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TechnoratiThe Outcry Is Muted, But The Food Crisis Is Getting Worse
The financial debacle has drowned out coverage of food shortages. Where are the billion-dollar bailouts for the hungry?
Just a few months ago, we were being told that this is a period of stark, unprecedented and unfolding food crisis, with looming shortages and huge global imbalances between demand and supply. Everyone who matters - from officials in international organisations to leaders of rich and poor countries - warned us of the terrible social, political and nutritional consequences of doing nothing, of the millions who would go hungry and the riots that would occur if the imbalances persisted or increased.
But now the whole problem has disappeared from the international radar, relegated to the inside pages of newspapers and perfunctory afterthoughts in politicians' speeches. So what happened? Was it not such a problem, after all?
No, the "silent tsunami" has simply been overwhelmed in public awareness by the much noisier tsunami in the world of international finance, with the giant sucking sounds of possible bank collapses and enormous bail-outs grabbing all the attention. Yet the global food crisis is far from over, and is even likely to intensify in the near future.
One reason why many analysts decided that the food crisis may not be so intense is the global decline in crop prices that began sometime in the middle of last year. For about two years before that, commodity prices, including both food and non-food crops, had been increasing, and in the first few months of 2008 they soared. But in early June last year the prices of both oil and food crops fell, so that they are now lower than they were even a year ago.
When food prices were rising, there was much talk of the shifts in demand that were causing this trend. President Bush joined those who decided that this reflected the increased demand from China and India as their per capita incomes grew. This was a ludicrous argument because food consumption has actually declined in both countries. Both economies have shown even sharper declines in per capita food intake despite the continued presence of widespread hunger, because of increased income inequalities within these countries. In any case, that argument about more food demand from China and India quickly collapsed along with the fall in global prices. Now it is more than evident that the wild swings that have been observed in food and several commodity markets over this year have been the result of speculative forces, rather than any real changes in global demand and supply.
But despite this volatility and the recent price decline, the food crisis remains. And it does indeed reflect patterns of demand and supply - but not the ones that have been talked about. The basic problem now is not even one of absolute shortage so much as the inability to pay for food, and this problem will get worse for many developing countries and their poorer citizens.
Three problems now dominate the global food scenario. First, there is a crisis of cultivation, especially in the developing world. This is the result of two decades of policy neglect: falling public investment in agricultural research, extension and support; aggressive trade liberalisation that exposed southern farmers to heavily subsidised marketing by northern agribusinesses; financial liberalisation that reduced cultivators' access to credit and made them prey to speculative forces that also affected prices. As a result, cultivation costs have increased even in years when crop prices are falling, and cultivation is becoming unviable in many countries.
Second, this has been associated with a depression in wages in developing countries, which means that mass purchasing power did not increase even when the economies were growing. So demand for food has not gone up, simply because the poor do not have the incomes to pay for it.
Third, there has been an increasing concentration of firms operating in global agriculture, with a few large agribusinesses coming to dominate both input and output markets. These companies are also the ones who benefit from government subsidies promoting ethanol, which divert land meant for food to the paradoxically more energy-intensive production of fuel for cars. This concentration is reflected in recent food-price trends: while world prices have fallen sharply in the past four months, retail prices of food in most developing countries have not fallen.
Unfortunately, each of these negative processes is likely to intensify. The financial crisis will reduce the ability of developing country governments to increase much-needed investment in agriculture or enlarge the distribution of affordable food. It will adversely affect wage incomes, reducing purchasing power further. And it will add to pressures for concentration in industry, including agribusiness.
In the middle of last year, we had a global outcry about the perilous state of billions of people in developing countries whose governments could not afford to provide enough food for them and who could not themselves earn enough to buy food at prevailing prices. These problems are now worse, but the global outcry is all about the multinational banks that are under threat. And several multiples of the money that could not be found to provide food for the hungry are quickly being delivered to bail out irresponsible finance.
15 Comments so far
Show AllHumans take food for granted. Rich people have it and never have to worry about it, so its the lowest priority for them(like clean air or drinking water).
That farmers, here and in poor countries, only get a few pennies from the sale price of cereal or bread, as Brad Wilson tells us, is truly horrifying. It means that the monopolistic, politically connected middleman companies, like Cargill, are stealing from both ends, from farmers and consumers alike. They need to be broken up, and farmers and consumers need to band together in marketing and purchasing co-ops.
