(1)
The silent tsunami
Apr 17th 2008
>From The
Economist print
editionhttp://www.economist.com/opinion/displaystory.cfm?story_id=11050146
Food prices
are causing misery and strife around the world. Radical solutions are needed
PICTURES of
hunger usually show passive eyes and swollen bellies. The harvest fails because
of war or strife; the onset of crisis is sudden and localised. Its burden falls
on those already at the margin.
Today's pictures
are different. This is a silent tsunami, says Josette Sheeran of the World
Food Programme, a United Nations agency. A wave of food-price inflation is
moving through the world, leaving riots and shaken governments in its wake. For
the first time in 30 years, food protests are erupting in many places at once.
Bangladeshis in turmoil (see
6th article); even Chinais worried (see 5th article). Elsewhere, the food
crisis of 2008 will test the assertion of
Amartya Sen, an Indian economist, that famines do not happen in democracies.
Famine
traditionally means mass starvation. The measures of today's crisis are misery
and malnutrition. The middle classes in poor countries are giving up health
care and cutting out meat so they can eat three meals a day. The middling poor,
those on $2 a day, are pulling children from school and cutting back on
vegetables so they can still afford rice. Those on $1 a day are cutting back on
meat, vegetables and one or two meals, so they can afford one bowl. The
desperatethose
on 50 cents a dayface disaster.
Roughly a billion
people live on $1 a day. If, on a conservative estimate, the cost of their food
rises 20% (and in some places, it has risen a lot more), 100m people could be
forced back to this level, the common measure of absolute poverty. In some
countries, that would undo all the gains in poverty reduction they have made
during the past decade of growth. Because food markets are in turmoil, civil
strife is growing; and because trade and openness itself could be undermined,
the food crisis of 2008 may become a challenge to globalisation.
First find
$700m
Rich countries
need to take the food problems as seriously as they take the credit crunch.
Already bigwigs at the World Bank and the United Nations are calling for a new
deal for food. Their clamour is justified. But getting the right kind of help
is not so easy, partly because food is not a one-solution-fits-all problem and
partly because some of the help needed now risks making matters worse in the
long
run.
The
starting-point should be that rising food prices bear more heavily on some
places than others. Food exporters, and countries where farmers are
self-sufficient, or net sellers, benefit. Some countriesthose in West
Africawhich import their staples, or Bangladesh, with its huge numbers of
landless
labourersrisk ruin and civil strife. Because of the severity there, the first
step must be to mend the holes in the world's safety net. That means financing
the World Food Programme properly. The WFP is the world's largest distributor
of food aid and its most important barrier between hungry people and
starvation. Like a $1-a-day family in a developing country, its purchasing
power has been slashed by the rising cost of grain. Merely to distribute the
same
amount of food as last year, the WFP needsand should getan extra $700m.
And because the
problems in many places are not like those of a traditional famine, the WFP
should be allowed to broaden what it does. At the moment, it mostly buys grain
and doles it out in areas where there is little or no food. That is necessary
in famine-ravaged places, but it damages local markets. In most places there
are no absolute shortages and the task is to lower domestic prices without
doing too much harm to farmers. That is best done by distributing cash, not
foodby supporting (sometimes inventing) social-protection programmes and
food-for-work schemes for the poor. The agency can help here, though the main
burdentens of billions of dollars' worthwill be borne by developing-country
governments and lending institutions in the West.
Such actions are
palliatives. But the food crisis of 2008 has revealed market failures at every
link of the food chain (see 2nd article).
Any new deal ought to try to address the long-term problems that are holding
poor farmers back.
Then stop the
distortions
In general,
governments ought to liberalise markets, not intervene in them further. Food is
riddled with state intervention at every turn, from subsidies to millers for
cheap bread to bribes for farmers to leave land fallow. The upshot of such
quotas, subsidies and controls is to dump all the imbalances that in another
business might be smoothed out through small adjustments onto the one
unregulated part of the food chain: the international market.
For decades, this
produced low world prices and disincentives to poor farmers. Now, the opposite
is happening. As a result of yet another government distortionthis time
subsidies to biofuels in the rich worldprices have gone through the roof.
