Food prices and demand

TWO YEARS after food riots around the developing world toppled governments in Haiti and Madagascar and claimed hundreds of lives…

TWO YEARS after food riots around the developing world toppled governments in Haiti and Madagascar and claimed hundreds of lives, 10 more people died in street clashes in Mozambique last week. Could this be a harbinger of another round of the same unrest? Russia’s decision in recent days to extend its ban on the export of wheat, introduced in response to the destruction wreaked by recent fires, has compounded international market jitters over wheat output forecasts in some major producers. In Germany and Canada, the fear is that rain and floods will hit harvests while drought is the problem in Argentina and Australia.

In Egypt there have been protests over food price inflation this month as escalating meat costs, up by as much as a third over the summer, hit the traditional Ramadan festivities. In Saudi Arabia – like Egypt – the price of wheat is up by more than half, and barley has doubled. The kingdom imports 70 per cent of its grain from the Black Sea region – Russia, Ukraine and Kazakhstan, each of which has implemented its own official or unofficial curbs on exports.

The causes of the rioting in the Mozambique capital Maputo included a 25 per cent rise in the price of bread, 30 per cent in water and electricity and sharp rises in the prices of fuel and cement. The government blames the soaring global wheat prices but the extent of the surge is partly related to the fact that it suppressed prices artificially ahead of an election last year.

According to the UN’s Food and Agriculture Organisation (FAO), world food prices rose five per cent in August and its food index hit a two-year high, although still more than a third below the June 2008 peak. Importantly however, the price increases are not so much to do with overall supply issues as with market worries over supply interruptions and hoarding, and – crucially – a long-term rise in demand. The FAO and other food policy experts say global food stocks remain healthy and that declining production in some countries is likely to be offset by larger harvests elsewhere.

READ MORE

More worrying is the long-term trend underlying short-term fluctuations. Increasing wealth and populations in the developing world, not least in the vast markets of India and China, are fuelling the surge in demand for meat and proteins. The FAO estimates that by 2050, while the world’s population (one in six of whom is currently under-nourished) will have increased by half, demand for food will be up 70 per cent.

The critical agricultural development issue is how to meet this challenge. Ireland’s focus, expressed in the 2008 Hunger Taskforce Report, rightly emphasises the sustainable intensification of agriculture, particularly in Africa. Instead of relying on traditional food aid, that means investment in small-scale farm production and diversification, particularly helping women who are the main producers; in making markets and infrastructure such as irrigation function; and in publicly-funded research into crop productivity, including into the potential – as yet unrealised by the private sector – of genetically-modified crops.