Let’s Avoid Food Riots

Rather than address the root causes, governments tackle emerging food shortages, climbing prices and angry publics like a carnival game of Whac-a-Mole: Like little moles poking their heads from random holes, crises emerge and leaders whack at them in a frenzied race against time. Food insecurity is the new normal, explains YaleGlobal Editor Nayan Chanda in his regular column for Businessworld, and crises will only worsen as the global population expands, extreme weather events threaten crops and speculators eye food commodities as a source for profits. The US supplies nearly two thirds of the world’s corn and yet diverts supplies for biofuel, and rising energy prices add to costs for net food importers. Rising wealth in the emerging economies combined with low interest rates in the wealthy nations spur speculation. Chanda suggests that governments stop the piecemeal attacks on food prices and riots, and cooperate to develop a systemic approach for feeding the planet. – YaleGlobal

Let’s Avoid Food Riots

Unless food inflation is dealt with a global approach, we will be jumping from crisis to crisis
Nayan Chanda
Tuesday, March 15, 2011

The thousands of protesters who assembled in New Delhi in the last week of February to demand lower food prices have gone back and the feverish rise in prices seems to have cooled. Officials may be heaving a sigh of relief, but the relief may only be temporary. Food insecurity may become the new normal not just in India, but for the world. While the problem is global, however, it is national governments who need to deal with hunger and food riots.

Just three years ago, when skyrocketing price of food led to riots in some 30 countries, the G-20 nations pledged to set up a $22-billion World Bank fund to help step up food production in vulnerable areas. The bank has received barely 20 per cent of that amount. This past month, world food prices have surpassed 2008 levels, prompting the United Nations (UN) to sound the alarm. Debates flared again as to who to blame. Some charged the diversion of corn and other food crops to produce ethanol as the cause of the price hike, while others blamed speculators in grain futures funded by cheap credit, hoarding by countries, rising price of oil and transportation, and, of course, a series of droughts and floods affecting major food producers.

All of these explanations are elements of a much more complex reality. To be sure, the US Congress’s decision to subsidise ethanol production in a misguided bid for energy independence has resulted in a third of American corn being diverted. As the US supplies nearly two-thirds of world’s corn, the 90 per cent rise in its price in 2010 has put pressure on other grains. Former US President Bill Clinton recently warned that over-emphasis on corn-based ethanol could lead to food riots. Not so, says the ethanol lobby. “The driver behind rising food prices,” they said, “has been and remains oil.”

It is ironic that the recent rise in oil prices has been propelled by the turmoil in the Middle East and North Africa (MENA), which itself was fuelled partly by high food prices. Egypt is among the world’s largest grain importers and other countries in the MENA rely heavily (80 per cent in case of Libya) on imported food as well. Now they are all trying to build up buffer stock against future unrest. With the price of oil surging to $120 a barrel, the effect on food inputs — from fertiliser and irrigation to transportation — will be significant. As prices rise, there is a pell-mell rush by other importing countries to build up reserve stocks of food from rice to oil seeds.

The US Federal Reserve has also been held responsible for encouraging speculation and driving up prices through its aggressive near-zero interest stimulus plan. Hedge funds, taking advantage of the easy money on offer, have moved aggressively in betting on commodities. Ben Bernanke refutes the charge by pointing to the growing demand for food from the developing world as the main cause behind the rise in prices. He is right, up to a point. Per capita meat consumption in newly prosperous countries such as China has indeed grown, requiring more feedstock.

But all of the above and other factors being cited provide only partial explanations requiring piecemeal solutions. The fact is that with nearly a quarter million new mouths coming to the world’s table every day, we need ever-increasing supply of food. But with the basic factors for food production — cultivable land, water and climate — facing long-term threat, shortage is shaping up to be a systemic problem.

While croplands are being lost to industry and feedstock farming, fresh water — needed to produce food — is running out. In a new book World On the Edge, Lester Brown points out that 70 per cent of world’s agriculture depends on irrigation. Yet because of reckless use of non-renewable fossil aquifers, water tables are falling in as many as 20 countries, including China, India and the US — the three countries that grow half the world’s grain.

Meanwhile, unchecked global warming risks are causing a drastic drop in food production. The sharp rise in atmospheric moisture, long predicted by climate scientists as a consequence of global warming, has already been producing extreme weather patterns of massive drought and floods in several parts of the world, destroying crops.

It is high time the governments adopted a global concerted approach on how to feed the planet rather than to lurch from one crisis to another.


The author is director of publications at the Yale Center for the Study of Globalization, and editor of YaleGlobal Online.
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