Wednesday, April 27, 2011

the capitalist food crisis

U.S. corn prices soared to their highest level since the food crisis of 2008. Corn futures have more than doubled since last summer.

Global agriculture currently produces 4,600 calories per person per day, enough food to feed the world population, but much of that is being lost along the supply chain. Despite adequate crop production, food is not always distributed to where it is needed, said Sudhakar Tomar, the managing director of Hakan Agro, a food trading company in Dubai. If people in the developed world ate 10 per cent less meat, enough farmland would be freed up to grow an extra 500 million tonnes of lentils and pulses every year. With better agricultural practices, food security could be achieved within a lifetime. Thirty per cent of food may be lost or wasted before and after it reaches the consumer, according to a recent British government report. Other estimates put the figure at fifty per cent. Technology that can tell when food is spoiled could be more efficient than relying on 'best before' dates. Food no longer fit for human consumption could be used as animal feed, while other, edible surpluses could be recycled to the needy.

Many farmers in the American southern states will be planting cotton in ground where they used to grow corn, soybeans or wheat - spurred on by cotton prices that have soared as clothing makers clamour for more and poor harvests crimp supply. The result is an acreage war between rival commodities used to feed and clothe the world.
''There's a lot more money to be made in cotton right now,'' Ramon Vela, a farmer in the Texas Panhandle, said . Farmers say they have no choice but to plant the crops that give them the best chance of making money. "...from a humanitarian perspective it's kind of scary,'' Webb Wallace, executive director of the Cotton and Grain Producers of the Lower Rio Grande Valley, said. ''Those people in poor countries that have a hard time affording food, they're going to be even less able to afford it now.'' Artificial fabrics have increased their prices as well, between 35 percent and 100 percent since December of 2009 affected by increases in the prices of petroleum and they are still climbing.

Also around a fifth of the world's farmland is currently used to grow crops for biofuels rather than food. The United States, which once was able to act as a global buffer of sorts against poor harvests elsewhere, is now converting massive quantities of grain into fuel for cars, even as world grain consumption, which is already up to roughly 2.2 billion metric tons per year, is growing at an accelerating rate. A decade ago, the growth in consumption was 20 million tons per year. More recently it has risen by 40 million tons every year. But the rate at which the United States is converting grain into ethanol has grown even faster. In 2010, the United States harvested nearly 400 million tons of grain, of which 126 million tons went to ethanol fuel distilleries (up from 16 million tons in 2000). This massive capacity to convert grain into fuel means that the price of grain is now tied to the price of oil. So if oil goes to $150 per barrel or more, the price of grain will follow it upward as it becomes ever more profitable to convert grain into oil substitutes. And it's not just a U.S. phenomenon: Brazil, which distills ethanol from sugar cane, ranks second in production after the United States, while the European Union's goal of getting 10 percent of its transport energy from renewables, mostly biofuels, by 2020 is also diverting land from food crops.

Financial speculation is also helping keep grain prices high. John Sanow, a grain market analyst with Telvent DTN, notes that speculators often cause exaggerated price swings because they trade on momentum. As prices rise, investors snap up futures contracts for grain, driving prices higher. Financial deregulation opened the door for pensions, hedge funds and other big investors to buy more contracts in the commodities market. That made grain markets far more volatile, said Scott Irwin, an agriculture economics professor at the University of Illinois. President Nicolas Sarkozy -- the reigning president of the G-20 -- is proposing to deal with rising food prices by curbing speculation in commodity markets. Useful though this may be, it treats the symptoms of growing food insecurity, not the causes.

No one knows where this intensifying competition for food supplies will go. Food nationalism may help secure food supplies for individual affluent countries, but it does little to enhance world food security. The Food and Agriculture Organization collects and analyzes global agricultural data and provides technical assistance but there is no organised effort to ensure the adequacy of world food supplies.

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