A Food Crisis that Hard to Stop

Draft
Part 1
An economic approach to the current food crisis is raspy to understand. You have to push through substantial reforms that may threaten millions of lives while letting the free market fix the high prices of food. Every decision being made and the consequences of them can push even further to the abyss poor nations -that struggle as they try to mitigate the famine that their citizens are facing. Our effete standing toward food aid is hurting places such as Sudan where hundreds of thousands will die if we don´t act soon.

It is imperative that alternatives should be consider with correlation of the effects that they have on the budget of hundreds of millions of people living with less than a dollar a day -read an article from the Economist "On the poverty line" to understand how the World Bank measures the purchasing power of people, they analyze the effects and numbers comparing various years using purchasing-power parity (PPP), so you have an idea that statistic could be misleading as they tend to draw a poverty line that is done according to a subjective perspective. Still we have to address this matter taking into account how to reach an agreement between farmers trying to profit from their production and billions getting the food needed to survive.

A big obstacle we face is that the world is moving too fast, our governments are incapable of building the necessary infrastructure that our current industries demands they shun to the responsibility of creating a XXI century world. More disturbing, private companies are also getting behind our needs and this has become a major conflict now that we need more food to be produced.

You have to wait to get a new Prius, your phone calls made through your cell phone get cut all the time, private insurance has gotten to a point where companies are struggling to pay for it, investment in new energy sources have not driven down the prices of those new alternatives so the mass can adopt them, recycling companies are too few for all the waste that humans produce, this just to name a few examples on critical industries that are failing to meet our needs. But the most critical one -the food industry- is the only that can crash a country in no time bringing the toll of deaths – caused not only by famine but from public unrest – to numbers that we have never seen before.

Food shortage has become a sordid problem that the world seems unprepared to handle – it has always been around – but the current scale makes it impossible to solve in the short term.

The factors that caused this food crisis to go out of control are various; some of them can be blame on economic mishandlings but many others are related to the rise of China and India, Global Warming and the high price of oil. Even when many politicians could cri de coeur matters will stay the course until arid soil could be turn into productive land.

On the economic perspective of the food crisis we have some serious analysis to make. Here is where we can blame our governments for poor investment on infrastructure and poor criteria when giving subsides to agriculture – such as CAP in Europe. Although we can trace how much this subsides had affected third world countries that couldn´t compete with low prices, the main reason to have them was the invaluable feeling that food should always be grown locally as much as possible, in case of a world food crisis you can always count that you won´t starve to dead. It is cinch to assume then that Europe won´t do anything to change its policy toward CAP in the near future.

There has been some recent criticism in Europe to the CAP approach. On a recent Economist article title "Let them eat cake" the French minister Michel Barnier was quoted saying that he does not “believe in industrial farms”, also implying that he is looking for a different approach on who gets subsides and how. The article goes on explaining that some American imports are ban due to "health" concerns – poultry washed in chlorine is a good example – this keeps the prices high, but the problem is that now that the rise of food prices has been constant, Europe is not taking serious steps to let the market set the prices, they are keeping subsides as if prices were low and they thwart any efforts to drive cut subsides.

The lack of efficient infrastructure investment in third world countries made agriculture a not desirable business to get into. When products were grown by rural agriculturist there were no roads to take them to bigger markets in cities, so a lot of the production was lost and the one that made to the markets was taken by intermediaries whom made the biggest profits. With no leverage to negotiate prices they barely survive and agriculture was not a business creating entrepreneurs, was something that was inherited and the only thing that this poor people could do.

This obviously discouraged many small growers that couldn´t afford to transport their products to nearby cities, it also left a lot of land unproductive. Not only this affected the prices to the final consumer, it made the development of new growing techniques impossible.

The crisis is worth to be seen from this angle – from the poor countries side – they are the ones that will suffer the most while this crisis last. Two factors are critical as they hit vulnerable people, one is that rich countries will always get access to food no matter how expensive it gets, they also give billions of dollars a year on subsides to its agriculturist. This means that producers from poor countries will want to export their products to these rich markets despite the local outcome of their decision. If prices are higher around the world they will get more money from exporting than from selling in their local markets – see the Argentina´s case. The second factor is climate change, agriculture has always been a risky business – as it counts on the good will of nature – but with droughts in Australia, “el niño” hitting many countries in South America, Africa facing drops on production due to little raining and several other countries watching their agriculture facing extreme weather conditions –the the risk is higher than ever.

One cruel example of how countries are using high food prices to their advantage is Thailand's proposal to make a "rice cartel" with Vietnam, Cambodia, Myanmar and Laos. They think about manipulating prices just like OPEC does – even when Mr. Samak denies this. The outcome could be devastating if they manage to keep price of rice at current levels, we can forget about affordable rice in the near future. Thailand exports around 10 million tons a year, three times as much as the United States, according to an article from Thomas Fuller, this means that they could become the Saudi Arabia of rice, and with countries like Brazil, Egypt, India and Vietnam talking about cutting their exports to ensure local supply we know that the "cartel" hold more power than we think.

This brings us to the food aid debacle. As prices keep skyrocketing food aid donors need to put more money to maintain the past levels steady. At the beginning of May Bush proposed to give $770 million on new US aid – according to Reuters – on the same article Robert Zoellick was quoted saying that two billion people could suffer severely from this food crisis. So Bush's proposal could actually be effective as it somehow slows famine in several countries. The problem is that if demand grows at current levels and supply stays stagnate, prices will be higher than expect by food aid donors, which means that more money will be necessary just to maintain people from dying, bringing to cero all the progress made to decrease malnutrition.

