World faces choice between higher energy, food cos

Musharraf era has seen unprecedented growth in all areas, except the two I mentioned. Middle Class in now something like 50 million plus, up from 7 million. And the standards for what is middle class is now much higher. Yes planning could have been better, political problems have also caused it. For example, a dam on the Indus cannot be built since Sindh* is dead against it, even though the fears are irrational, it is so politicised that no gov can order it constructed, without declaring martial law in Sindh.

Wheat. We had a record crop this year. But the thing is since there is a liberal export/import policy, producers (80% of whom are private) have the ability to sell wherever they want. As a result they sold it in the mid east, and Afghanistan (where the UN was buying) since they got better prices. In other words priced out for our own wheat.

Hey, its not funny. Gone from an all time surplus to a shortage in two years. After a bumper crop. Since most of it was sold abroad.

Originally posted by vulkan A crazy world we live in these days, just 50 years ago governments were trying to wipe each other out now they are buying each other out ...

They buying each other out 50 years ago and they are trying to wipe each other out today too.

So basically its a combination of booming population vs. stagnant agricultural methods, transportation has gone way up since oil is skyrocketing and finally the speculators (middleman) in international stocks also help somewhat to drive up of the prices.
And you are saying that food is less expensive today than 30 years ago?

A crazy world we live in these days, just 50 years ago governments were trying to wipe each other out now they are buying each other out ...

I never heard that Saudi Arabia and Lybia are buying land abroad. You meant land from other nations in the Middle East or in the West as well?

I think you could also add the actions of speculators to the mix that  helps drive food prices higher. Maybe it isn't the primary cause but them making billions by betting on food stocks is of course going to have its effect on raising that price even more.

Actually, the issue is slightly more complicated:

1. There is no clear relationship between rising food prices and the increased use of biofuel. More precisely, this relationship seems very weak. A wealth of other factors are at play (natural disasters in the  big producers such as Burma, the US and Australia, rampant diseases and parasites are also taking their toll on the production of Ethiopia, Iran and Kazakstan, rise in demand, rise in the price of transport, land, seeds and fertilizer, institutional disincentives in Argentina, China, North Korea, Egypt, speculation for profit or to guaranty food supplies) and by any mean decreasing the share of biofuel in the next harvest will do very little to help.

2. Agriculture is badly hit by the cost of oil. Machines, transports and fertilizer use energy and/or oil. Decreasing the biofuel supply would merely increase the price of these three things and thus the price of food.

3. The prices of biofuel-producing crops (mainly corn and sugarcane) are amongst those that have increased the least over the last few month. There is next to no relationship between the amount of rice produced in Asia and the one amount of corn produced in the US.

To prevent such food prices hick in the future some key policies are important:

1. Cutting red tape in many regions where agricultural production is limited artificially by the price of corruption, the weight of the administration, etc. For instance, Ukraine and specially Russia and Khazakstan could easily double the amount of land cultivated if they let farmers and financiers do their stuff freely.

2. Some state keep their farmers' productivity artificially low. In Egypt, India, Ukraine and Argentina, farmers are prevented from exporting their production. As a result, while world prices are rising, the farmers from these countries do not benefit from this windfall, so they have no incentive to produce more, so their country still has to rely on the world food markets. This situation is even worst in China, Burma and North Korea, there the lack of freedom, the inability to benefit from one's labour and other factors have slashed productivity to the point that North Korea is not even able to avoid starvation and that rice production in Burma is a mere 10% of what it was 50 years ago.

3. Investment in infrastructures is also essential. In Africa in particular, but in other places too, roads, ports, dams and levies are essential for producing more and being able to bring that production to the consumers.

Unfortunately, the recent crisis seems to have fueled a form of hysteria highly prejudicial to almost every body. The US and the EU do not seem to want to diminish their policies designed to artificially keep the price of their agricultural produces low. But a new element is starting to appear: the food-poor but cash-rich nations such as Lybia and Saudi Arabia are starting to buy huge quantities of land abroad to make sure that their food supply will not only depend on the international market. But ultimately this may seem a bit petty considering that despite their financial might these nations are quite small in term if demography and thus won't create too much problem.

The situation is much more frightening when China joins the ranks of the countries buying land abroad. Feeding 1.4bn Chinese is a huge issue, and their eagerness to eat more meat and dairy will soon make them the biggest consumer in the world. The Chinese government is planning to buy through public companies or private ones financed through public banks huge amounts of land mostly in Africa and South America. So far so good, but it quickly appeared that this had more to do with neo-imperialism than anything else. Most of the farmers will be Chinese, they will draw on resources such as water and compete with local peasants, they will certainly keep the best land, and re-distribute very little to the host country. It will create a system very close from the one observable nowadays in the oil field in Africa where foreign engineers trust the best jobs and the locals benefit mostly from pollution.

Overall, certainly, the best thing to do is to make the agriculture more sustainable. Using less fertilizer would decrease significantly the price of production. It is mostly up to us to support bio-agriculture… I have a dream…

I'm not convinced biofuels are making any impact on food prices. Six months ago I was sure we had a food surplus, now suddenly a deficit? Huh?
For all of the foods that I buy the price hasn't gone up. Flour (atta) is the same, rice (banaspati) is the same, meat is only subject to local issues (weaker drought, price goes up slightly), where are these higher food costs?

I think that most of the higher food costs are in transportation. It costs more to transport the food, therefore the price is higher.


Edited by Omar al Hashim - 18-May-2008 at 12:24