A Bittersweet- but mostly bitter- Harvest

Tuesday 10 June 2008, by Michael Ryan Wiseman

Is there a Global Food Crisis? Yes and no. It is mostly a distributional problem; this is a world, after all, where both under and over nutrition are at epidemic levels- there are around 1 billion people in either camp according to the World Health Organisation. The current crisis merely underlines the gross inequity of income and clout between countries- and, especially, between people within countries.

Sadly, but predictably, it is poor people from poor countries who are bearing the brunt of the increased prices of food staples such as wheat, corn, rice and soya. People in industrialized countries spend about 14% of their household income on food, and so are much better placed to cope with the spike than households in developing countries, whose average expenditures on food total 70% of their income.

On a national level, the toll that elevated prices takes on net food staple importers, which tend to be poorer countries, is massive. Esteban Lazo Hernandez, Vice-President of the Council of State of the Republic of Cuba gave an indication of his country’s rising grocery bill,

“In 2005, we used to pay 250 dollars for every ton of rice we imported; now we pay 1,050 dollars… For a ton of wheat, we used to pay 132 dollars; now we pay 330 dollars… For a ton of corn, we used to pay 82 dollars; now we pay 230 dollars… For a ton of powdered milk, we used to pay 2,200 dollars; now it’s 4,800 dollars.”

The social fabric of badly affected countries is coming dangerously close to unravelling: thus far, food riots have erupted in 33 countries. The tale is much different for big agricultural exporters such as the US, Canada, Australia, and the EU. Last year saw the US register record agricultural export revenues of $85 billion dollars just as French grain farmers have seen their incomes double. Meanwhile, the UN’s World Food Program launched an international appeal for the modest sum of $755 million to cover the funding gap caused by higher food prices, which have reduced by 40% the amount of food it is able to purchase compared to a year ago.

Over the past, say, 25 years global demand for food- especially meat, which is grain intensive to rear, has risen steadily in line with rising living standards. Of course, this has had an impact on prices, but cannot alone account for the recent jump.

A bittersweet harvest is at hand. Having sown seeds of industrialized and unsustainable agriculture, inequitable trade, unfettered markets, and cack-handed environmental policies, the world is now reaping two types of fruit. One is sweet profit and export revenues, the other is bitter starvation.

International Agribusiness

The ‘International’ in ‘International Agribusiness’ is well-warranted: in the past year, industry behemoth Cargill acquired a chicken processing business in the U.K., opened new oilseed facilities in Argentina, Australia, Russia, China and the United States, and opened a fifth feed-mill in Vietnam.

And just how big of a business is international agribusiness? Cargill, Conagra, Bunge, Archer Daniels Midland, and Dreyfus control 80% of the world’s cereal trade, their profits in 2007 increased by 36%, 67%, 30%, 49% and 77% respectively over the previous year. In less abstract terms, Cargill, the second-largest private company in the U.S., posted profits for its last quarter, yes quarter, of $1.03 billion, that is $11.3 million a day.

Profiteering aside, the methods promoted by industrial agriculture are environmentally unsustainable, not least due to its addiction to oil. Meanwhile, farmers- themselves dependent upon everything down to the purchase of non-perennial seed- must use ever-increasing quantities of fertilizers, pest/herb/fungicides, and water to maintain yields on plots of land that are rapidly stripped of fertility due to intensive monocropping, and that possess pests that invariably develop immunities from the designer poisons that are meant to eradicate them.

Trade Regime, Subsidies, and Enforced Liberalisation

The imposition of ‘free trade’ led to severe restrictions on poor country subsidies and to the erosion of their import tariffs and quotas. These rules were not drawn-up to their economic and social advantage. Years of structural adjustment programs have brought a systematic dismantling of the protection mechanism of domestic food production among poor countries. These countries were (are) advised and coerced to divert their production of domestic food crops to the export of agricultural commodities, including the exotic and non-alimentary, while ever more dependent on imported staple commodities. Over the past 30 years, the prices of non-staple exports, such as tea, cocoa, coffee, sugar, and cotton have remained relatively depressed compared to staples such as wheat, maize and soya.

The overall result is an undercutting of internal markets within poor countries, thereby turning former exporters into importers of these basic food necessities. Mexico provides an extreme example of the effects of such a system.

Prior to the 1970’s, Mexico used to be self-sufficient in maize, with an export surplus. Since that time there has been a steady rise in imports as US farm subsidies increased. Subsidies exist to this day: Mexican farmers receive a production subsidy of $700 compared to an American farmers’ $21,000. With the signing of NAFTA in 1994, a displacement of domestic by imported sources of food supply has greatly increased vulnerability to volatile prices. Mexico has tripled its imports of cereals since and now depends on them for 40% of its food needs: 60% for rice, 50% for wheat, 23% for maize, almost 100% for soya.