The rise of an undesirable middle class from India and China that will only exacerbates global contamination, food shortage – as they turn from rice to meat – and push prices of other goods to records high, is making the competition for food even worst. They have the money to get the food that they need, while many African countries that depend on international aid are seeing their daily meals running short of what is expected. Sure the approach of the WFP was stupid enough to give “free” food instead of investing in agriculture so these countries could produce their own, but local conditions made it very difficult in some areas to pass through corrupt governments and civil wars, like the genocide in Darfur.

On a New York Times article "Food Crisis Meets Chaos in Horn of Africa" Jeffrey Gettleman talks about Somalia and how Africa "was about the last place on earth that needed a food crisis." People there haven't eaten for weeks and the animals they had – due to a severe drought – were dying increasing the chaos there. Gettleman mention Jeffrey D. Sachs as saying that some countries in Africa face a perfect storm. He explains that food aid is also scarce because local violence in places like Darfur makes it really hard for aid to be delivered. Another problem Gettleman described is that Americans launched air strikes on Somalia accusing it of hiding Al Qaeda terrorists; this has caused a "wave of revenge threats against Western aid workers". This is added to the already terrible shape of international aid. Like in Myanmar when aid was not accepted, African regions could face famine not only because aid is short, but also because they don't want to receive it.

This is a storm that was formed while we enjoyed talking about global warming and thinking that climate change won´t hit us anytime soon. We know that prices are up because demand is higher than production, but what has caused all of this?

Low production is the first problem to face. If demand is big you would expect that high prices will encourage many more individuals to start producing and get their products in the market, therefore products will be available in more quantities and demand will balance with what is offered. Also demand will contract over non necessaries items, bringing the pressure on prices to lower levels making them go down significantly.

We encounter two big differences on the analysis of this food crisis. On one hand we know that demand will eventually go down on its own, although this will cause famine in many regions –Africa will face the worst of it – malnutrition in others and severe changes in ecological systems that will be turned into farm lands, as they become more attractive to investments. On the other hand we encounter that even if supply increases it will be slow on certain regions that are suffering from severe droughts such as Australia. A problem is that supply is also going to satisfy the need of biofuels that pay much more than a hungry Sudanese child.

So even when supply increases not all of it will go to feed people, some will go to feed animals –grains that go to cattle –and other to “feed” our cars. This will bring the balance as follows: food demand will raise bringing prices to the roof; food supply will catch up eventually when the world faces an economic downturn that finally stabilizes the unsustainable growth of China, India and south East Asian nations. But food prices won't go down as alternative biofuels take much of the production and turns it into ethanol.

The inevitable force that will make farmers need more land to grow food will be a heavy toll on protected areas. Brazil may cut even more trees when farm lands are a better deal than standing forests. Rivers that in some places are already polluted will take water from habitat areas to agricultural ones lowering the quality of life for millions.

As production increases so will the need to improve transportation, the need to control the kind of production that goes into the country, safety measures will be harder to implement, speculators will play with futures, but most important as the economic cycle ends, millions of kilometers of grown areas will be left abandoned when prices drop. This will create a devastating effect on the people that bet too late on food and will leave an irreparable damage to nature.

The excessive and threatening demand from China and India, that is excessive because it happens too fast, and threatening because the world can´t handle a middle class this big, is bringing the prices of every product on earth to records high. They sure have the right to ask why they can't enjoy what the West has had for decades? But they also are entitled to answer, are they willing to destroy the world for that right?

Both countries hold about 36% of the world population, both are deploying millions of its citizens around the world on business trips to get as much rough materials as possible. A growing middle class from this countries can put on the street millions of new cars a year – China bought 8.3 million last year alone , millions computers – China bought 2,5 million notebooks on the first half of 2007 , a millions of cell phones, one billion cell phones were sold on 2007 on the world, just to name a few. Even when producing these goods is done on sustainable basis the wastes produced by them contaminate on great scale our fragile nature. Sure clothes will be available to everyone.

Clothing them is one thing, when it comes to feed two giants things get rough. If you move from eating rice and vegetables to meet, you are creating demand for inefficient food sources, such as cattle, in the United States on factor farming production cattle that is fed of corn is called corn-fed of grain-fed, this means that they don´t have a diet composed of forage but they have a diet that involves corn. How about giving to cattle the corn needed to stop famine in places in Africa and Asia – I am being ironic by the way.

According to a Foreign Policy article title "The List: The World's Most Dangerous Food Crisis", some countries will be hit mercilessly by short food supply. North Korea for example will face "the worst food crisis the world has ever seen", the price of rice it’s up 186% since April 2007. About half of the population in Pakistan suffer from food insecurity, and "the average food prices have risen 35% since last year". Indonesia is on the list, Ethiopia where 45 percent of its population is undernourished has no problems with food supply, but its population simply can't afford high food prices, so according to Josette Sheeran "food is on the shelves" but people lack the money to purchase them. Yemen is the last country on the list, and the article mentions that "the World Bank has warned, Yemen’s food crisis could wipe out all the gains made in poverty reduction between 1998 and 2005."

But we have much more to discuss: the price of food correlated to fuel surge, the rise in price due to the use of corn for biofuels, how CAP is not the answer to solve this food crisis, the millions of dollars that the fertilizer sector is making this days, how much food is needed to stop millions from facing famine.

Most important are the answers on how to solve this problem, they are basic to endure a long term reaction that applies economic development to a sustainable growth of developing world countries. Gordon Brown, Robert Zoellick, Jeffrey Sachs, Josette Sheeran and others will be quoted proposing measures that may reduce the threat of global famine that could appear on a scale that we have never seen before, I will also state some conclusions on the direction that I think is needed, and some on the direction where I think we are heading. On the second part of this article we will see the plethora of opportunities that we have as society to solve what could be, a long lasting crisis.