Already a Bloomberg.com user?
Sign in with the same account.
The global food shortage could lead to lower trade barriers and innovation that may raise farm productivity
The global food crisis has brought on riots in about a dozen countries and left many panicked world leaders scrambling for answers. Alarming increases in once-affordable basic food staples such as rice, corn, and wheat have made millions more of the world's poor vulnerable to hunger and malnutrition. Past food market emergencies have been mainly regional in scope. This one has affected both rich and poor countries around the world and will be far from a passing turbulence.
Consider that food prices globally have climbed 83% in the past 36 months and are expected to stay high through 2015, according to the World Bank. "This is hitting everyone, but it's hitting hardest people who live on less than $1 a day," says Josette Sheeran, executive director of the U.N.'s World Food Programme, or WFP.
Depressing stuff. Step back, however, from the alarmist headlines and doomsday talk-show chatter. There are sensible measures, though hardly easy ones, that can be taken to prevent widespread hunger and social unrest from becoming a permanent feature of the early 21st century. Right now, the WFP and other relief agencies have been rounding up pledges of emergency aid from governments. The U.S. has promised $200 million, and Japan, $100 million. That helps, but it isn't a lasting solution to the crisis. What's needed are more enlightened global agricultural policies and smarter, more efficient farming technologies—and in both realms there is cause for optimism.
The food crisis seems to have strengthened resolve to kick-start World Trade Organization (WTO) negotiations aimed in part at lowering trade barriers for food. Innovation will play a role, too: A new wave of improvements in farming methods could eventually produce a major increase in agricultural productivity, especially in the heavily populated regions of Asia and Africa.
The cause of the current food crisis is multifaceted. A prolonged drought in Australia's wheat belt, combined with richer diets and massive increases in fuel consumption in the surging economies of China and India, set the stage for higher food prices everywhere. The soaring cost of oil makes producing and distributing food more expensive. At the same time, the increased use of corn for ethanol, while not creating shortages, has helped drive up the price of bushels.
If the crisis has an upside, it may be that the runup in global food prices has given some negotiators at the WTO in Geneva hope for progress in the current round of global trade talks. The so-called Doha Round of trade negotiations calls for rich and poor nations to reduce subsidies for farmers and tariffs on food imports. Talks broke off twice in the past two years amid acrimonious disagreements over subsidies and price controls.
But diplomats now expect to hand in a draft agreement to the world's trade ministers in May. One reason for hope: It's hard to justify crop price supports in a world experiencing instances of social unrest because of global food inflation. India's minister of commerce and industry, Kamal Nath, has expressed optimism about a trade deal, and a senior U.S. trade official says pressure to solve the food problem "should make it easier to reach an agreement." But he cautioned that the ministers will consider the trade-offs and may balk. "The reality is some people are still stuck on the lines of the past," he says.
Trade restraints worsen the food squeeze. Export restrictions by poor countries such as India and Indonesia take away the international market for local farmers' crops, reducing the incentive for farmers to grow more. Meanwhile, rich countries' subsidies and import curbs mean too much of the world's food is produced in high-cost regions such as North America and Europe, both big exporters. When shortages develop, the rich-country crops are too costly for poor nations to afford.
There's little relief for the food crisis in the farm bill now wending through Congress. It essentially maintains the status quo, continuing price supports and retaining the policy of requiring developing nations to use the U.S. aid they get to purchase American crops. That said, if a new WTO agreement is reached lowering subsidies, the farm bill will have to be amended later. Mary Kay Thatcher, director of public policy at the American Farm Bureau Federation, which represents agriculture interests, says that if the WTO agreement is reached, "we can make the farm bill fit."
While food policy remains tangled, there's a lot of new thinking about agriculture methods that promises productivity increases in the big food-producing countries and for small farms in developing nations. After major farm production gains worldwide between the 1940s and 1970s, investments by nations tailed off. Now that seems to be reversing.
The technology advances that have swept other business segments are now being felt full force in U.S. agriculture. So-called precision agriculture changes the way farmers manage their fields. Using sophisticated computer systems and global positioning satellites, a farmer can modify the amount of fertilizer, seeds, and water applied within a single field based on varying soil and moisture conditions. Techniques such as these bring efficiency gains of between 7% and 15%.
Meanwhile, the genomic revolution is coming to farming. When the Maize Genome Sequencing Project is completed this fall, seed producers will be able to identify the genes for key traits of various crops faster and more cheaply. At the same time, resistance by some countries to genetically modified grains appears to be easing.
But there's a catch. Now that some crops, such as corn and sugar, are fuel as well as food, advances in agricultural productivity won't automatically improve the food supply. "Crops will go to the highest bidder, and we in the Western world are willing to pay more for fuel than poor people are able to pay for food," says Patrick S. Schnable, professor of agronomy at Iowa State University and a researcher on the maize project.
THIRD WORLD FOCUS
So another challenge for policymakers is to make bigger productivity and crop yield gains in the agricultural sectors of the developing world. (An immediate problem is that farmers face soaring prices for fertilizer products, a market also experiencing shortages.) The U.N. on Apr. 29 announced a $1.7 billion plan to distribute highly productive hybrid seeds to farmers in the developing world to boost crop output.
The Bill & Melinda Gates Foundation supports a handful of projects aimed at improving the entire business ecology of small farms. The groups it funds provide seeds, advice, low-cost technologies, and access to markets. "We think we and others can pull several hundred million people out of poverty in spite of the longer-term increase in the price of food," says Raj Shah, Gates' director of agricultural development.
In the meantime, 1 billion people are at risk of starvation or severe malnutrition. The WFP's Sheeran warns that during the so-called hungry period, just before harvest, "poor farmers will eat their seeds if they don't have anything else." To prevent that kind of outcome on a large scale will take plenty of smart thinking and political resolve in the years ahead.