Strategising for food security

Jun 10, 2008 Editorial

It is our intention to comment on the recently concluded Regional Agriculture Investment Forum held at the Guyana International Conference Centre, but that initiative must be considered within the broader pattern of response by the rest of the world in response to the global crisis in the price of food. In Rome last week, the United Nations Food and Agriculture Organisation (FAO) convened a summit on the hot topic, which was attended by representatives from most countries of the world.

FAO Director-General Jacques Diouf called for “urgent and coordinated action to combat the negative impacts of soaring food prices on the world’s most vulnerable countries and populations” in the form of immediate food aid and increasing agricultural investment.

He reminded his august audience that the first World Food Summit in 1996 had made a “solemn pledge” to halve world food hunger by 2015, and the second World Food Summit in 2002 had determined that just $24 billion a year would eradicate world hunger. Diouf told the summit that the current food crisis was a “chronicle of disaster foretold.” He pointed out that in 2006 the world spent $1,200 billion on arms, yet his appeal met with a tepid response of less than $3 billion in promises of extra aid.

With all the grandiose promises in the past, the reality was that the financing of agricultural programmes in developing countries had decreased “significantly”.

Diouf elaborated: “Today, the facts speak for themselves; from 1980 to 2005, aid to agriculture fell from $8 billion (2004 basis) in 1984 to $3.4 billion in 2004, representing a reduction in real terms of 58 percent.” He charged the world’s richest countries with distorting world markets by spending $372 billion in 2006 alone to support their agriculture.

He noted that he had issued warnings last September on the risks of social and political unrest due to hunger, and added that in December he had appealed for $1.7 billion to help farmers buy seeds, fertiliser and animal feed.

Diouf said he found it “incomprehensible” that the food crisis remained unsolved under conditions where a $64 billion carbon market was rapidly created in the developed countries, and subsidies worth $12 billion were used to divert 100 million tonnes of cereals from human consumption to the production of bio-fuels.

In response, US Agriculture Secretary Ed Schafer boosted the benefits of bio-fuels and genetically modified crops, the trade in which is dominated by American corporations. He claimed that less than three percent of the global increase in food prices was attributable to competition from bio-fuels, although the Washington-based International Food Policy Research Institute puts the figure closer to 30 percent.

The US response is typical of the developed world, which has sidestepped its role in the creation of the crisis in spiralling food prices – and not confined simply to subsidies. As a recent article in the New Statesman magazine stated, “The reason for food ‘shortages’ is speculation in commodity futures following the collapse of the financial derivatives markets.

“Desperate for quick returns, dealers are taking trillions of dollars out of equities and mortgage bonds and ploughing them into food and raw materials. It’s called the ‘commodities super-cycle’ on Wall Street, and it is likely to cause starvation on an epic scale.” Agricultural producers sell so-called “futures contracts” on crops several months before harvest, thereby guaranteeing certain prices.
Grain distributors and processors buy these futures contracts, guaranteeing they will not pay more upon harvest. However, this arrangement has been hit by a massive influx of speculative capital—up from $13 billion in 2003 to $260 billion this year. The article concludes: “Just like the boom in house prices, commodity price inflation feeds on itself.

The more prices rise, and big profits are made, the more others invest, hoping for big returns. Look at the financial web sites: everyone and their mother are piling into commodities.”

While the FAO Rome summit itself was dominated by fears of social unrest, its declaration ended up with a nebulous formulation calling on governments to “foster a coherent, effective and results-oriented international dialogue on bio-fuels in the context of food security and sustainable development needs.”

And if agriculture and food prices could receive this short shrift in a world forum, it raises the question “quo vadis?”

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