My pick of the month (May 08): Global Food Crisis

I have picked a news article titled “How to respond to global food crisis” from the newspaper “The Hindu” published on 19th of May, 2008, to discuss the facts presented and suggested line of action in the article. The news article is written by Dr Arvind Subramanian who is Senior Fellow at the Peterson Institute for International Economics at the Center for Global Development, Washington D.C.

World leaders are meeting on Tuesday, June 5, 2008 to discuss the global food security as runaway prices have sparked riots across the world. Unrest tied to increased food prices has erupted in Egypt, Haiti, Cameroon, Ivory Coast, mauritania, Ethiopia, Madagaskar, Philippines and Indonesia. The author has justified the old saying “there are only seven meals between civilization and anarchy” by citing social unrest and riots witnessed around the world. This article assumes special significance in the context of the views expressed few days by George Bush, President of USA, who blamed India for the present food crisis and price rise of food grain commodities. Bush blamed improved economic conditions of middle classes in India for this entire crisis. I failed to understand improvement in economic conditions of middle class people in India is good or bad for India and rest of the world. Since I am diverting from the issue, I leave Bush and Indian economy here for discussion in some other forum and continue to focus on my discussion of the news article.

Few among us will be aware of the fact that present price rise will make 100 million people poor who have just been elated to the middle class because largest spending of the income goes to purchase food. These figures presented by the author could be of great interest for us. Nigerians invest about 70% of their income on food whereas Vietnamese and Indonesians about 75 and 50%, respectively, compared to 12% in United States. As a result of food crisis riots have taken place in some countries and World Bank has identified such vulnerable countries to be about 33 in number. Author opined that food crisis and price rise are likely to be medium to long term reality and there is need to respond in short, medium and long run basis to deal with this crisis.

Author appreciates the initiatives taken by US Administration and Congress to deal with crisis on short run basis. He puts emphasis for more steps in this direction. He suggests getting new rice supplies from the Japan to the world market and Japan can do it only if US allows Japan to do it. Japan has large stocks of rice (about 1.5 million tons) based on its WTO obligation to import rice. As Japan could not sell it without approval, last year 400,000 tons of rice was allowed to decay and later on used as livestock food. Other suggestion from author is elimination of current requirement of sourcing food from the US. In this way US can easily increase its food aid by 50% without providing any additional money.

In medium run prices of food commodities may be reduced 16-20% by fixing incentives facing agriculture globally. He alleges diversion of land from wheat and Soybean production towards production of bio-fuel and blames this change of attitude responsible for the current price rise. A moratorium on bio-fuel production in developed countries through 2008 would ease corn prices by 20 and wheat prices by 10 percent. Implementation of export controls by developing countries to keep prices under control is a temporary arrangement and may not be a viable approach in long term neither in controlling prices nor in the interests of domestic farmers. Issue of alternative fuel to save fossils fuel is discussed at length and incentives given to producers of bio-fuel are not justified at tax payers cost.

In author’s opinion, there is need of a system where both imports and exports remain free to flow in good and bad times. That becomes important if trade is to remain a reliable avenue for food security.

In long run more funds are suggested to be diverted towards agricultural research to bring second green revolution. There is need for similar incentives in the public as well as private sector. Author presents interesting data on funds being utilized by the private and public sector organizations. Monsato, the private corporation, spends about $700 million on R & D compared with total spending by the International public agricultural research institutes of only about $100 million (of which less than $20 million is spent on agricultural research for Africa).

In the end he discusses the inter-linkage of fuel prices with food prices. Cost of fuel prices is always associated with cost of food commodities. A smaller increase in fuel price results in comparatively higher increase of food prices due to increase in transportation costs. He concludes with “Any long run strategy to increase food supplies will need to include action to reducing dependence on fossils fuels.

Author is a very knowledgeable person and I fully agree with his views on short and medium term strategies. However, I differ a bit with suggestions of strengthening CGIAR and similar incentives to both public and private sector research groups. Major interest of the private research group is to draw huge returns from their research and they usually overlook the interests of the farmers. Few examples of this type of research are development of herbicide resistant varieties, GM crops and release of varieties having terminator gene. Farmers have not yet exploited potential of improved inbred varieties and private firms are releasing hybrid varieties. Major international research program are focused on quality based research (important for academic viewpoint only) oriented for publication of quality research papers in international journals and neglecting applied research useful for poor farmers of developing countries. Major portion of funds does towards travelling expenses of national and international Scientists, and organization of meetings, symposia and publication of reports. Contigecy is utilized by national organizations for meeting fuel consumption costs and in some cases diverted towards purchase of vehicles, airconditioners and furnishing rooms and conference rooms etc. Planning itself is done on the themes suggested by these international collaborators who have little idea of ground realities and problems faced by the local farmers. Best option to do something substantial is identification of national institutes and strengthening of these institute and their programs. needless to say, impact analysis is seldom done for such projects

Other major issue associated with food crisis, that author forgot to raise, is unmatched growth of population and food production. Overgrowth of population is a great contibutor to this crisis. However, this is a complex issue and need to to be dealt tacticly. China has taken several steps to check growth in population but countries having democratic ways of governance has failed in taking appropriate action.Ethnic and religious concerns prohibit governments of these countries to do something fruitful.

Global food crisis should be dealt with holistic approach. Entire world should be treated as a unit and world food organization should take intiatitives and allot quota for reserve stock to different countries depending on surplus production. each country maintaining food stocks as a reserve should be compensated appropriately if these stocks remain unutilized. In the times of crisis, WFO should provide food material to the needy countries at reasonable prices during the time of stress. Import and export duties for shipment of such stocks in the times of emergency must be waived.

UN SUMMIT DECLARATION:

Delegates approved a declaration resolving to ease the sufferings caused by soaring food prices and step up investment in agriculture. Declaration called for help for small-holder farmers in poor countries who need seed, fertilizer and straw (animal feed) in time for approaching planting season. UN Secretary-General told the summit that import taxes and export restrictions must be minimized to alleviate hunger.

The draft summit declaration, however, avoided any restrictions on biofuels. Under pressure from US, decalaration made reference to biofuels saying they present "Challanges and opportunities" and called for an "International Dialogue".

Steps for long -term solution of global food crisis:

Considering all these facts, discussions and summit decalaration, the following measures are suggested for long term solution of the crisis.

1. There is not much left to be exploited from irrigated agriculture as utilization of this ecosystem has already reached the peak. Hence all the focus must be on rainfed agriculture.

2. Crop Production Technology (Crop Management & crop improvement) has limited role in rainfed agriculture. Water management is the most vital component of rainfed agriculture. Water harvesting may contribute to about 20 % improvement in agricultural production. If we develop irrigation potential in these area even in small increament phasewise, we can assure food for our population for atleast coming ten years .

3. Farmers of rainfed areas have limited resources. They should be provided finances to use good seeds and other inputs so that the production can be maximized.

4. Flood and drought are two major factors that limit the production in these areas. Instead of providing help & subsidies after flood and drought occurances, government should consider permanent solutions to these problems.

5. Drought has become a permanent feature in most of rainfed areas. Main cause for this is deforestation. Measures should be taken to control deforestation and for afforestation of these areas.