Governments have further exaggerated the problem by imposing export quotas and
trade restrictions, raising prices again. In the past, the main argument for
liberalising farming was that it would raise food prices and boost returns to
farmers. Now that prices have massively overshot, the argument stands for the
opposite reason: liberalisation would reduce prices, while leaving farmers with
a decent living.
There is an
occasional exception to the rule that governments should keep out of
agriculture. They can provide basic technology: executing capital-intensive
irrigation projects too large for poor individual farmers to undertake, or
paying for basic science that helps produce higher-yielding seeds. But be
careful. Too oftenas in Europe, where superstitious distrust of genetic
modification is slowing take-up of the technologygovernments hinder rather
than help such advances. Since the way to feed the world is not to bring more
land under cultivation, but to increase yields, science is crucial.
Agriculture is
now in limbo. The world of cheap food has gone. With luck and good policy,
there will be a new equilibrium. The transition from one to the other is
proving more costly and painful than anyone had expected. But the change is
desirable, and governments should be seeking to ease the pain of transition,
not to stop the process itself.
Food and the
poor
(2)
The new face of hunger
Apr 17th 2008
>From The
Economist print
editionhttp://www.economist.com/world/international/displaystory.cfm?story_id=11049284
Global food
shortages have taken everyone by surprise. What is to be done?
SAMAKE BAKARY
sells rice from wooden basins at Abobote market in the northern suburbs of
Abidjanin Côte dIvoire. He points to a bowl of broken Thai rice
which, at 400 CFA francs (roughly $1) per kilogram, is
the most popular variety. On a good day he used to sell 150 kilos. Now he is
lucky to sell half that. People ask the price and go away without buying
anything, he complains. In early April they went away and rioted: two days of
violence persuaded the government to postpone planned elections.
World
agriculture has entered a new, unsustainable and politically risky period,
says Joachim von Braun, the head of the International Food Policy Research
Institute (IFPRI) in Washington, DC. To prove it, food riots have erupted in
countries all along the equator. In Haiti, protesters chanting Were hungry
forced the prime minister to resign; 24 people were killed in riots in
Cameroon; Egypts president ordered the army to start baking bread; the
Philippines made hoarding rice punishable by life imprisonment. Its an
explosive situation and threatens political stability, worries Jean-Louis
Billon,
president of Côte dIvoires chamber of commerce.
Last year wheat prices rose 77% and rice 16%
(see chart 1). These were some of the sharpest rises in food prices ever. But
this year the speed of change has accelerated. Since January, rice prices have
soared 141%; the price of one variety of wheat shot up 25% in a day. Some 40km
outside Abidjan, Mariam Kone, who grows sweet potatoes,
okra and maize but feeds her family on imported rice, laments: Rice is very
expensive, but we dont know why.
The prices mainly
reflect changes in demandnot problems of supply, such as harvest failure. The
changes include the gentle upward pressure from people in Chinaand Indiaeating
more grain and meat as they grow
rich and the sudden, voracious appetites of western biofuels programmes, which
convert cereals into fuel. This year the share of the maize (corn) crop going
into ethanol in Americahas risen and the European Union is
implementing its own biofuels targets. To make matters worse, more febrile
behaviour seems to be influencing markets: export quotas by large grain
producers, rumours of panic-buying by grain importers, money from hedge funds
looking for new markets.
Such shifts have
not been matched by comparable changes on the farm. This is partly because they
cannot be: farmers always take a while to respond. It is also because
governments have softened the impact of price rises on domestic markets,
muffling the signals that would otherwise have encouraged farmers to grow more
food. Of 58 countries whose reactions are tracked by the World Bank, 48 have
imposed price controls, consumer subsidies, export restrictions or lower
tariffs.
But the food
scare of 2008, severe as it is, is only a symptom of a broader problem. The
surge in food prices has ended 30 years in which food was cheap, farming was
subsidised in rich countries and international food markets were wildly
distorted. Eventually, no doubt, farmers will respond to higher prices by
growing more and a new equilibrium will be established. If all goes well, food
will be affordable again without the subsidies, dumping and distortions of the
earlier period. But at the moment, agriculture has been caught in limbo. The
era of cheap food is over. The transition to a new equilibrium is proving
costlier, more prolonged and much more painful than anyone had expected.
