food crisis – what you don’t know

Submitted by sproutingforth on Mon, 2008-05-05 11:17

We know the touted reasons for the global food crisis, taken up by media world wide.

But do we know the implications behind the food crisis? Do we understand what the food crisis means for the independent small farmer? Are you aware that global agricultural markets are deregulated? The current free market leaves the fate of our economic and food systems to the roll of the dice. []

During the eighties and nineties, global commodity agreements, price supports and other mechanisms which helped keep global supplies and prices stable were dismantled. The World Trade Organization’s Agreement on Agriculture, together with multi-lateral and bilateral agreements including the North American Free Trade Agreement (NAFTA), slashed agricultural tariffs in the developing world, and opened up markets for a growing global agribusiness industry.

The food crisis in figures: From March 2007 – March 2008 via [BBC]

  • The price of corn has risen 31%
  • Rice 74%
  • Soya 87%
  • Wheat 130%
  • The world population:
  • 2.5 bn in 1950
  • 4.1bn in 1975
  • 6.1bn in 2000
  • 8 bn in 2025
  • 9.2bn in 2050
  • pressure on resources
  • 1000-2000 litres of water is needed to produce 1kg of wheat
  • 10 000-13 000 litres of water is needed to produce 1kg of beef
  • in 1980 meat consumption in China per capita was 20kg
  • in 2007 meat consumption in China per capita was 50kg

Market liberalisation and the dumping of cheap commodities in the US swamped small farmers both there and abroad, pricing them out of local markets. The reason: in 1996 the US pass the Farm Bill, which eliminated domestic price supports for most commodities and replaced them with a massive system of subsidies.

The result of all of this deregulation meant that small producers lost access to the local market giving global market access to a few global producers. Three companies—Cargill, Archer Daniels Midland, and Bunge—control the vast majority of global grain trading, while Monsanto controls more than one-fifth of the global market in seeds. Consumers from Sioux City to Soweto are more and more dependent on fewer and fewer producers. By eliminating the breadth and diversity of the system, we’ve eliminated its ability to withstand shock or manipulation.

Perhaps the greatest evidence of the scale of deregulation of the world agricultural market is the liquidation of reliable grain reserves. Though we’ve impressively deregulated financial markets, the Federal Reserve and central bankers across the globe still maintain the ability to soften the spikes and plunges of our monetary system. Not so in food markets. For centuries grain reserves have been an essential component of functioning food systems. When prices are high grain reserves can be released on the market, bringing prices down. When prices are low, reserve systems buy up grain, bringing prices back up. In the last two decades, however, the U.S. and most other governments have let reserve systems wither, placing full faith in the free market to self-correct, and eliminating their last emergency response mechanism.

The Cargills and ADMs of the world are traders—similar to financial traders—but in livestock and commodity futures. In an un-regulated global market they’ve gained enough market share that through buying and selling, they can play off both supply and demand. And their actions can set the direction of global prices. They can send shockwaves through the entire system.

If the weather turns bad, commodity prices could still double over the next few months. But with the stability of the food and agriculture system left up to the whims of mother nature’s next crop yield, or how Cargill, ADM and the venture capitalists spin the roulette wheel, the bust is in the making. If the rural farm economy tanks, we’re set to see farm foreclosures, another banking crisis, and global hunger that will make the sub-prime mortgage effects look like a drop in the bucket.

So what are world leaders doing about this impending crisis? Politicians like George Bush and Gordon Brown, in lockstep with the World Trade Organization and the World Bank, are mainly proposing two solutions to the food crisis: food aid, and increased free trade in industrial agriculture. Agribusiness is positioned to cash in on the perceived need to ramp up production globally and to tear down remaining trade barriers. And Monsanto already has policymakers parroting its line of increasing efficiency and yields through investments in genetic engineering and high-tech inputs.

But these are NOT the solutions to the failed food system – they’re the root causes… []