President Bush’s remark stating that the developing economies of India and China with their burgeoning middle class and greater demand for food are the primary cause of the rise in food prices has fueled much debate. In light of the ongoing food grain crisis and the reasons underlying it, his remark seems to be absolutely immature. The pent up demand in these economies is just one of the pieces of the puzzle. There are several complex factors at work which need to be given immediate attention and addressed in due course.
The world population is growing constantly while the land available for cultivation is declining at the same pace. Climatic changes and unfavorable weather conditions like the droughts in Australia, floods in South Asia and pest infestation in Vietnam have adversely affected the harvests, especially that of rice. The world’s grain stocks are at their lowest ever in 30 years. Thus, decreasing supplies have led to adoption of protective measures by many countries. Export bans, and price support for farmers in countries like China, India and Vietnam have increased food prices and distorted price signals. Moreover infrastructural bottlenecks and government interventions in the form of subsidies have led to inefficient use of resources. Speculation in the food-grain market has also contributed to increased input prices.
However, the key factor behind the increase of food prices is the rising oil price which touched $126 a barrel in May 2008. Oil is a critical input in agriculture and increase in its price has led to higher prices for fertilizers and electricity. According to the World Bank, fertilizer prices have risen by 150 per cent in the past five years. Moreover, transportation costs have also shot up.
Thus the escalation of food prices across the world have led to 18 per cent inflation in China, 13 per cent in Indonesia and Pakistan, and 10 per cent or more in Latin America, Russia and India (statistics are in accordance to the UN Food and Agricultural Organization (FAO).) Wheat has doubled in price, maize is nearly 50 per cent higher than it was a year ago and rice is 20 per cent more expensive, states the UN.
However, much of the food price hike is believed to have been caused by the increasing demand for biofuel. In the year 2007, 20 per cent of the entire maize crop in the US was converted into ethanol for use as fuel in vehicles. This has put enormous pressure on the supply of food in other countries since the US alone contributes to about 70 per cent of the world’s maize exports. Thus, the allocation of foodgrains towards production of biofuel has led to huge inflationary pressures.
The use of foodgrains for the production of biofuel has been criticized on account of the acute scarcity of food. Food production has already declined and is causing severe deprivation amongst the poor who form the most vulnerable section of society. This has also caused protests in many countries including Haiti, Mexico, Bangladesh and Egypt.
Hence, the plight of the poor and of the larger populace in general needs to be considered and immediate action needs to be taken in order to provide relief. Along with addressing the problems of rising prices, other concerns like water scarcity, ground water depletion, unavailability of credit and inaccessibility of markets needs to be addressed. Investment needs to be stepped up in agricultural research and development as this would lead to the discovery of high-yielding varieties of crops and more efficient techniques of production.
Before the food crisis devours the earth and robs humanity of its basic entitlements, food relief operations and other long term measures to combat global warming need to be undertaken. Moreover, even though the use of biofuel instead of oil is supposed to be environment friendly, these efforts will be in vain if hunger takes its toll on people. Because obviosly, the efforts to save the planet will be of little relevance if the human race itself is extinct…
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