We are the
canary in the mine, says Josette Sheeran, the head of the UNs
World Food Programme, the largest distributor of food aid. Usually, a food
crisis is clear and localised. The harvest fails, often because of war or
strife, and the burden in the affected region falls heavily on the poorest.
This crisis is different. It is occurring in many countries simultaneously, the
first time that has happened since the early 1970s. And it is affecting people
not usually hit by famines. For the middle classes, says Ms Sheeran, it
means cutting out medical care. For those on $2 a day, it means cutting out
meat and taking the children out of school. For those on $1 a day, it means
cutting out meat and vegetables and eating only cereals. And for those on 50
cents a day, it means total disaster. The poorest are selling their animals,
tools, the tin roof over their headsmaking recovery, when it comes, much
harder.
Because the
problem is not yet reflected in national statistics, its scale is hard to
judge. The effect on the poor will depend on whether they are net buyers of
food or net sellers (see 3rd article); for some net buyers, the price rises may
be enough to turn
them into sellers. But by almost any measure, the human suffering is likely to
be vast. In El Salvadorthe poor are eating only half as much food
as they were a year ago. Afghans are now spending half their income on food, up
from a tenth in 2006.
On a conservative
estimate, food-price rises may reduce the spending power of the urban poor and
country people who buy their own food by 20% (in some regions, prices are
rising by far more). Just over 1 billion people live on $1 a day, the benchmark
of absolute poverty; 1.5 billion live on $1 to $2 a day. Bob Zoellick, the
president of the World Bank, reckons that food inflation could push at least
100m people into poverty, wiping out all the gains the poorest billion have
made during almost a decade of economic growth.
Small is fairly beautiful
In the short run,
humanitarian aid, social-protection programmes and trade policies will
determine how well the world copes with these problems. But in the medium term
the question is different: where does the world get more food from? If the
extra supplies come mainly from large farmers in America, Europe and other big
producers, then the new equilibrium may end up looking much like the old one,
with world food depending on a small number of suppliers andpossiblytrade
distortions and food dumping. So far, farmers in rich countries have indeed
responded. Americas winter wheat plantings are up 4% and the
spring-sown area is likely to rise more. The Food and Agriculture Organisation
forecasts that the wheat harvest in the European Union will rise 13%.
Ideally, a big
part of the supply response would come from the worlds 450m smallholders in
developing countries, people who farm just a few acres. There are three reasons
why this would be desirable. First, it would reduce poverty: three-quarters of
those making do on $1 a day live in the countryside and depend on the health of
smallholder farming. Next, it might help the environment: those smallholders
manage a disproportionate share of the worlds water and vegetation cover, so
raising their productivity on existing land would be environmentally friendlier
than cutting down the rainforest. And it should be efficient: in terms of
returns on investment, it would be easier to boost grain yields in Africafrom
two tonnes per hectare to four than it
would be to raise yields in Europefrom eight tonnes to ten. The opportunities
are greater and the law of diminishing returns has not set in.
Unfortunately, no
smallholder bonanza is yet happening. In parts of east Africa, farmers are
cutting back on the area
planted, mostly because they cannot afford fertilisers (driven by oil,
fertiliser prices have soared, too). This reaction is not universal. Indiais
forecasting a record cereal harvest;
South African planting is up 8% this year. Still, some anecdotal evidence, plus
the general increase in food prices, suggests that smallholders are not
responding enough. In a perfect world, says a recent IFPRI report,
the response to higher prices is higher output. In the real world, however,
this isnt always the case. Farming in emerging markets is riddled with market
failures and does not react to price signals as other businesses do.
This is true to a
certain extent of farming in general. If you own a toy factory, or an oilfield,
and the price of toys or oil rises, you run the factory night and day, or turn
the taps full on. But it always takes a season to grow more food, which is why
farm prices everywhere tend to be sticky: a 10% increase in prices leads to a
1% increase in output. But the food crisis of 2008 suggests farm prices in
developing countries may be stickier than that.
The quickest way
to increase your crop is to plant more. But in the short run there is only a
limited amount of fallow land easily available. (The substantial unused acreage
in Braziland Russiawill take a decade or so to get ready.) For
some cropsnotably rice in East Asiathe amount of
good, productive land is actually falling, buried under the concrete of
expanding cities. In other words, food increases now need to come mainly from
higher yields.
