Why you will never eat cheaply again

It is no small irony that as the world’s poor farmers get richer, the rest of the world pays.

Solving world hunger should be a goal commonly shared. Activists have long spoken out that the developed world enjoyed a glut of cheap food while the poor world was left out. Similarly, critics fretted that the low prices kept foreign farmers impoverished. Many rash fixes were developed (like Fair Trade), but to no avail. My, how things have changed.

Global food prices have risen over a third this past year alone and are at their highest since 1845. Many things have caused this; some good, and some bad. In the past, price shocks came from food scarcity. No longer. The root cause is that Asia’s development has reached greater levels. Now, millions who once starved in China and India have more money to spend on food, and they buy meat. It takes about seven to eight kilograms of feed to produce one kilogram of meat. So grain prices have commensurately risen, as over 200 million more tons of it are now needed to feed livestock when compared to 20 years ago. And as Asian incomes continue to rise, so will the amount of meat they consume.

The price of oil also is a large part of the increase in food prices. Agriculture is an energy intensive industry. Fuel is needed to process fertilizer, run tractors, complete harvests and to finally transport the food to its various distribution points. As more food is needed, more energy will be needed to make it. That may seem anathematic to fighting global warming, but green-ambitions must not come at the expense of the world’s poor. Indeed, there is already an example of that conflict of interests.

Exacerbating food prices is the misguided drive for ethanol fuels (which are derived from corn). It may create fewer emissions than traditional fossil fuels, but it takes tremendous amounts of energy to produce it. Therefore, any environmental gains are practically negated. And with the same amount of crop needed to fill an SUV, a person could be fed for a year.

In the attempt to encourage environmental efficiency, Congress has given out subsidies to encourage ethanol production. Quickly, America’s verdant farmlands were switched to corn, which in turn deprived land from other crops – particularly wheat. The irony is that the type of corn produced in America produces a relatively inefficient fuel; the much sweeter corns of Brazil or Mexico are far better alternatives. Still, that does not legitimize the drive for ethanol. Too much harm comes from it.

Could any of these price shocks have been avoided? Conventional wisdom says no, but there are some points to be made. First, globally there used to be reasonable reserves of staple foods, but the stocks did not rise at nearly the same rate as demand. Second, there has been a trend of underinvestment in the farm industry. A lack of new technology and scarce land makes expanding the industry efficiently quite difficult. Furthermore, much of the undeveloped land lies in geopolitical hotspots.

Possible prevention aside, the world now must endure the consequences. Aid agencies such as USAID and the UN’s World Food Program have had to request up to $500 million in extra funds in order to maintain their stocks. Poor sub-Saharan Africa is perhaps hardest hit by higher prices, and those aid agencies provide vital relief.

Two and a half billion people, roughly two-thirds of the world’s poorest, are involved in farming in developing countries. These soaring prices should provide welcomed income increases. It is no small irony that the poor farmers of the world are now richer, as their urban counterparts must spend more of their income on food. Yet, these urban folk carry much more political clout, and globally, rioting has begun. No surprise that some action needs to be taken to make sure a new demographic is impoverished, but worldwide the wrong things are being done.

Primarily, various governments – Cambodia, Russia, Argentina and Ukraine, for example – have imposed high export tariffs in order to contain prices at home. So much harm comes from this, as it is politically motivated and economically self-destructive. In Ukraine, farmers harvested more than the country needed, so the remaining 100 million tons of grain was dumped into the Black Sea. The world desperately could have used that. Similarly, “rice wars” have erupted in Southeast Asia as major production countries try to redirect supplies home. When Cambodia imposes export restrictions, Thailand does too, and so it goes. The higher price gives great incentive for countries to hoard stocks, and price pressures continue rising; rice, the staple food of many developing nations, has risen by 75 percent.

It is believed that overall, the restrictions on food exports account for about 20 percent of food price levels. Therefore, this seeming crisis presents an incredible opportunity to fight poverty. A robust agricultural sector is the first step in development. So restrictions need to be lifted, and trade in food increased. If two-thirds of the world’s poor live on farming, they stand to reap the benefits of the higher prices. There will be no better opportunity to take a giant step in reducing global poverty.

Globalization is the best chance to simultaneously fight poverty and bring food prices under control. As the hub of international trade, America needs to lead this charge. To date, the Presidential candidates have hardly acknowledged high food prices. America’s poor will suffer from it too, and presently, American policies make the problem worse. The Democrats stand to suffer the worse from such inattention. Plainly, their strategy is to rail against trade, all the while promising to eliminate poverty. How simple.

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