October 7, 2008

Running on Empty

By Coonan, Clifford

AS THE WORLD'S POPULATION INCREASES, ENERGY, WATER AND LAND ARE BECOMING SCARCE, CREATING A POTENTIAL FOOD CATASTROPHE ACROSS THE PLANET Li Yue runs a small restaurant in Beijing's Chaoyang district, selling noodles and fried rice to construction workers from the nearby sites and also to the growing army of white-collar workers from the surrounding offices. But she finds that ingredients are getting more expensive. "Rising food prices make it much harder to run a restaurant business," she says. "I've had to increase prices on the menu to cover costs, but that makes it harder to get people in, and rent is rising, too. Life is getting that bit harder. The only way out is to work harder and save my money more carefully."

Li Yue's story is the public face of a global food crisis that is causing misery and woe across the planet. Rice, corn and wheat prices are reaching record levels, sparking unrest in desperately poor countries and worsening the plight of the 982 million people already in the grip of hunger. Last year, the cost of food imports in poor countries rose 25 per cent as a direct result of this global food crisis, which is translating into a serious political headache, both for domestic rulers and globally, and is also raising the spectre of global food wars as developing countries try to fend off possible starvation.

According to the World Bank, by 2030 world food demand will have risen by 50 per cent. And by 2050 the world's population will have increased by a third to more than nine billion. At the same time, the energy, water and land needed for agricultural production are becoming increasingly scarce. The figures are horrendous. More than 3.5 million children die every year - nearly 10,000 every day - from hunger and malnutrition. In India, rioters are burning food ration stores. There is looting in Burkina Faso, while in Cameroon, taxi drivers are protesting against fuel costs. Everywhere natural disasters resulting from global warming damage infrastructure and tie up resources.

More than 3.5 million children die every year - nearly 10,000 every day - from hunger and malnutrition.

More than 3.5 million children die every year - nearly 10,000 every day - from hunger and malnutrition.

So what brought about the food crisis? A lot of the current situation can be attributed to the rising price of oil, flirting with US$150 a barrel at times, and the fact that farmers are simply not able to keep up with the astonishing global demand for grain. Some of the world's most populous countries, including China and India, have an increasingly affluent middle class, which wants to eat better. They want to eat more meat, and more meat means higher grain prices.

While consumers in developing countries want to match their growing wealth with an improved diet, their rich-nation counterparts refuse to modify their consumption patterns one iota. This causes an obvious problem: too many people trying to eat from a diminishing amount of land. As the price of crude keeps hitting new highs nearly every day, farmers in both poor and rich countries are switching from low-yield food production to growing crops that can be used for high-value ethanol production. The International Monetary Fund says that US corn ethanol production has driven at least half the rise in world corn demand for the past three years, which means higher corn prices. This also results in higher prices for other crops such as soybeans, which farmers discard to grow corn in the hope of selling it to ethanol barons.

In sub-Saharan Africa, home to nearly half of the world's malnourished people, food riots have broken out in several poor countries. In July, tens of thousands of people marched through Niamey, the capital of Niger (one of the poorest countries in the world) to protest against the high cost of living and electricity blackouts caused by disruptions in power supplies from neighbouring Nigeria. Like many African nations, Niger has experienced sharp increases in oil and food prices. The cost of staples such as rice, maize and sorghum have risen more than 20 per cent since the beginning of the year, driven up by soaring world grain and oil prices. This has led to destabilising unrest in Niger, where one in five children die before their fifth birthday. Non-government organisations are warning that rising food prices could soon mean several million people cannot afford a proper meal.

Last year in the Indonesian capital Jakarta there were riots caused by shortages of cooking oil. Many people were rightly angry about the situation because Indonesia is the world's largest producer of crude palm oil, which is used to make cooking oil. Yet because there is more money to be made selling abroad, companies are only too happy to export the product. The government tried to quell unrest by imposing high tariffs on palm oil exports.

"If we do not take urgent steps to halt and reverse the current trend in rising food prices, the people who can least afford it will suffer the most," said United Nations secretary-general Ban Ki-moon in a speech at Hokkaido University around the time of the meeting of G-8 leaders in Japan.

"Hunger and severe malnutrition will spread further," said Ban. "With climate change already taking an erosive toll on our common humanity, it threatens to deepen the food crisis. And with food and fuel prices soaring, [which are] accelerating global inflation pressures, we risk losing ground in our race to achieve the Millennium Development Goals, just as we pass the midpoint to the target date of 2015. Families are forced to make choices no family should have to face: a bowl of rice versus a visit to the doctor or school tuition."

The poorest families in the US spend 16 per cent of their income on food, while the average is 10 per cent. In the developing world, around half the family budget goes on food, and this is often understated - the figure is 73 per cent in Nigeria, 65 per cent in Vietnam and 50 per cent in Indonesia. And the foodstuffs bought are the ones that are becoming most expensive: corn, soybeans and rice. The Food and Agriculture Organisation food price index rose by 51 per cent in the past 12 months, with the world expected to spend US$215 billion more on food imports than in 2007.

The leaders of wealthy nations are watching the worsening hunger situation, which is sharpening the debate over the West's push to turn crops into fuel, as well as stirring political instability across the developing world. China's economic boom has become the stuff of legend, but it remains a poor country, with some 800 million people still living on less than A$1.50 a day.