Yields cannot be
switched on and off like a tap. Spreading extra fertiliser or buying new
machinery helps. But higher yields also need better irrigation and fancier
seeds. The time lag between dreaming up a new seed and growing it commercially
in the field is ten to 15 years, says Bob Zeigler of the International Rice
Research Institute (IRRI) in the Philippines. Even if a farmer wanted to plant
something
more productive this year, and could afford to, he could notunless research
work had been going on for years.
It has not. Most agricultural research in
developing countries is financed by governments. In the 1980s, governments
started to reduce green-revolutionary spending, either out of complacency
(believing the problem of food had been licked), or because they preferred to
involve the private sector. But many of the private firms brought in to replace
state researchers turned out to be rent-seeking monopolists. And in the 1980s
and 1990s huge farm surpluses from the rich world were being dumped on markets,
depressing prices and returns on investment. Spending on farming as a share of
total public spending in developing countries fell by half between 1980 and
2004.
This decline has
had a slow, inevitable impact. Creating a new seed is a bit like designing a
flu vaccine: you need to keep updating it, or pests and disease will negate its
effectiveness. When the rice variety IR8 was
introduced in 1966, it produced almost ten tonnes per hectare; now it yields
barely seven. In developing countries between the 1960s and 1980s, yields of
the main cereal crops increased by 3-6% a year. Now annual growth is down to
1-2%, below the increase in demand (see chart 2). Were paying the price for
15 years of neglect, says Mr Zeigler.
Alterations in
the structure of farming have exacerbated the effects of underinvestment.
Farming is just one part of a food chain that stretches from fertiliser and
seed companies at one end to supermarkets at the other. In the past, the end of
the chain nearest consumers was less important. Food policy meant improving
links between farmers and suppliers. The Green Revolution of the 1960s, for
example, provided new seeds and subsidised fertilisers. Malawiis doing
something similar now. But over
the past decade, the other end of the chain has come to matter more. The main
reason why Kenyan and Ethiopian farmers planted less this year was not just
that fertilisers were expensive, but that farmers could not get credit to
finance purchases. Supermarkets are also more important to farmers than they
used to be, accounting for half or more of food sales, even in many developing
countries.
Success in patches
In theory, the
growing importance of traders and supermarkets ought to make farmers more
responsive to changes in prices and consumer tastes. In some places, that is
the case. But supermarkets need uniform quality, minimum large quantities and
high standards of hygiene, which the average smallholder in a poor country is
ill equipped to provide. So traders and supermarkets may benefit commercial
farmers more than smallholders.
To make matters
worse, smallholdings are fragmenting in many countries. Because of population
growth and the loss of farmland, the average farm size in Chinaand
Bangladeshhas fallen from about 1.5 hectares in the
1970s to barely 0.5 hectares now; in Ethiopiaand Malawi, it fell from 1.2
hectares to 0.8 in the
1990s. By and large, the smaller the farm, the greater the burden of the cost
of doing business with big retailers. Smaller smallholders are also at a
disadvantage in getting loans, new seeds and other innovations on which higher
yields depend.
Such bottlenecks
and market failures make it harder for smallholders to respond to higher
prices, even without the multiple distortions that governments also introduce
into world food markets. They mean the transition to a new equilibrium will be
prolonged and painful. But they do not mean it will not happen. Lennart Båge,
the head of the International Fund for Agricultural Development, a UN agency in
Rome, argues that if farmers can keep the higher
prices, they will overcome the problems that beset them. As he points out,
Indiafeeds 17% of the worlds people on less
than 5% of the worlds water and 3% of its farmlandand, along with China, is
seeing its cereal crop rise this year.
Similar success stories are cropping up, in patches.
Despite East Africas problems, Ethiopiathis week opened its own commodity
exchange, a rare thing on the continent, in an attempt to improve the markets
that connect farmers and traders. The spread of mobile phones also relays
market information more widely. In landlocked Malawi, it costs almost as much
to ship maize to and from world markets as it does to grow it locally, so
Malawian farmers have found it hard to export their surplus even with prices
high. But partly because of the political disaster of Zimbabwe, regional
markets are now springing up out
of nowhere in southern Africaand Malawis farmers are selling there.
