A global food crisis is upon us

CI’s Anna Glayzer examines the effect of recent droughts and subsequent food price rises on consumers and what needs to happen to curtail shortages worldwide.

Global food prices are rising again spurred by the worst US drought in more than half a century. 

America is the world's largest producer of corn and the destruction of this year’s crop will lead to disastrous knock-on effects across the globe, particularly in countries where food shortages are already a reality.

Big corn importers, including South Korea, Japan, Peru, Guatemala, El Salvador, Columbia and much of East Africa will be badly affected, according to Marie Brill, a policy analyst at ActionAid, as reported in the UK’s Guardian newspaper.

Couple the US problem with persistent dryness in other key grain-producing countries such as Russia, Kazakhstan and Ukraine, and corn, soybean and wheat prices are being pushed to record highs. 

In the latest developments, farmers in many parts of the world have begun a  mass slaughter of farm animals, as few can afford the huge prices hikes in feed resulting from the lacklustre harvest.

The Food and Agriculture Organization of the United Nations (FAO), the International Fund for Agricultural Development and the World Food Programme issued a joint statement last week calling for swift, coordinated international action to stop the spike becoming a crisis. 

According to the statement: “We need to act urgently to make sure that these price shocks do not turn into a catastrophe hurting tens of millions over the coming months.”

Drought

In the US, the effects of the drought are immediately apparent. Scores of drought-starved animals have been invading towns and cities across the country looking for food. 

Elk and mule deer are stealing into farmers’ corn and alfalfa fields more aggressively, and in greater numbers than usual, wildlife officials say. 

Bears have been spotted lumbering through alleys, raiding rubbish bins and climbing into people’s homes through open windows and unlocked kitchen doors. At least two sweet shops have reportedly been burgled by bears.

The effect of the drought on consumers is less straightforward. Prices have gone up already, and are expected to continue to rise, though no one can predict by how much. 

How consumers are affected will depend on where they live. As usual, the poorest consumers will suffer the most. In countries where the supply chain is shorter, price rises are passed on to the consumers directly. In economies like the US, food companies may try to absorb some of the rises themselves, rather than lose their customers.  

As The Wall Street Journal argues: “Consumers monitor what we pay for milk more than our electricity bills. Any big shift in consumer behavior — less buying of hamburgers, say — could hammer the bottom line of a food company already struggling with tighter profit margins.”

It is not clear yet how governments will act to stop the price spike from becoming a crisis. Measures will need to include revising biofuel targets and taking measures to prevent commodity speculation.  

Last week French president Francois Hollande called for the use of the strategic global and regional agricultural stock piles to help cool prices.

Price crisis

Oxfam estimated that a global grain reserve of just 105 million tonnes would have been enough to help avoid the food price crisis in 2007-2008. 

The cost of maintaining this reserve would have been 1.5 billion USD; or just 10 USD for each of the 150 million additional hungry people that may have been fed. 

Jose Graziano da Silva, the director-general of the FAO, has expressed support for the French proposals. 

The success of any such plan will depend on whether there is support from national governments. 

Graziano da Silva is talking to China next month. China operates extensive state crop stockpiles. 

The US generally opposes regional or global reserves as counter-productive, costly and disruptive to the market.

CI will continue to watch food prices and report on changes via its Food Prices Monitor, a quarterly international overview of current news, research, policy developments, CI member and NGO activity in relation to food prices. See the latest Food Prices Monitor on our website.