The Binkley Report on the food-price crisis

Alex Binkley is a foremost political and economic analyst, whose website is Readers will be aware that his columns in True North Perspective have foreseen political and economic developments in Canada. This week in ...

The Binkley Report

A food-price crisis looms

'What we really need is public attention to climate change'

By Alex Binkley
True North Perspective
27 July 2012 — The heat and drought that’s gripped much of North America this summer combined with weather challenges elsewhere has the world headed toward another food-price crisis.
We went through this in 2008 when shortages and speculation caused prices to skyrocket hitting consumers in emerging countries hard. Prices jumped again last year because of farm production problems in parts of the world.
The rising cost of food is thought to have played a major role in triggering the Arab Spring movement that has toppled governments in Egypt and Libya and generated unrest elsewhere in the Middle East. Food riots broke out in at least 30 countries.
Rarely mentioned is that by midyear 2008, farm commodity prices were on the decline although the cost of food remained high, mostly because of the interference of market speculators. The use of corn in ethanol production has also attracted criticism.
This time, we likely won’t see significantly higher food prices until later the late fall or early 2013. Besides hurting poor consumers, they could also undermine international efforts to revive the fragile global economy because many governments will be unable to provide any kind of stimulus to drive a recovery.
Up to half of the agriculture production in Central and Eastern Canada has been hit this summer by the record-setting heat and some of the lowest rainfall on record.
South of the border, temperatures above 40 degrees C and drought-like conditions in such states as Iowa and Wisconsin have baked parts of the upper Midwest for weeks, taking a severe toll on corn and soybeans.
However, Prairie farmers appear headed toward decent crops this summer, but many of them have suffered from excessive moisture during the last couple of years.
Lester Brown, President of the Washington-based Earth Policy Institute, says, “World carryover stocks of grain will fall further at the end of this crop year, making the food situation even more precarious. Food prices, already elevated, will follow the price of corn upward, quite possibly to record highs.”
Brown warns the world could be entering a dangerous era of the geopolitics of food scarcity. Countries will look after themselves first. “The world is in serious trouble on the food front. But there is little evidence that political leaders have yet grasped the magnitude of what is happening. The progress in reducing hunger in recent decades has been reversed. Unless we move quickly to adopt new population, energy, and water policies, the goal of eradicating hunger will remain just that.
“Time is running out,” he continues. “The world may be much closer to an unmanageable food shortage — replete with soaring food prices, spreading food unrest, and ultimately political instability — than most people realize.”
Rising food prices have far less impact in western countries where consumers spend 15% or less of their income on food.
Ruth Kelly, Oxfam's food policy adviser, notes in published reports that people in developing countries spend around 75% of their income on food, so any change in food prices has a dramatic impact on household budgets.
“People are already in debt from previous spikes and suffering the consequences,” she says. “When the first food crisis hit people were forced to sell off their assets, their cattle and jewellery, and take on debt to make ends meet. After multiple crises, people run out of savings and that can be quite disastrous.
“People can find it much harder to cope when you have multiple shocks like this, without time to recover between them, rather than just a single shock.”
In Canada, the opposition parties are calling on the Harper government to help farmers and rural communities cope with drought in Central and Eastern Canada.
“The drought is reaching crisis levels in many parts of Canada, leaving farmers anxious and looking for action from the Conservative government,” said Malcolm Allen, the NDP agriculture critic. Agriculture Minister Gerry Ritz “must act now to develop a plan to help mitigate the impact on farmers. People are looking for help and leadership, but unfortunately the minister is simply nowhere to be found.”
Meanwhile, Liberal spokesman Frank Valeriote noted, “These extreme conditions create great uncertainty for the agricultural sector, but the Conservatives have consistently ignored calls to streamline programs that would ensure timely, predictable support for Canada’s farmers. In fact, the only thing we have heard from them on the issue of income support is their plan to cut these programs by $2 billion over the next year.”
Ritz replied that he has asked Agriculture Canada officials to monitor the situation and work with farmers to support them through this difficult period. “Our government will continue to be there for farmers when they need it.”
What we really need is public attention to climate change. Before we got caught up in the global warming debate a few years ago, the concern about climate change was the prospect of destabilized weather patterns, which would cause food shortages. This is what governments need to focus on. While we’ve had droughts before, there’re a lot more people to feed and less land to do it on. Every crop counts.

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