Moreover,
technological improvements are still pushing through the neglected soil. Mr
Zeigler reckons IRRI has enough tinkerings in the
pipeline to increase yields by one or two tonnes a hectare. And if European
countries relax their hostility to genetically modified organisms, crop
scientists could do thingssuch as redesigning photosynthesis in plantswhich
could boost yields 50% or more.
Between November
2007 and February 2008, rice exports from Thailand(the worlds biggest
exporter) were running
at 1m tonnes a monthan unprecedented bonanza. But for even for producers and
traders, the blessing was mixed. Some farmers sold their crop before prices
soared. Millers tried to keep supplies back, waiting for higher prices. The
government capped exports below last years levels. The secretary-general of
the Thai rice exporters association told IRRI that
We dont know where the 2007 harvest is. Vichai Sriprasert, a big exporter,
describes the Thai rice market using language that, elsewhere, is literally
true. This is a crucial time, he says. It will tell the story of who will
survive and who will not survive.
How countries
cope
(3)
Reviving the ration card
Apr 17th 2008
>From The
Economist print
editionhttp://www.economist.com/world/international/displaystory.cfm?story_id=11049320
Making food
cheaper is not impossible
IN RANGPUR, one
of Bangladesh's poorest districts, prices of rice, wheat,
cooking oil and pulses have doubled in the past year. About 40% of people there
live on less than $1 a day and, in the country as a whole, more than half are
landless labourers, who buy rather than grow their food. Government officials
talk about hidden hunger.
In Malawi, on the other hand, farmers are weighing a
record crop, thanks partly to government-subsidised fertilisers. Malawihas few
landless poor people, though many
smallholders are net food buyers.
The impact of
higher food prices varies dramatically from place to place. So does countries'
capacity to respond by getting cheap food to poor consumers. The simplest way
is to cut taxes on imported food. Twenty-four of the 58 countries tracked by
the World Bank have done it. Côte d'Ivoire, for example, halved value-added tax
after
its food riots. Ethiopiascrapped VAT on food. Indonesialifted import controls
on soyabeans in
January after the biggest food protests there for years.
Selling
subsidised bread to the poor requires more administrative competence.
Pakistanrecently announced that it was reviving an
old system of ration cards for cheap wheat. Yemensupplies subsidised wheat at
selected
markets and Egyptprovides it to millers to bring down bread
prices. Such measures can easily become entrenchedEgypt's has been operating
for yearsand costs
can spiral. Egyptbudgeted $1.7 billion for wheat subsidies
this year; the estimated cost is now $2.2 billion and rising.
Bob Zoellick, the
head of the World Bank, argues that the best way to protect the poor without
harming farmers is through conditional cash transfers. Mexico, for example,
runs a programme called
PROCAMPO which transfers cash to poor farmers. But such schemes ideally need to
be up and running already (PROCAMPO was set up to compensate farmers before
NAFTA came into force in 1994). And they usually work best in middle-income
developing countries because they make considerable administrative demands on
the bureaucracy. Countries without social-protection systems, argues Simon
Maxwell of Britain's Overseas Development Institute, will
depend on food aid, food-for-work and cash-for-work programmesand it is not
clear how quickly these can be scaled up. Ethiopia's various emergency
programmes will
probably cost well over 1% of national income this year. The World Bank is
almost doubling lending to Africa, to help foot bills like this.
The food
industry
(4)
Tightening belts
Apr 10th 2008
>From The
Economist print
editionhttp://www.economist.com/business/displaystory.cfm?story_id=11021146
As commodity
prices rocket and America's economy sickens, food companies and
retailers are racing to adapt
THE food industry
is being squeezed from all sides. Last year prices for milk, eggs, corn, wheat,
oils and almost all other edible commodities climbed to unprecedented levels.
They are still rising, although at a slower pace. The prices of electricity and
fuel are also on the increase, which makes processing and distribution more
expensive. And passing on higher costs is not easy when customers too are
feeling the pinch, as unemployment rises, the value of their homes falls, and
inflation erodes their purchasing power.
In one sense, food is recession-proof, since
people have to eat in good times and bad. What is more, over the past 30 years
the share of food in American and European household spending has fallen from
an average of 30% to less than 10%, so consumers do not care about price hikes
as much as they did in the past. Even so, they are responding to the economic
gloom by changing what they eat, where they eat and where they buy their
groceries.
