Soaring food prices
Inadequate production levels, oil price hikes and a new fad for biofuels are making food costs soar. The trend spells disaster for the poorest consumers, but offers opportunities for farmers in the South.
Cars pelted with stones, tyres burned, petrol stations looted: Bobo Dioulasso, a major town in western Burkina Faso, had never seen such displays of violence and vandalism. On 20 February 2008, a demonstration against the high cost of living – the price of some products having risen by 65% in January – got out of hand. Food riots are becoming more and more frequent in Cameroon, Guinea and Senegal, as well as in other countries, such as Morocco and Yemen.
In the North as in the South, shopping for food is becoming more expensive with each day that passes, especially in places where most food products have to be imported, such as the Caribbean islands. The poorest people are finding it increasingly difficult to feed themselves. In Haiti, 6 out of every 10 people do not have enough to eat and some calm their hunger pangs with biscuits made of clay. The rising cost of food aid, now forcing some donors to restrict the volume, is compounding the problem.
The FAO Food Price Index has increased by almost 36%. “The cost of living is rising all the time: for example, the price of a kilo of salt has risen from RWF150 to 300 (€0.2 to 0.4), a litre of oil from RWF700 to 1,200 (€0.85 to 1.4),” complains a Rwandan farmer.
Bewildered citizens are calling on their governments to bring prices down to a level that is acceptable to all. “The government should do something. If it doesn’t there will soon be nothing left that consumers can afford,” said the spokesman for Burundi’s consumer association at the end of 2007.
For the time being, there is little that authorities in either the South or the North can do, for the general price rises are linked to a range of factors currently affecting world markets, exacerbated in some African countries by mediocre or poor harvests.
Inadequate supply
Demand for food products is climbing rapidly. The population growth – more than 28 million new mouths to feed each year – is not the only reason. Improvements in living standards are driving consumer demand and changes in eating habits in emerging countries, contributing to the overheating of the food-based economy. Annual per capita meat consumption in China has jumped from 20 to 50 kg in less than 30 years. Almost half the global output of cereals is used to feed livestock.
Unfortunately, supply is failing to match this growth in demand. Global wheat production, for example, is inadequate. Drought in Australia, a major producer, coupled with a fall in the quantity of land given over to wheat production in Europe have led to a sharp drop in stockpiles and massive price hikes – wheat prices rose by 83% between January 2007 and the beginning of 2008. The price of bread soon followed. In Swaziland, half the population lives on less than one dollar a day, not even enough to buy a loaf of bread at today’s prices.
Supplies of rice, imported in large quantities by many ACP countries, are dwindling on the world market due to growing consumer demand. India has opted to keep its rice for the domestic market, Pakistan is having trouble exporting its crop due to political instability and Vietnam has little available for sale. So it is hardly surprising that the price of rice delivered to Dakar rose from US$400 to 500/t between January and February 2008. Such price hikes have an impact on the cost of local products, especially in cases where production is limited. The price of South African maize exported to a number of southern African countries has risen by 31% in a year, gravely compromising the food security of communities in Katanga, southern Democratic Republic of Congo, amongst others.
Biofuel and oil prices
Shortfalls in food products are also linked to the rapid advance of biofuel crops. The case of maize offers a dramatic illustration. USA used 54 million t of maize for ethanol production in 2006/7. Maize prices rocketed at the beginning of 2007, before increased output helped stabilise the figure at 30% higher than the previous year. In the EU, the amount of wheat turned into biofuel is expected to increase twelvefold between now and 2016.
This downturn in supply has a knock-on effect for the majority of the world’s most commonly traded food products. Livestock has been particularly hard hit by price rises for cereals and fodder, especially maize, and the cost of its products strongly reflects these hikes. The price of milk has risen by 80 to 200%. Poultry prices have climbed by 10% globally.
The expansion of land areas sown with maize has resulted in a 6% drop in those used to grow soya, the world’s major oil-producing crop. Contributing to the relentless growth in price is the strong demand for vegetable oils to make biodiesel. According to FAO, the price of oils and fats has risen by 70% in just a year. “So, for example, palm oil in Africa, which is used for biofuel, is now being priced at the fuel price which people cannot afford,” said Josette Sheeran, Executive Director of the World Food Programme. Oil prices have also spiked to over US$100 a barrel – more than twice the figure of a year ago. As a result, the cost of sea freight has virtually doubled, which has led to an increase in the cost of imports, while road transport places a heavy burden on the economies of land-locked countries. Local products are also affected by rising fuel costs. Oil prices have an impact on the manufacture of fertiliser and other chemical products needed for crop cultivation.
A combination of these factors caused the cost of food imports in developing countries to soar by 25% in 2007 and those of cereals to climb by 35%, according to FAO, which forecasts similar increases in 2008.
An opportunity for farmers
In spite of the evident anger of their people, governments have few options available to cushion the price hikes in the short term. They can lower import duties, as Senegal has done. In September 2007, it abolished the 10% tax on rice imports. At the beginning of March 2008, Burkina Faso removed import duties on rice, milk and salt.
Other possibilities include banning exports and subsidising the purchase of certain staple food products. Since January 2008, Jamaica has been doing this for five major commodities. At the beginning of March, CARICOM also proposed removing import taxes on a range of products in a bid to slow down the rise in food prices, which has reached 40% in the poorest islands.
However, these difficulties can also offer opportunities for farmers as local production becomes more competitive in order to feed people living in towns. Increasing outputs of food crops, especially cereals, as well as productivity is now imperative for many countries faced with food deficits – shortfalls that have been exacerbated in recent years by the vagaries of climate change. That means proactive policies to support farmers, help them buy inputs and materials and keep prices buoyant. Since 2005, Malawi has managed to increase maize output by 73% thanks to a vigorous policy of subsidies for seeds and fertilisers.
One strategy to cut consumption of imported products is to make more use of local cereals, especially in bread manufacturing. Nigeria has been doing this since 2005, making it obligatory for bakers to incorporate 10% of cassava flour in bread. The same thing is happening in Jamaica, where cassava-based bammy bread is proving increasingly popular. In St. Lucia, local poultry production is enjoying a revival as the search is stepped up for substitutes to imported maize as feed. Food security is more in the spotlight than ever.
More details: spore.cta.int or www.globalhort.org
Posted: April 23rd, 2008 under Development.