The globe has been experiencing worst food crisis. Rising food prices have developed into a global crisis. The UN Chief Mr. Ban has rightly opined that ‘this steeply rising price of food has developed into a real global crisis’.1 Ban The United Nations must take immediate action in a concerted manner. Hence, there has been an urgent need to evolve a sound and effective strategy to over come the crisis.
Emerging trends:
The following are the alarming facts about present world food scene:
Global food stock stocks are the lowest opined by FAO.
Food riots reported fro Egypt, Cameroon, Haiti, and Senegal.
Rising food demand from rapidly developing economies in general and emerging economies in particular namely-China and India, the use of crops for bio-fuels, world stocks at 25 year low and market speculation are pushing prices of staples such as wheat, maize and rice to record high.
But the future looks food with better crop prospects.
India may lift restrictions on wheat and rice exports.
Good output of rice expected from India, Thailand and Vietnam.
Bumper wheat output from India, Australia, the US and Canada.
Matter of great concern:
The rise in food prices world over is hurting the poor the most. This is because the prices of commodities like wheat, rice, cereals, edible oil and milk have increased drastically during the last one year. Particularly steep has been the rise in prices of wheat, and rice (Chart1). Governments of several food growing nations worried about domestic shortages have imposed export curbs, spooking markets at a time when world inventories are down sharply. Prices of rice, s staple in most of Asia and 50 per cent of the global population, have registered a rise of 68 per cent since the beginning of 2008. US rice futures have went up to an all-time high.
Source: Prepared by the author from FAO, Data.
Average global food prices will retreat from current peaks but will still be up to 50 per cent higher in the coming decade than in the previous years. High oil prices are the part and parcel of food prices.
World Bank’s Point of View:
The President of World Bank has suggested a 10-point action plan for meeting the present food crisis. The 10-point strategy is as under:2(Zoellick)
The various economies should agree to fund fully the World Food Programme’s emergency needs.
Calls for support for safety nets namely distribution of food in schools or offering food in return fro works.
Availability of more seeds and fertilizer for coming planting session especially in poor nations.
To enhance agricultural supply and increase research spending.
More emphasis on the need fro investment in agribusiness.
Calls for innovative instruments for risk management and crop insurance for small and marginal farmers.
To realize the need for the US and EU to ease the effects of subsidies, mandates and tariffs on bio-fuels.
Removal of export bans by 28 leading exports of food grains in the world.
The plan calls for action on the part of the Japan and China and other countries to release some of their buffer stocks to dampen the price rise situation.
There is an urgent need for an agreement among G-8 and the key developing countries to hold global food stocks.
Crisis Response Facility:
In order to give sustainability to the World Bank’s action plan, the Bank is initiating a ‘Global Food Crisis Response Facility’. This facility was put on fast-track action to address immediate needs arising out of the crisis. This includes US $ 200 million grants, especially to the exposed economies. Assistance would be made available for cheap fertilizers, safety net programmes and budget support. Accordingly the Bank would enhance assistance for agriculture and food related operations from US $ 4 billion to US 4 6 billion over the years. This step is productive and is similar to the one that Henry Kissinger initiated as US Secretary of State by establishing the International Fund for Agriculture and Development in the decade of 1970s.
The quantities of agricultural commodities that could be bought declined as prices rose because most food aid organizations had fixed resources and budgets and little availability to raise more funds. The increase in costs hit non-governmental organizations’ food aid operations particularly hard, with a 19 per cent reduction in volumes last year.3 (Brinkman H)
In fact, Venezuela has used these projects to provide free or subsidized food to millions of people. Under the said projects, redistribution of 2 million hectares of land has been made among small-scale farmers. Added to this, the Venezuelan Government has raised its spending on agricultural out by huge margin of 728 per cent during the last three years. Similarly, the ALBA States initiated a US $ 100 million fund for staple foods like maize and rice to ease out the impact of the persisting food crisis and rising food prices on the poor people in these countries.
In order to avoid speculations, these economies have agreed in principle to create a public food distribution network and to regulate the price of food. Unfortunately, the vast majority of other economies in the SOUTH, which do not have progress governments, have largely failed to take similar measures for the benefit of their populations.
For the first time, India would build a strategic food grains reserve of 5 million ton to meet emergency situations. The decision to build the reserve’ is a clear indication that the Government is deeply concerned and worried about the possibility of a grain shortage in the event of a calamity’.4
Multilateral Agencies:
The International Monetary Fund (IMF) has suggested in talks with Governments in 10 countries, mostly in Africa, about increasing financial assistance to cover the soaring cost of food.
The World Trade Organization (WTO) should push food-producing economies to maintain exports to prevent a worsening of the international food crisis. WTO needs to exert its pressure and influence to reduce tariffs and thereby encourage trade. It should also got to stand up against export restrictions, export taxes, which too would stop the free flow of trade in food-stuffs and agricultural produce.5
The European Union has observed that if we restrict trade, we are simply going to add food scarcity to the already large problems of food shortages that exist in different part of the world.
Japan has announced US $ 100 million in emergency food aid and World Food Program’s opined that that the cost of feeding the world’s hungry had spiked nearly 40 per cent amid spiraling food costs and oil prices.
Food agriculture Organization (FAO) has come out and suggested that there is an urgent need to help developing economies and countries in transition expand agriculture, agri-business and rural development, from both public and private sources.6
The looming threat to global food security that recent development point to comes not so much from concerns about food production as from the rising prices of crude oil, which are prompting the division of vital grains to bio-fuel output. This had adversely distorted the global market of coarse cereal, which occupies a central place in food items as well as feed crop in different parts of the globe.
The adverse impact of the commodity boom on food availability and prices, especially at the retail level, has tended to linger even after international prices have declined back to more reasonable levels. This is borne out by the current situation in the USA and Japan though global prices of wheat, rice, oilseeds and some other goods have already softened.
Prospects:
The things are looking up. Besides the expectation that major producing nations of wheat and rice might lift ban on exports of wheat and rice, the crop prospects look bright in the United States and Australia. While in developing nations namely India, Thailand and Vietnam have better wheat and rice outlook and therefore, it is expected that the crisis would be eased out. But fact is that future look uncertain if economies continue to neglect agriculture as has been the case for decades.
References:
1. Rising Food Prices A Global Crisis: UN Chief; The Monthly Commentary; New Delhi; June 2008.
2.World Bank’s 10-point Plan for the Food Crisis; The Business Line; Chennai; June 9, 2008.
3. 17. Brinkman, H; Head of Food Security Policy and Management at WFP; Rome, Italy.
4. Grain Drain; The Financial Express; New Delhi; June 15, 2008.
5. Food for Thought; The Yojana; Planning Commission; Government of India; New Delhi; June 2008.
6. Liberalizing Food Trade to Death; South Bulletin; Geneva; Switzerland; June 16, 2008.
Guest post By Prof. Dr. Badar Alam Iqbal
Chairman, Department of Commerce
Aligarh Muslim University (UP) India
Dr. Munir Hassan
Associate Professor
Business School, Park University
USA
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