Martin Deboo, an
analyst at Investec Securities, a stockbroker, uses the well-worn but apt
analogy of the perfect storm to describe the industry's predicament. Those
best positioned to weather it include multinational companies with diversified
customer bases, such as Nestlé, Unilever and Danone, as well as retailers that
focus on low prices, such as America's Wal-Mart. Among the losers are posh
grocers such as Whole Foods Market, a firm based in Texaswhich specialises in
fancy, often organic
food (see chart). The downturn also hurts smaller companies that do not have
the benefits of scale, depend too much on customers in a single country or
region, and do not add much value to the commodities they process.
Nestlé, the
world's biggest food firm, has so far coped well with the rise in commodity
prices. Its sales around the world grew 7% last year compared with an average
of 1.8% for the industry. Like most of its rivals, the firm has passed some of
the price increases on to its clients. But it was better prepared for inflation
than most. We saw this coming, so we hedged by forward-buying raw materials,
says François-Xavier Perroud, Nestlé's spokesman.
Far-sighted and
nimble sourcing, needless to say, has become more important than ever. Nestlé,
which uses lots of milk making baby formula and chocolate bars, buys it under
contract directly from farmers, rather than on the open market, where prices
jumped by as much as 50% last year. It has also changed the recipe of some of
its goodies to reduce their milk content.
But even clever
purchasing is not enough to help makers of lightly processed or generic
products, which tend to have slender margins. So Nestlé is getting out of the
business of making basic wholesale products such as tomato purée and cocoa
paste. It is also putting a huge pasta factory at Sansepolcro in Italyup for
sale, though it will continue to use
much of its output, and to sell fresh pasta dishes, sauces and other more
profitable Italian products under the Buitoni brand.
Hold the soya
oil
Kraft, one of America's biggest food firms, is struggling with
the soaring prices of its ingredients. The cost of these jumped by 9% or $1.3
billion last year, taking a bite out of profits. The Illinois-based company
says it is working hard to defray the extra expense by saving money elsewhere.
But it believes its best defence against rising costs is to go on the attack,
with products and marketing that are better suited to leaner times. For
example, the company has changed the recipe and packaging of Miracle Whip, a
salad dressing and sandwich spread that is advertised as having the taste of
mayonnaise with half the fat. It now comes in a plastic jar instead of a glass
one, and has a wider opening that allows buyers to scrape out the very last
glob. It now contains less soya oil, which is both fattening and expensive, and
more water, which is slimming and cheap.
Kraft has
launched a new pizza called DiGiorno Ultimate, in an effort to lift its
DiGiorno brand of frozen pizzas into what it calls the super premium
category. The idea is to offer consumers a cheaper alternative to eating in
pizzerias, which rack up $35 billion in sales each year in America. Customers
seem to like it: the DiGiorno
Ultimate accounted for a third of all sales of new sorts of frozen pizza last
year. To keep the pizzas flying from the freezers this year, Kraft plans to
offer individual servings of both its DiGiorno and California Pizza Kitchen
brands, aimed at single people who might not enjoy a lonely meal at a pizzeria
anyway.
American
restaurants are also feeling the effects of the slowing economy, according to a
spokeswoman for the National Restaurant Association. The industry is still
growing: sales are still forecast to reach $558 billion in 2008. But the rate
of growth, at 4.4%, is lower than in previous years. So far restaurant-goers
are not cutting back too much on their restaurant visits, but they are spending
less each time. Restaurateurs are trying to avoid passing the higher cost of
ingredients on to customers by increasing productivityby training waiters to
double as kitchen hands, for example.
Cheap restaurants
are becoming more popular. McDonald's, the biggest fast-food chain, did much
better last year than the year before, though the firm says it is not sure
whether to attribute this to higher food prices, revised menus or a redesign of
many of its outlets. Its customers do not (yet) seem to be trading down to
value-priced food, but then all the items on its menu cost less than $10.
Just to be on the
safe side, McDonald's has come up with a whole menu of items that cost just $1.
It has started an advertising campaign aimed at Dollar Menunaires. Its rivals
have followed suit: Wendy's and Burger King are both selling double
cheeseburgers for $1. Even Starbucks has plans for a $1 coffee.
