Soaring Staples

24 Oct 2007

Growing demand and record high trading for staples such as wheat, corn and rice are leading nations – rich and poor – to ask themselves how they will fair in feeding their nation in the near future.

For many countries food security is not a new concern. However, for the first time since the early 1970s when there were global food shortages it is starting to concern more stable nations as well. The prices of wheat and milk have surged to all-time highs, corn and soya-beans stand at well above their 1990s averages, rice and coffee have jumped to 10-year records and meat prices have recently risen by up to 50 percent in some countries.

While some price rises are occurring due to temporary problems, such as drought in Australia, the increases are being connected to a range of more permanent issues. Growing demand from richer populations in Asian countries, such as India and China, for more protein and strong developments in the biofuel industry, which looks set to consume around 30 percent of the US corn crop in 2010, are key concerns. In addition, the heavy subsidies placed on agricultural producers by American and European Governments in recent decades has been linked to decreased agricultural investment in other countries that have found it extremely difficult to compete.

Economies where food represents a significant portion of import payments will be particularly affected by price rises, as will poorer nations in Africa and Asia and parts of the Middle East. The IMF has found that food as percentage of consumer spending correlates negatively with income levels – accounting for 60 percent of spending in sub-Saharan Africa, 30 percent in China and only 10 percent in the US – further compounding the problem.

The United Nations FAO has forecast that the lower-income “food-deficit” countries will next year spend double what they spent in 2002 on importing cereals. “The combination of higher export prices and soaring freight rates is pushing up domestic prices of bread and other basic food in importing developing countries, which has caused social unrest in parts,” the organization said in its latest Crop Prospects and Food Situation report.

Developed countries are not immune, however, and the UK Department for Environment, Food and Rural Affairs acknowledged in a December paper that food security was becoming a “matter of concern”. Kate Bailey of London-based think-tank Chatham House, commented that Britain’s food supply is facing “huge change” due to shifts in global trade patterns and that policymakers may have to return to thinking about food as a “strategic asset”, even in a nation that has not been self-sufficient in food since the Industrial Revolution.”

Source: Financial Times

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