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No Nonsense

Feeding the hungry first

17 April 2008
• EDITORIAL
Abdullah A. Dewan
WORLD Bank President Robert Zoellick held up a loaf of bread as he spoke during a news conference in Washington on April 10. He said: "In Bangladesh, a two-kilogram bag of rice now consumes about half of the daily income of a poor family. The price of a loaf of bread has more than doubled. Poor people in Yemen are now spending more than a quarter of their incomes just on bread." Right when the global economy is fraught with the US subprime mortgage crisis, plummeting dollar, and crude oil prices hovering over $100 a barrel, Josette Sheeran of the World Food Program (WFP) forewarned about the need to start food rationing. We have already seen that in Pakistan, Egypt, and Haiti soaring food prices have caused unrest. Soaring food prices are already having adverse political ramifications around the world. For example, Pakistan, Egypt, and Bangladesh have introduced food ration cards, a desperate and crisis-driven move to circumvent the hunger and famine like scenario. The Indian government is sticking to maintaining its food price subsidy program as prices soar. China and Russia are resorting to price controls, and Argentina and Vietnam are restricting food exports to the world market through rationing and imposing higher export taxes. The problem has been brewing for some time now. Conversion of food grains to the production of biofuels as a way of achieving energy independence by US and EU countries is the leading cause. In the US, last year's wheat harvest was 10.5 billion bushels, the third-largest crop ever. Unfortunately, instead of feeding cattle or people, an increasing slice of that bumper crop is being transformed into fuel for cars. "The roughly 5 billion gallons of ethanol made in 2006 by 112 U.S. plants consumed nearly one-fifth of the corn crop. If all the scores of factories under construction or planned go into operation, fuel will gobble up no less than half of the entire corn harvest by 2008." (Business Week). Corn is caught in a tug-of-war between ethanol plants and food. Massive expansion of biofuels is supported by both sides of the political aisle in the US congress. In his January 23, 2007 State of the Union address, President George Bush called for 35 billion gallons of renewable fuels per year within 10 yearsenough to replace 15% of gasoline burned in American cars and trucks. Congress is considering measures that would require 60 billion gallons by 2030. This isn't just a U.S. phenomenon. Europe is requiring that 5.75% of diesel fuel come from plants by 2010, while Japan and other nations have lined up contracts to buy biofuels to reduce their greenhouse gas emissions. Nestle, the world's biggest food and beverage company, warned on March 23 that increased production of biofuels from wheat and corn is putting world food supplies in peril. A confluence of many other factors has also worsened the situation:
  • Worldwide population increase;
  • Rising energy prices;
  • Emergent economies like India and China are stepping up the ladder of prosperity and consuming more meat protein, which takes eight times as much land to produce as vegetable protein;
  • Short-sighted government subsidies for biofuels are depleting the amount of crops available for feeding humans;
  • Prolonged drought in Australia shrinking supply;
  • Market speculation and hoarding for higher profits;
  • Government manipulation of policies and prices and (for example, US subsidies for biofuels, EU's restrictions on production of genetically modified organisms etc).
  • Globalisation and increasing economic integration. This, according to UNDP, has led to the rich getting richer and the poor getting poorer;
  • Depletion of food stocks. Joseph Glauber of the U.S. Department of Agriculture (USDA) noted in February that world grain reserves were at their lowest levels since 1960.
The impacts of these factors have translated into mounting food prices everywhere. Some developing countries are seeing food prices increase by as much as 80 percent. These abnormally high prices caused WFP's budget to increase by millions of dollars a week, and a steep decline in food procurement and contribution. Princeton economist Paul Krugman in The New York Times (April 11) suggested that the first thing was getting aid to "people in distress." The second was halting the push for biofuelsthe "subsidised conversion of crops into fuel was supposed to promote energy independence and help limit global warming," but this was clearly a big mistake. "You might put it this way: people are starving in Africa so that American politicians can court votes in farm states." Other suggestions include:
  • Increase contribution to WFP funds to procure enough food to save the world's poor from dying of hunger;
  • Augment production by bringing more acreage under the plough in countries like Brazil;
  • Genetically modified organisms, which can survive drought and saltwater flooding, and need less fertiliser, can be tailored to grow on marginal land. EU countries should lift restrictions on genetically modified corps;
  • Cutting waste: A November 2004 study by the University of Arizona in Tucson revealed that 40 to 50 percent of all food ready for harvest in the US find their way to waste. The assessment is that the staggering loss, in addition to feeding the poor, could save US consumers and manufacturers tens of billions of dollars each year;
  • Letting the free market adjust to the supply-demand imbalances.
Improving market regulations by combating market manipulation by hoarders and speculators for higher profits is of paramount importance. The market would then adjust, spurring more planting and more production in response to higher prices. In fact, in February, USDA reported that U.S. farmers were scaling back their cotton and sugar production in response to higher prices for wheat, corn and soy. Based on farmers' expansion of planting by 6 percent, wheat production has been projected to soar 13 percent to 2.33 billion bushels. Canadian Renewable Fuels Association assures that extensive production of ethanol from grain will not detract from Canada's ability to feed its own citizens and supply large quantities of high-quality grains to export markets. With crude oil prices soaring, the world has no choice but to move smoothly to biofuels through increased farm acreage, higher yields, and new crops and technologies. US farmers have already planned to seed 10 million more acres of corn this spring. Some even worry about overshooting demand. "There's an old saying that goes: 'Farmers will see a hole in supply and put a pile on top of it,'" jokes Illinois farmer Steve Pitstick, who's shifting most of his soybean field to corn (BusinessWeek).
Dr. Abdullah A. Dewan is Professor of Economics at Eastern Michigan University.
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