Another firm that
is thriving in the stormy environment is Wal-Mart, the world's biggest
supermarket chain. It argues that its obsessive focus on low prices is in
keeping with the straitened times. The firm is working with food producers to
come up with ever-cheaper offers. We aim to be, wherever possible, the first
to lower prices and the last to raise them, says a spokeswoman.
Food prices are
likely to remain high for some time. The trends that are feeding the inflation,
including increased demand from developing countries and the growing diversion
of crops to make biofuels, show little sign of slowing. But necessity is the
mother of invention; and the food industry seems to have no shortage of fresh
recipes.
Chinas grain supply
(5)
The ravening hoards
Apr 17th 2008| BEIJING
>From The
Economist print
editionhttp://www.economist.com/world/asia/displaystory.cfm?story_id=11058402
No need for
alarm; but some Chinese ring bells anyway
WITH grain in
our hands there is no need to panic, according to Chinas prime minister, Wen
Jiabao. But officials
worry about how to keep Chinanear self-sufficiency in grain and
sheltered from rising world prices. Mr Wens remarks during a farm tour in
Hebeiin the north were meant to calm public
anxieties about food-price inflation elsewhere in the world. Chinese food
prices have been rising fast too in recent months, but the main impact has been
on meat. Rice- and wheat-price increases have been modest, except for
high-quality imports, a small share of domestic consumption. Chinaproduces more
than 90% of the grain it
consumes.
With global grain
markets so jittery, officials are rather smug about having so long stressed the
need for self-sufficiency. It has enabled the government to keep the domestic
market relatively calm. Early this year, to control demand, it began curbing
grain exports through quotas and taxes. It promised continuing supplies to Hong
Kong. But now grain importers there have had to
pledge that they will not re-export. Diplomats say that Chinas caution has
even affected the flow of
food to North Korea,
an old ally heavily reliant on shipments from abroad. Aid workers say North
Koreais facing its worst food-supply crisis
since a famine in the late 1990s.
Mr Wen offered
reassurances that Chinahas no shortage. When output fell in 2003,
the government renewed efforts to encourage grain production (see chart). They
entailed big increases in subsidies for grain farmers and in the states
guaranteed minimum purchase price for grain. Much else has also been done to
raise farmers living standards, from tax exemption to free education. This
years central-government spending on rural development including education,
welfare and subsidies is due to grow by 30% to nearly $80 billion.
Last month Mr Wen even revealed what had
been a state secret: that Chinahad grain reserves of 150m-200m tonnes,
equal to 30-40% of annual production. Officials note that Chinas ratio of
reserves to consumption is much
higher than the 17-18% level regarded by the United Nations Food and
Agriculture Organisation as a safe minimum for global stocks.
But not everyone
is convinced. Reports in the state-controlled press say that some people in
Guangdongprovince, next to Hong Kong, have been stockpiling grain. In March a
senior agriculturalist, Yuan Longping, accused officials in some areas of
exaggerating the size of grain reserves in order to get more subsidies for
storing them. A commentator in the China
Daily said export curbs would encourage smuggling. Others worry
that the harsh winter in the south and spring drought in the north might dent
output growth this year; and rising prices of fertiliser and other inputs could
deter farmers from growing grain.
Officials
acknowledge that maintaining near self-sufficiency in grain will become harder
as the population grows and arable land shrinks. In 2006 the government said
that the minimum amount of arable land needed to protect grain security was
120m hectares. At that time it was already giving warning that Chinawas
approaching the red line, with about
121.8m hectares available. For local governments building on arable land is
often a money-spinner. Central-government efforts to curb this have not worked.
Some Chinese commentators say the line has already been crossed: some land
registered as arable is in fact being used for non-agricultural purposes.
There has long
been debate in Chinaover whether the countrys grain policy,
which calls for 95% self-sufficiency, is too conservative given the potential
for imports. On grain, however, conservative thinking is now back in vogue.
Bangladesh
(6)
A different sort of emergency
Apr 17th 2008| DHAKA
>From The
Economist print
editionhttp://www.economist.com/world/asia/displaystory.cfm?story_id=11058143
A food crisis
further complicates the army's exit strategy
OUR politicians
were corrupt, but we had enough money to buy food, says Shah Alam, a day
labourer in Rangpur, one of Bangladesh's poorest districts, nostalgic for the
days before the state of emergency imposed in January last year. He has been
queuing all day for government-subsidised rice. Two floods and a devastating
cyclone last year, combined with a sharp rise in global rice prices, have left
some 60m of Bangladesh's poor, who spend about 40% of their skimpy
income on rice, struggling to feed themselves.