Using traditional Chinese weighing scales, the fruitmonger on the streets of the bustling town of Baoding in Hebei province is weighing out oranges and trying to convince the buyers to add a couple of apples from the front of the stall to their shopping basket. "Prices have trebled in a year, it's tough enough," says the fruit merchant, who is wearing a bright orange jacket and gives her surname only, Zhang. "People want fruit obviously, but they really have to pay for it."

A nearby food-stall owner, who applies the batter for a traditional bing pancake onto a hot plate with admirable dexterity, has the same problems. Food is getting expensive in China, especially if it comes from far away, a problem people recognise in poor areas all over the world.

The US Department of Agriculture (USDA) has revised upwards the number of people it estimates are going hungry because of the global food crisis. The USDA believes rising food costs increased the number of hungry people in the world by 122 million in 2007, and could now increase the malnourished population for a decade. Rising food prices are causing all kinds of revisions, and suddenly the world hunger picture does not look as positive as it did a year ago. In a survey of 70 developing countries, the USDA forecasts the number of malnourished will climb to 1.2 billion people by 2017. Only last year it said that number would fall to about 800 million by 2017.

World Bank president Robert Zoellick has described the global food crisis as a "man-made catastrophe that must be fixed by people." Wild things are happening. The Indonesian government is developing a huge farming area to grow rice, sugar cane and soybeans in the remote province of Papua, funded with Saudi Arabian money.

Last year the Philippines government said it was planning a series of investments with Chinese investors to grow corn, rice and sorghum, which prompted hard-pressed farmers in remote areas to lobby president Gloria Macapagal Arroyo to block the deal, as they were having a hard enough time growing enough food to feed their own families. However, the case showed how locking in supplies of food is becoming geopolitically essential in the way locking in oil reserves was in the past decade. "We're really in a danger zone because of the combination of the food and fuel," Zoellick told US television. "And so we estimate that, for some 40 or 50 countries, you could have a decline of 3 per cent to 10 per cent in their GDP, [and] that you could have 100 million people pushed into poverty."

A Zimbabwean woman puts maize into her bag. She managed to get three bags from this year's harvest that has to feed a family of 10.

He cited the example of Liberia, where a 25 per cent rise in food prices in January pushed 200,000 people into poverty, which translates into 70 per cent of the country below the poverty line and undermines president Johnson-Sirleaf's efforts to get the country back on its feet. "What we need to try to do is have a system where the market works and developing countries have a fair chance to profit and grow with these needs," Zoellick said. "In the case of Africa, for example, I do think one also needs to look at some of the possibilities for local crop production, whether it be cassava or some other varieties. We need some research, in terms of seeds that, for example, can deal under different climatic conditions with the challenges of climate change, or whether it's flood conditions or drought conditions."

One of the reasons posited for the world food crisis is that in countries such as India and China so many people are buying ever more food. China's president Hu Jintao ardently denies the growing demand in developing countries was responsible for rising food prices across the world, saying this is an irresponsible and baseless accusation.

He made his remarks at a meeting in July with leaders of four other developing countries: India, Brazil, South Africa and Mexico. The five countries together account for 42 per cent of the world population and 12 per cent of its GDP. The developing country leaders said soaring food prices had badly affected regional stability and made it much harder to reduce global poverty. "Developing countries suffer most from rising food prices, and we the five countries have all been affected," the leaders said.

Biofuel production is a major issue. Output is expected to rise from 11 billion litres a year in 2007 to about 24 billion litres by 2017. This growth means more grains, oil seeds and sugarcane will be used to make biofuel. Developing country leaders say it was "essential to address the challenges and opportunities posed by biofuels. It is important that public policies for production of biofuels contribute to sustainable development and the wellbeing of the most vulnerable people and do not threaten food security."

There are also signs the hunger fight is running out of steam in Asia, where the 1960s green revolution put seeds for high-yield wheat and rice in the hands of millions of farmers. "The daily demand for oil is 86 million barrels while oil supply is 87 million barrels per day," says Hong Kong-based economist Lang Xianping. "Obviously this is oversupply. With oversupply the price should have fallen but instead it has risen," Lang says. "The rise in food prices stimulated farmers' enthusiasm for producing grain because they can make more profits and food companies can make more money. The sharp rise in food prices puts a heavier burden on urban residents. During the first quarter of this year, as rice, flour and vegetable oil prices rose strongly, China's urban and rural residents, especially in the lower income sector, have had a much heavier burden."

Familles are forced to make choices no family should have to face: a bowl of rice versus a visit to the doctor or school tuition

United Nations secretary-general Ban Ki-moon

Locking in supplies of food is becoming geopolitically essential in the way locking in oil reserves was in the past decade


Read how Germany is urging the world to focus aid on the food crisis: www.tinyurl.com/56hw7n


"Fueling hunger" by William Hoffman, Traffic World, 5 May, 2008; "Only a few green shoots", The Economist, 7 June, 2008; "Rising food prices intensify food insecurity in developing countries" by Stacey Rosen and Shahla Shapouri, Amber Waves, February 2008; "When inflation means starvation" by Mohamed A EI-Erian, Newsweek, 30 June 2008.

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Clifford Coonan is INTHEBLACK's China correspondent

Copyright CPA Australia Sep 2008

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