When farmers take back their end of the middleman corporate theft, they will be paid enough to keep producing. And when poor consumers take back their end, through lower prices, they will have enough to buy. Governments don't have to tell anyone when or what to plant. They just have to favor co-ops over monopolies.
It will take a lot of organizing and struggle to get there. A good example? The MST, or Landless Workers' Movement in Brazil. They seize corporate and plantation land which produces for the international market, and produce food for local consumption. Even though the allegedly "Workers" government is neutral at best, they have placed a million people back on the land, nonviolently, although plenty of violence has been used against them. (Google mst,brazil for 800,000 sites)
Yes, it is truly horrifying to see how much we pay to get so little and have so little go through to farmers.
Naturally there are word limits here, and many qualifications to generalizations like mine. So, more specifically, . . .
I don't know the levels of farm share in poor countries. If you grind your own wheat or have it ground in town, etc. if it lacks the advertising and packaging we have here, the markups are less and the impact of rises in farm prices are higher. (Doubling the cost of corn doesn't affect U.S. cornflakes much. It may have a far greater impact on Mexican tortillas. I understand, however, that tortilla flour rose in price before corn prices did.) Farm shares of bread and cornflakes here are among the smallest. Overall, in a U.S. "domestic" view, Stewart Smith found a 7.7% farm share, 19.3% input share, and 73.% output share in 1997, with a trend line reducing farm share to zero by 2020. Some items, of course, had farm shares higher than 7.7%.
Generally fruits and vegetables get larger shares than grains. USDA's Economic Research Service has numbers on this sort of thing, but doesn't factor out the input share, which is paid by the farmer out of sales (farm market prices). What they call "farm value share" would better be called "input value share," since the agribusiness input complex gets far more of it than the farmers. ERS shows farm share falling from 41% in 1950 to 19% in 2006, but Stewart Smith found that input share has grown considerably over the years, so that obscures how much farm share has fallen. See USDA-ERS "Marketing bill and farm value components of consumer expenditures for domestically produced farm food," http://www dot ers dot usda dot gov/Data/FarmToConsumer/Data/ marketingbilltable1 dot htm. On Stewart Smith's work in factoring out input share from farm share see "Sustainable agriculture and public policy," Maine Policy Review (1993). Volume 2, Number 1. http://denali dot asap dot um dot maine dot edu:16080/mcs/files/pdf_mpr/SmithS_V2N1 dot pdf. He hasn't updated it since 1997 (a big job).
I hope progressives will pick up on this info and start including it in their articles and books on food issues. Again, I also recommend reviewing the older sources for issues (Hightower, 1974 and Krebs, 1992). And give credit where credit is due.
HUNGER is the greatest sauce, bon apetit!
The crisis of cultivation is no doubt real but there is no analysis of its causes here. Governments in the developed and poor nations have colluded for a long time to destroy local, maybe inefficient, agricultural practices and bring in wheat or corn subsidized by US and European governments. So now government policy and actions should be the saving mechanism?
The financial crisis will reduce the ability of developing country governments to increase much-needed investment in agriculture or enlarge the distribution of affordable food. Huh? These governments should be responsible for growing food???
“As a result, cultivation costs have increased even in years when crop prices are falling, “
Reminds me of my Dad trying to make a buck on eggs. When prices were high he would get a bunch of day old chickens. Outputs overpriced, feed relatively cheap since there were not as many hens being fed. Four months later he and many like him would be losing money feeding expensive grain into those beaks for eggs which had dropped by half in price. “As a result, cultivation costs have increased even in years when crop prices are falling,.”, says the good professor. Looks familiar to me, and Dad didn't need a government policy to tell him it was time to send those birds to the packing house.
“Third ……… a few large agribusinesses coming to dominate both input and output markets.”
Now, it is possible that this sort of imperial reach will continue, but only as long as the USA continues able to dominate through its grotesque military power and the effects of its ‘reserve currency’ Ponzi scheme. There is no reason to conclude that either is certain to continue much longer. But even if some other great power replaced Washington, the weak or corrupt local government would doubtless kowtow to it in the same way.
“So demand for food has not gone up, simply because the poor do not have the incomes to pay for it.”
That fact may or may not have much to do with charity or agricultural policy – probably not much of either. But it is clear that most of the professor’s complaints are against government power. And incongruously, government is to provide his solutions.
