions , said. "We've only started to see the impact of higher costs translate into higher consumer prices,"

"Things are really getting tight now and the importing countries are getting worried and some of them may even be panicking a bit because they need to import grain and are not sure if there will be enough," Lester Brown , president of the Earth Policy Institute and author of the 1995 book, "Who Will Feed China?", said, noting that world grain stocks have fallen in seven of the last eight years. "There is going to be continued upward pressure on prices. One of my concerns is that this will lead to social unrest and growing political instability in the low- and middle-income countries that import a large share of their grain supply."

The Food and Agriculture Organization in Rome on December 17 said 37 countries are facing food crises and called for aid.
"High international cereal prices have already sparked food riots in several countries," the FAO said.

FAO chief Jacques Diouf pointed to political unrest over food markets in countries like Yemen and Senegal."There is a very serious risk that there will be less people able to get access to food because of prices," Diouf said.

The reasons apart from bad weather and the suspected climate change , income growth and population growth in China and India -- they are westernizing their diets . Moving up the food chain to meat has a built-in accelerator for draining grain supplies . Chinese consumers ate an average of 20 kilograms (44 lb) of meat a year in 1985, but this shot up to 50 kg in 2007. This reduces the amount of grain available because one kg of beef can take as much as eight kg of grain to produce.

And then there is the effect of the new darling of farmers, politicians and agribusiness: biofuels.

About 24 percent of a record U.S. corn crop in 2007 will be diverted to ethanol , a percentage that could shoot well past 30 percent within two years after President George W. Bush signed the new U.S. energy bill into law on December 19.

"If we convert our entire grain harvest into fuel for cars, it may satisfy 16 percent of our total automotive fuel needs. So it's not really a solution," Brown said. At a time when more than 800 million people go to bed hungry every night, history will judge the U.S. energy bill as "one of the great tragedies," he added.

So importer and biofuels demand look set to continue to shrink world grain stocks, even without major weather or climate shocks. It all adds up to rising U.S. food price inflation with knock-on effects for the world.

A Very Happy New Year