The World Bank estimates that global food prices have risen 83 percent in the last three years. Hence, food riots in Haiti, Egypt and Ethiopia, and the use of troops in Pakistan and Thailand to protect crops and storage centers. Many countries are banning or limiting food exports. World Bank President Robert B. Zoellick says that 33 countries are at risk of food related upheaval. Famine may revisit North Korea, parts of Africa or Afghanistan.
To many, the villain is biofuels. U.S. and European ethanol programs, intended as an antidote to climate change and an alternative to OPEC oil, stand accused of snatching food from the world's hungry. According to India's finance minister, ethanol is "a crime against humanity." But ethanol's impact should not be overstated. The International Food Policy Research Institute, which is critical of ethanol, pins about 25 to 33 percent of the recent price rise on biofuels; the U.N. Food and Agriculture Organization guesses about 10 to 15 percent.
(Note dated 7/7/08: National Public Radio reported that a World Bank report is being quashed that states biofuels are responsible for 75% of the world food price increases.)
Most of the crisis is rooted in three other factors: Drought in grain-exporting Australia. The surging price of crude oil, which raises food prices through the costs of shipping and petrochemical fertilizer. And booming demand for food in China, India and other newly prosperous areas of the developing world. These areas consume not only more staples such as rice and wheat but also more meat from animals fed on grain.
This trend is here to stay --and, unlike Australian drought or oil inflation, no one should want it to go away.
In richer developed nations, where people spend an average of 10 to 15% of their disposable income on food, price hikes have been a growing irritation. But in the developing world, where most poor people spend at least half of their income to eat, rising costs threaten to create major social unrest.
In Haiti, at least five protesters were killed this month after hungry mobs tried to storm the presidential palace, and later lawmakers voted to dismiss the country's prime minister. Food riots have also flared across Africa's Sahel and in Mexico, Uzbekistan and Morocco. Egypt's government has put the army to work baking subsidized bread. All told, 33 countries around the world are at risk of social upheaval as a result of acute increases in food and energy prices, said Robert Zoellick, president of the World Bank, in a speech this month. In countries where buying food requires half to three-quarters of a poor person's income, "there is no margin for survival," he warned.
One example of how this all fits together. The US, Mexico and Canada create NAFTA, the North American Free Trade Agreement. As a result of NAFTA Mexico started importing a lot of it's corn from the US instead of growing it. Then the Bush Administration and Congress create a "biofuels policy" to turn corn into gasoline. This has resulted in much more corn being grown to meet the new demand but has had a major side effect…. corn now is priced for it's energy content and not for it's food value. And it is much more valuable for it's energy. So corn more than doubles in price. So, the price of tortillas in Mexico more than doubles. Food riots occur. Hunger grows. More Mexicans come North to survive. The same corn scenario is happening with soybeans. The biofuel that is being sold mostly comes from soybeans. Biofuel is big in Europe. Soybeans are being priced for their energy content and not their food value. Some wheat and, especially, rice land is being diverted to soybeans (and some corn) in foreign countries. So guess what's happening to the price of rice and wheat? Why are all of these things so interrelated? Because, as an energy product, they are nearly perfectly "Fungible"
"fungible - of goods or commodities; freely exchangeable for or replaceable by another of like nature or kind."
The Bottom Line and what to do? Globalization is creating world prosperity, but it is not even. Growing world prosperity is driving up commodities, especially food and oil. People and countries not on the wining side of globalization are being severely hurt. Biofuels (especially ethanol) are exacerbating the problem and not doing any good for anyone except farmers. Don't vote for politicians who talk about growing our way out of the lack of energy. Maybe, someday, more efficient biofuel production will make sense. But we would still need much more land to grow the biofuel on so we aren't taking food out of peoples mouths. The US needs to take the agricultural land it pays farmers not to grow crops on out of that program and put that land back into production. In a food market of scarcity droughts, etc. can also have much more severe affects than would be typical.
