Wednesday, January 19, 2011 by: Alexander Frantzis
A rapid increase in demand coupled with insufficient food production has stretched the world’s food supply to the limit. Already, food prices have hit record highs and food riots have recently broken out in several countries. Yet experts fear this is only the tip of the iceberg, and we may be on the verge of a cutthroat competition for control of the remaining food supplies once an inevitable disruption occurs.
In Tunisia, riots over food prices and corruption forced the president to flee country and slashfood pricesin an attempt to contain them. Protests and riots over high commoditypriceshave since spread to Algeria, Libya, Morocco, Yemen and Jordan. In response, each respectivegovernmenthas begun implementing fiscal packages to temporarily ease prices and restore political stability.
Unfortunately, this problem is anything but temporary. The currentfooddistribution system aimed at improving market efficiency and profit is lacking in safeguards from disruptions in thefood supply. Market economics have shifted food production to specialized regions, leaving many places incapable of independently cultivating food. Government grain supply stocks, designed to guard againstfood shortages, are nearly gone, with most remaining stocks in China. By the USDA‘s recent estimates, its soy bean stocks are now at a 30 year low.
Price and demand for many food staples have rapidly increased for reasons beyond just population growth. The recent explosion of the middle class in Brazil, India and China – and the heightened level of resourceconsumptionconcomitant to it – has generated a demand the market is ill prepared to handle. Additionally, increasing oil prices have further exacerbated the cost of traditional food production and transportation, while also leading to food being diverted for biofuel production, further increasing demand.
Unlike previous food shortages, this one was not caused by a bad harvest. The last three years have produced bumpercropswith record yields, yet demand is simply outstripping thenaturalsupply. The Food and Agriculture Organization (FAO) reported on Wednesday that global food prices had hit a record high and were likely to continue increasing. In the words of the FAO’s senior economist,“we are entering danger territory”.
Other leading figures share these sentiments. Robert Zoellick, president of the World Bank, warns that the rising prices are“a threat to global growth and social stability”, and French President Nicolas Sarkozy has identified them as a top priority when he chairs the G20 economic group this year.
Lester Brown, president of the Washington-based Earth Policy Institute, poses the obvious question. If the system is this close to the brink with bumper crops, what will happen when we experience a bad year?“The reality,”he says,“is that the world is only one poor harvest away from chaos. We are so close to the edge that politically destabilising food prices could come at any time.”
Up to this time, the increasing food prices have mostly been felt by the poor and been easy to ignore. With processed food composing the majority of food consumption in the first world, only a small percentage of total cost correlates to the raw materials used to make these goods. With over half of individual income in many countries going directly to food supply, an increase in food costs is devastating.