Since NAFTA came into force in 1994, subsidized US maize has cost the Mexican farming industry two million jobs as well as draining the country of eight million farm workers who have emigrated to the U.S. Every hour, 30 Mexican farmers leave for the U.S and $1.5m worth of food heads the other way.

At midnight on 1 January 2008, the same day when all agricultural tariffs within Canada, the US, and Mexico were eliminated, thousands of Mexican farmers formed a human chain at the Ciudad Juárez border crossing into the United States under an enormous banner with the slogan Sin maiz no hay pais, or Without corn there is no country.

Biofuels

Without question, biofuels have contributed to the increased price of corn and soya- and because in economics basic foods are to a considerable degree substitutes they have, in turn, influenced the price of wheat and rice. Recent IMF estimates suggest that increased demand for biofuels account for 70% of the increase in corn prices and 40% of the increase in soybean prices.

Compounding the issue, the diversion of food crops to fuel crops shows few signs of abating. America, the world’s principle supplier of corn, used one-quarter of 2007’s crop to make ethanol, up from 18% in 2006. Estimates for 2008 put the figure at one third. The current American farm bill proposes only modest cuts in ethanol subsidies, while the EU recently reaffirmed its biofuels target of 10% of all fuel by 2020. Canada’s target is 5% by 2010.

Environmentalists initially looked to biofuels as a saving grace but by some estimates, harvesting, crush-ing, fermenting and distilling corn requires 29% more energy than is eventually created and due to the water required to irrigate crops, an alternate-fuel vehicle requires up to 100 times more water than a gas-powered vehicle.

The absurdity of the situation is overwhelming.Due to the carbon-intensive lifestyles of excess in a minority of obesity-ridden countries, said countries have attempted to mitigate their emissions by pursuing so-called green policies that, while having negligible environmental benefits, have succeeded in pushing large swaths of the planet- who just so happen to have polluted very little- toward starvation.

The Carbon content of industrial food production

The doubling of the price of oil in the past year has driven a large portion of the increased price of food. Given the significant role oil-based products play in the agricultural industry, this comes as no surprise. Indeed, Josette Sheeran, Executive Director of the World Food Programme, said recently that, “food and fuel markets were linked as never before.” There is a petroleum-based step in every part of the system, from the fertilizer right on up to the energy requirements of processing and transporting the harvest.

By way of contrast, the techniques of traditional farming- including measures as simple as intercropping and composting- while appearing to be less productive, not only require fewer petroleum-based inputs, but being kinder to soil, water and air, are more sustainable. What is more, they provide countries with the security of a local domestic food supply and they provide employment and income for large parts of the population. They are a more effective and more efficient form of farming when all this is taken into account. That is not to say that all technological advances in agricul-
ture should be forsaken, after all more than half of humanity now lives in cities and must be fed, rather it is a matter of smarter farming that looks beyond next year’s harvest and, above all, next quarter’s profits.

Financial Markets and Speculation

The spike in food prices cannot be solely attributed to secular movements of supply and demand. Corn is up 62% on last year’s price, soya is up 71%, wheat prices have risen 130% since March 2007, while the World Bank reports that food prices across the board have jumped 83% over the past three years. In 2007, the volume of capital managed by listed investment funds on European agricultural products grew fivefold while American agricultural markets have jumped sevenfold on a year earlier. Some estimates hold that speculation has added 20% to the price of wheat.

Money is pouring into the market, piggy backing on a greater drive for commodities that has seen the price of metals and oil soar in recent years. It is cold comfort for those trying to scrape together their next meal that this is the latest in a string of bubbles. Fortunes have been made in this bonanza. The casino economy has seen several jackpots and, tragically, many going bust from a game in which they had no say on the rules and had no choice but to play.

Food Security and Sovereignty

If the current system is not working, where should we go from here? There are many lessons to be learned, many of which where touched on in a recently released report from a myriad of IGOs, NGOs, scientific institutions, etc, entitled The International Assessment of Agricultural Science and Technology for Development. It summed-up thusly:

“Food security strategies require… the development of food stock management, effective market intelligence and early warning, monitoring, and distribution systems. Production measures create the conditions for food security, but they need to be looked at in conjunction with people’s access to food (through own production, exchange and public entitlements) and their ability to absorb nutrients consumed (through adequate access to water and sanitation, adequate nutrition and nutritional information) in order to fully achieve food security.”

Hand-in-hand with food security is food sovereignty, which is the right of peoples to democratically determine their own agricultural and food policies. Of the 60 governments who contributed to the report, 3 expressed reservations: Canada, the USA and Australia- all major exporters of grain.

Both food security and food sovereignty are long overdue- if healthcare is believed to be an inalienable, universal right, surely food, too, must be considered one as well.

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