'...we ate all the food we wanted'

Understanding the global food crisis

by Jonathan Cornford

Manna Matters June 2009

You have probably heard that the world has been in a 'food crisis' for a couple of years, but other than an annoying increase to our grocery bills, it can be hard for us in Australia to treat it seriously. However, the UN's Food and Agriculture Organisation estimates that since mid-2007 an additional 75 million people have gone hungry. The story by Samantha Baker-Evens puts a human face on this statistic.

World food prices - especially for the three key global crops: wheat, rice and corn - have been steadily rising since 2000. Between mid-2007 and mid-2008 there was a sharp spike in the prices of these crops - 130% for wheat, 98% for rice and 38% for corn. This had a dramatic impact on the ability of the poor to buy food, resulting in food riots across three continents. Since mid-2008, the export prices for these crops has dropped, although prices in developing countries still remain high.

So what has caused this crisis? The current food situation is a perfect storm of factors coming together all at once - some of these are what are called cyclical factors, which means they come and go; and some of these are structural factors, which means they will affect food prices for the long term. At the root of it all are some fundamental conundrums concerning our global food economy.

Cyclical Factors

  1. Drought in Australia resulted in a significant decline in the global wheat supply in 2006 and 2007. Flooding in South Asia and pests in Vietnam also impacted the 2007 rice crop.
  2. Fleeing the sub-prime mortgage crisis, large financial investors, especially pension and superannuation funds, increasingly moved into speculation in food futures markets (where future crops are traded) to take advantage of rising prices, and further contributing to the price spike. (That's right, some of us may actually have made a profit from the food crisis through our super funds.)
  3. Depreciation of the US dollar against Asian currencies resulted in higher wheat prices, as wheat is traded in US dollars.
  4. In some countries, opportunistic hoarding of food stocks by traders pushed prices even higher.

Structural Factors

  1. Rising oil prices have had a dramatic impact as agriculture around the world has become increasingly dependent on oil-based inputs, such as fertilizer, tractors and irrigation pumps.
  2. Growing European demand for biofuels has led to a growing portion of corn to be diverted from food sale to biofuel use. In Asia, an increasing amount of land that was previously used for rice has been diverted to biofuel production.
  3. As the growing Asian middle-class increasingly adopt Western-style diets, the dramatic increase in meat and dairy consumption has led to increasing amounts of food grains (especially wheat and corn) being diverted from human consumption to livestock feed.

However, perhaps the most significant underlying factor in this food crisis is the one least talked about. Since the Industrial Revolution we have evolved a global economy that is dependent on undervaluing food production. The fantastic cheapness of our consumer goods is dependent on cheap wage labour in the urban centres of developing countries, who are in turn dependent on cheap food in order to survive. It is these who are hurting the most in the current crisis. The dark irony is that urban migration in developing countries is itself largely a result of the undervaluing of agriculture that keeps food cheap, as broken and dispirited farmers are left no option but to stream into the cities looking for work.

I am personally convinced that a fairer and more ecologically sustainable economy is dependent on bringing the role of agriculture back to the centre of things, and this ultimately means paying more for food. But how can we get there without increasing the suffering of the world's urban poor? Solving this Gordian Knot is one of the great challenges of our time, as if we didn't have enough to sort out already...

The Food Crisis and You

How can we take responsibility for our part in the global food system?

  • Eat less meat - much of the livestock that produces our meat are fed grain at some stage of their life cycle (some intensively). This diverts grain from human consumption, increasing demand and raising the price.
  • Take some action to support international labour rights - in the longer term, the best outcome for workers in poor countries is higher wages rather than cheaper food. See www.oxfam.org.au/campaigns/labour-rights
  • Switch your superannuation to an ethical investment fund that uses a positive screen investment approach - see www.responsibleinvestment.org for a comparison of super funds. This should mean that they do not speculate in commodities futures markets, however it wouldn't hurt to ask them just to check.
  • Voluntarily begin to pay a higher price for food by buying organic food (fruit and veges, milk, meat) and fair trade produce (tea, coffee, chocolate, cocoa). This will not alleviate the food crisis in poorer countries, but it does promote fairer and more careful agriculture and it is a start down the long road to restoring a higher economic standing for agriculture.
  • Where you can, try to buy food grown closer to home. Once again, this will not alleviate the current food crisis, but if more countries have a greater degree of food production that services local needs, this will improve food security in the longer-term. Reducing 'food miles' is also important for climate change reasons.