In the capital, Dhaka, a debate is raging about whether this is a
famine or hidden hunger. The crisis is not of the army-backed interim
governments own making. But it is struggling to convince people that the
politicians it locked up as part of an anti-corruption drive would have been
equally helpless. They include the feuding leaders of the two big political
parties, the former prime ministers Khaleda Zia of the Bangladesh Nationalist
Party and Sheikh Hasina Wajed of the Awami League.
The state of
emergency, imposed to silence riotous politicians and repair corrupted
institutions, can barely contain the growing discontent. This week thousands of
garment workers went on strike for higher pay to cope with soaring food prices.
The crisis has emboldened the political parties, which have been calling more
loudly for the release of their leaders.
The armys main
headache is Sheikh Hasina, whose party is widely expected to win the election.
Her detention on corruption charges has made her more popular than ever. Senior
leaders of the League say it will boycott the election if the courts convict
her. The threat might be empty. But it is a risk the army cannot afford to
take. The patience of Western governments, which backed the state of emergency,
is wearing thin. Human-rights abuses continue unabated. And they fear the
political vacuum might be filled by an Islamist fringe, whose members this week
went on a rampage to protest against a draft law giving equal inheritance
rights to men and women.
The election will
almost certainly take place. And, unlike in the past, rigging it will be hard.
Bangladeshhas its first proper voters list.
Criminals will be banned from running. But to hold truly free and fair
elections, the army will need to reach an accommodation with the parties. There
is talk of a face-saving deal allowing Sheikh Hasina to go abroad for medical
treatment, in return for a promise that the League will not boycott the
election.
Hardliners in the army will not like it. But they have largely been sidelined.
With food prices likely to remain high and rice yields half those of India,
Bangladeshdesperately needs to secure food aid,
investment and trade.
It also badly needs to sustain the rising
flow of billions of dollars in remittances, which have lifted millions of
Bangladeshis out of poverty. This complicates the governments stated plan of
considering prosecution of those who assisted the Pakistani army in a campaign
that left 3m Bengalis dead in the countrys liberation war in 1971. Saudi
Arabia, which accounts for 40% of total
remittances, objects to an international war-crimes tribunal. If the two big
political parties had their way, a large number of leaders of Jamaat-e-Islami,
Bangladeshs largest Islamist party, would stand
trial.
It appears
unlikely that the army will walk off the pitch and let the politicians run the
country without altering the rules of the game. The interim government has
already approved, in principle, the creation of a National Security Council,
which would institutionalise the armys role in politics. Last month the army
chief, General Moeen U Ahmed, extended his term by one year in the public
interest. His term now runs out in June 2009. But many Bangladeshis still
doubt that he will go down in history as that rare general who gave up power
voluntarily.
____________________________________________________________________________________
Be a better friend, newshound, and
know-it-all with Yahoo! Mobile. Try it now.
http://mobile.yahoo.com/;_ylt=Ahu06i62sR8HDtDypao8Wcj9tAcJ
[Non-text portions of this message have been removed]
------------------------------------
***************************************************************************
Berdikusi dg Santun & Elegan, dg Semangat Persahabatan. Menuju Indonesia yg
Lebih Baik, in Commonality & Shared Destiny.
http://groups.yahoo.com/group/ppiindia
***************************************************************************
__________________________________________________________________________
Mohon Perhatian:
1. Harap tdk. memposting/reply yg menyinggung SARA (kecuali sbg otokritik)
2. Pesan yg akan direply harap dihapus, kecuali yg akan dikomentari.
3. Reading only, http://ppi-india.blogspot.com
4. Satu email perhari: [EMAIL PROTECTED]
5. No-email/web only: [EMAIL PROTECTED]
6. kembali menerima email: [EMAIL PROTECTED]
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/ppiindia/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/ppiindia/join
(Yahoo! ID required)
<*> To change settings via email:
mailto:[EMAIL PROTECTED]
mailto:[EMAIL PROTECTED]
<*> To unsubscribe from this group, send an email to:
[EMAIL PROTECTED]
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
