Who caused the world food crisis?
Tuesday, April 08, 2008
We are now by all accounts in the midst of a global food crisis: key grain prices were up 40% to 130% in the last year, people are protesting and hardship is mounting. But it could soon be worse. Governments and agencies all over the world are gearing up for a global "New Deal" on agriculture policy to solve the food crisis, which means the people who brought us the food crisis are the same people who now want to fix it.
The World Bank reports that prices of staples have jumped 80% since 2005. The price of rice hit a 19-year high last month, and wheat rose to a 28-year high, twice the average price of the last 25 years. Factors behind the surge in prices are varied, including bad weather in some regions, soaring demand from growing populations, and US$100-a-barrel oil.
But no factor gets more consistent credit for food price turmoil than the international biofuels stampede. Spurred on by what can only be described as massive subsidies and supporting regulations, farmers all over the planet are giving up on food production and shifting to fuel production.
The biggest biofuels boosters are in the United States, Europe and Canada. In the U.S., the leading Democratic candidates are campaigning on even more aid for ethanol. Canada's Conservative government, playing to the farm lobby and a coterie of rent-seeking corporations, has showered millions on the biofuels market. Regulations forcing consumers to convert to biofuel automobiles are in the works.
As the world food market is thrown into chaos, no Canadian politician has yet been asked to answer for Canada's role. Canada's agriculture policy is largely aimed at dodging trade bullets at the Doha Round of talks that could undermine Canada's trade-killing farm policies. The biofuels subsidies and mandates sink Canada's farm economy deeper into the arms of government policy.
Developing countries are also promoting biofuel programs. In the Philippines, where people are protesting soaring prices for rice, the government recently passed the Biofuels Act to mandate and subsidize biofuel production. Meantime, the Philippine government is considering using
policy powers to to take over rice warehouses to prevent merchants from stockpiling.
Warnings that ethanol programs, brought on by absurd national energy policies and myths about reducing the risk of climate change, could severely disturb food production and prices, have been issued for years. Now that the consequences have materialized, a new policy stampede is in the making.
It starts at the top, where the G8 -- home of the world's leading biofuels subsidies -- is being called on to do something. At the World Bank, president Robert B. Zoellick last week proposed a "New Deal for Global Food Policy." The bank estimates that 33 countries face potential social unrest because of the "acute hike in food and energy prices."
The United Nations, previously a big booster of biofuels, is now issuing warnings. The head of the UN panel on climate change, Rajendra Pachauri, said the other day that the world must take great care in developing biofuels. "Several questions have arisen on even the emissions implications of that route, and the fact that this has clearly raised corn prices," he said. "We should be very, very careful about coming up with biofuel solutions that have major impacts on production of food grains and may have an implication for overall food security."
Too late for that science alert from the UN. So now what is to be done? Agencies and governments all over the world are now busy dreaming up and imposing fix-it programs. Countries are banning exports of grains, imposing price controls and drafting new laws and regulations to counter the price surges.
There are rumours that the Doha trade talks are about to produce an agreement, or at least a meeting about a possible agreement. That might help, but not much. Farm production and food trade, even after some liberalization, would still be too much the domain of governments and the United Nations. Food is a trade issue before it is a food issue. In the case of biofuels, it became a climate-policy game that lost sight of food.