"Were we directed from Washington when to sow and when to reap, we should soon want bread."
- Thomas Jefferson
Are those developing nations growing too much corn? If so, that's the reason the food crisis still stays. Growing corn consumes more water and to process it consumes fossil fuels the most. I gave up growing too much corn and minimized it and as a result of substituting them with various veggies, it's not so bad. Sure, I may not make quite as much but the food is great and I think that even my farm soil is healing. I suggest that more farmers try that for a change.
The question raised here is right on target and it's importance cannot be over estimated.
We must give, to feed these people. We must find ways.
I must comment, however.
1. Just as the "food crisis" has been neglected, so too the dumping crisis has been forgotten among progressives and the mainstream media generally. A few years back the devastation of LDCs by low, below cost, farm prices was the key issue. It was related to the rash of farmer suicides in India, for example, or cotton in Mali, or corn in Mexico where farmers abandoned their land and fled across the border. On this point, we must not try to fix the food crisis by again dumping on LDC farmers. They need fair trade, "living wage" prices. We must pay these prices to LDC farmers as we feed the hungry, so that we create jobs and economic development throughout LDCs (which average about 73% rural). So this is huge in the "depression" of wages in LDCs.
2. Paradoxically, then, the food crisis is also, to a certain extent, a boom for related LDC farmers. That is, the higher farm prices that are part of higher food prices, help stimulate economic multipliers in LDCs that, in time, could end most hunger. (But farm prices have already fallen back to dumping levels.) Dumping was devastating, especially 1981-2006. That's more than a quarter century! As a result of this and related policies, (an often other factors,) many people were so poor in these countries that couldn't even afford dumped (below cost) food. That's the dilemma. Basically the United States chose to lose money on farm exports for a quarter century to be "competitive" (to bankrupt foreign farmers, while subsidizing foreign commodity buyers, as we paid our own farmers subsidies that partially compensated them for massive losses, but mainly, of course, to subsidize our own commodity buyers as well, the agribusiness output complex and giant animal factories and feedlots). It's hard to afford food aid when we lose money on farm exports.
3. Ethanol, to the extent it raised farm market prices, helped end dumping. Yes, the output complex is primarily to blame. But the quote: "These companies are also the ones who benefit from government subsidies promoting ethanol" is misleading and false. Yes they benefit from the commodity subsidy smokescreen (and other direct ethanol subsidies), but subsidies are not what they benefit from economically. See #4.
4. I quote the article: "aggressive trade liberalisation" ..."exposed southern farmers to heavily subsidised marketing by northern agribusinesses." Meaning dumping, I assume. Yes, liberalisation. Yes, farmers (and exporters for years) were heavily subsidized. But don't misunderstand. Subsidies are corelated with low prices oversupply and dumping, but they do not cause it. Don't listen to the free traders at WTO on this, they're blowing a smokescreen to protect the agribusiness output complex. Yes, subsidies are terribly unfair. U.S. and E.U. farmers should go broke, not be subsidized, to be fair under their policies to have low market prices. But them going broke doesn't economically cause higher market prices or reduced supply. The ending of the traditional farm policies of the new deal, (after ongoing reductions 1953-1995) in 1996 did that, the lowering and eliminating of price floors and supply management in the U.S. (and EU?). The ending of price ceilings and grain reserves along the way set us up for price spikes. Behind all of this is a lack of "price responsiveness" on both supply and demand sides in farm commodity markets. Prices are usually low, for more than 100 years, with a few spikes now and then. Yes you can protest subsidies at WTO, (but not the lack of price responsiveness or lack of price floors), but eliminating subsidies doesn't raise prices, and sometimes lowers them and increases production, (ie. Daryl E. Ray's finding on corn). The National Family Farm Coalition and the Institute for Agriculture and Trade Policy understand these issues and are working on them internationally (see Global Farmer and La Via Campesina). Obama could restore this way of profiting on exports and use part of profits to feed the hungry, buying from LDC farmers.
5. The article fails to mention a "fair trade," "living wage" standard for farm prices. Actually, it seems to suggest dumping as a standard, the farm prices of a few years ago. This is unacceptable. One traditional standard of a fair trade, living wage price is 100% of parity. U.S. farmers had 100% of parity or more 1942-1952, and there were no government costs involved, as interest paid by farmers on support loans made for a net gain. But look back at farm prices in September of 2005 (http://www dot nfu dot org/documents/nfunews/2005/1105_nfunews_wb dot pdf, p. 2, "Farm Price Barometer"). Corn 25%, Rice 26%, Grain Sorghum 27%: in need of quadrupling. Wheat 32%, soybeans 32: , in need of tripling. Note above that chart that the farmer only got 5¢ from a box of cereal and 7¢ from a loaf of bread in the U.S. And those amounts likely include the amount that goes through to the input complex, so farmers get only 1.5-2 cents. Actually it should be called input share, not producer share. For hunger here, the lion's share of costs come from the output complex. In 2005 the farm share of hunger was below zero. That is, farmers were subsidizing food taking a loss as consumers paid a few pennies less. And that includes LDC farmers. Consumers should take the log out of their eyes (blaming farmers) and get after those who get, sometimes, 99% of the cost of corn flakes or bread.
Now, reread my first 3 sentences.
If you think that civil rights, anti-war, or immigrant protests were something, just wait till food riots errupt because there is nothing to stock on the store shelves at any price. There will be hell to pay. Militaries don't work too well with no food avaiable either.
Poet
(no relation, by the way, to the largest--and privately held--ethanol producer!)
This article hits the nail on the head.........people don't have money to buy food. I am a farmer, and there is no way I can stay in business giving away food.
The reason for the price spike the past 2 years is quit simple. IT was no longer at alllllll profitable to grow food at the price being offered, so the growth of food diminished to the point that supply and demand equalized again.
For those of you who want free food, it just isn't going to happen.
People formed governments to save up food during the seven fat years and to feed the people during the seven lean years. That's why we vote and pay taxes. Something is badly broken.
Is it better to grow food to feed a hungry child who will grow up to feed you or
to grow food to feed a hungry Hummer that will only rust away? Feed the child.
And yet the child is hungry, in a long perspective, because of too much food, oversupply with low, below cost prices, that put LDC farmers into poverty, which impacts LDC economies (73% rural). So they lack jobs and incomes and can't afford food, even though we've never run out of food but had ongoing surpluses. They're hungry even though (ie. because of) below cost farm prices. And ethanol, in spite of it's limitations and harms, to the extent it raises farm prices, contributed to the ending of dumping and an improvement in farm economies worldwide. Again, we must not dump on LDC farmers as a solution to the food crisis, but pay them fair trade, living wage prices, to feed all of those children.
The outrage over low farm prices here is fully justified.
However, it is not true that lack of profitability reduced the supply of food. The prices of major farm commodities were below full costs (USDA-ERS, "Commodity Costs and Returns: U.S. and Regional Cost and Return Data") for a quarter century and supply increased. All over the world farmers are working for a few dollars per day.
On these issues see Daryl E. Ray, "Rethinking US Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide," http://www dot agpolicy dot org/blueprint dot html.
VeraSun, the largest publicly traded producer of ethanol in the United States, filed for Chapter 11 bankruptcy in late October, 2008. (The largest domestic ethanol producer is POET and it is privately held.)
Many experts in the industry think that even after reorganization VeraSun can not be made solvent. In a heads VeraSun wins, tails farmers lose ruling the bankruptcy judge has ruled that VeraSun has until ten business days before a corn delivery contract comes due to state if they are going to honor the contract or cancel the contract.
Since current corn prices are significantly lower that what VeraSun contracted for the delivery of corn VeraSun is canceling all contracts. Farmers who had contracted to sell corn to VeraSun at prices as high as seven dollars a bushel are now forced to accept the cash price around $4.50 a bushel. If corn prices should go back up above the contract price VeraSun can chose to honor the contracted price and force farmers to sell at prices lower than the current cash price at some future point in time.
With crude oil selling for$40.00 to $45.00 a barrel and corn at $4.50 a bushel the once very profitable ethanol industry is in real trouble. Also the Federal subsidy on ethanol is a $.46 cent per gallon tax CREDIT. If ethanol is not profitable to produce there are no profits to tax; hence no subsidy.
Why, given the dire financial position of VeraSun, the judge would make a ruling that screws over thousands of farmers is a freakin mystery to me. It would have been far better to give the farmers the choice to void the contracts so they would be free to market their grain as they saw fit rather than let VeraSun hold them to contracts that they, in all probability, will never honor.
The Glue That Holds Chaos Together
The real problem is how food production is controlled and regulated, and how the media is paid off to not cover the issues.
A-effing-men.