Pressure's On

The pressure's indeed on--the World Bank is reporting global food price increases, increases due to global warming and oil price increases.




The April Food Price Watch report says "Global food prices have increased by 8% in the last four months since December 2011, and in March 2012 were only 6% below their February 2011 historical peak. All key food prices have increased, except for rice."

Cold weather in extreme cold in Europe, the Russian Federation, and other countries is blamed for upward pressure on wheat prices, while hot and dry conditions in South America have affected sugar, maize, and soybeans. There is a little good news in that a slowdown in maize-to-ethanol conversion in the US is helping put a brake on price rises, as is aa lower value for the Euro.Also, record prices in 2010-2011 have encouraged more planting, which should help offset weather/climate induced shortfalls.
The report also points out some dramatic domestic price changes around the world:

Wheat price increases between March 2011 and March 2012  reached 92% in Belarus and 56% in Moldova, while they declined by 30% in El Salvador, 19% in Kyrgyzstan, and 16% in South Africa. The price of maize rose by 82% in Malawi, 80% in Ethiopia, and 71% in Mexico. The largest maize declines occurred in Honduras (31%), Somalia (20%), and El Salvador (19%). Rice prices in the same period rose by 125% in Uganda, 54% in Tanzania, and 38% in Rwanda. In turn, Bolivia saw its rice prices decline by a more modest 21% and Bangladesh's declined by 18%.

So while there have been some declines in prices, the rises have more than outweighed them. But once again, the shortfalls in production, while worrying, and the price increases, while scary, do not mean that there isn't enough food in the world. Famine is not an automatic byproduct of these shortfalls. Starvation will result from a lack of purchasing power, not a lack of food.
And, to repeat:

 Models that just treat supply and demand are not consistent with the actual price dynamics. There is a consistent firm upward pressure on food prices from the increased demand from ethanol conversion programs, but the big driver of food prices is "specifically due to investor speculation."

NECSI Update

The New England Complex Systems Institute and their President, Professor Yaneer Bar-Yam who's study I quoted when writing about debt and food prices, have issued an update to the landmark study done on the relationship between corn ethanol production, food commodity speculation and food prices. And Professor Bar-Yam is pretty convinced we're not done with the madness yet.
The Institute's web site hosts three very interesting short videos (regretfully, not embeddable) about the relationship of corn ethanol production, food commodity speculation, and food prices. The first shows how food prices between 1980 and 2000 fluctuated moderately around a consistent value, where prices neither spiked nor collapsed. Then food prices begin a dramatic upward climb peaking in 2008 and 2011. These two spikes are rather dramatic, and Professor Bar-Yam draws a direct link between the price spikes and social unrest. This is shown in the second video which links social unrest (like the Arab Spring) with food prices between 2004 and 2011.
The third video graphs actual food prices with increases in demand from ethanol production and speculation. To quote the update:

Our analysis shows that dominant causes of price increases are investor speculation and corn to ethanol conversion. Models that just treat supply and demand are not consistent with the actual price dynamics. The two sharp peaks in 2007/2008 and 2010/2011 are specifically due to investor speculation, while an underlying upward trend is due to increasing demand from ethanol conversion.

 Models that just treat supply and demand are not consistent with the actual price dynamics. I thought that bore repeating with emphasis. There is a consistent firm upward pressure on food prices from the increased demand from ethanol conversion programs, but the big driver of food prices is "specifically due to investor speculation."

"The food price bubble of 2011 caused widespread hunger and helped trigger the Arab spring. In 2013 we expect prices to be even higher and may lead to major social disruptions." said Professor Bar-Yam President of NECSI, who has just returned from Davos where he presented his findings on speculation in global commodity markets. His paper "The Food Crises: A Quantitative Model of Food Prices Including Speculators and Ethanol Conversion" was called by Wired magazine one of the top 10 discoveries in science of 2011.
In 2008 and 2011 increases in global food prices triggered hunger, food riots and social unrest in North Africa, the Middle East, and elsewhere, at a cost to global stability which policy makers can no longer ignore. Over the past decade, world unrest has sharply increased at time of peak food prices; now the long-term price trend is getting close to what used to be episodic peaks.
According to the new study, the next food price peak will take place in about a year. The results will be dramatically higher prices than we have encountered thus far. The study warns that should ethanol production continue to grow according to multiyear trends, even the underlying trend will reach social-crisis levels in just one year.

from the update

So get a garden in, build a chicken coop in you backyard, and plan to do a lot less of everything, because you're going to need your $$ for food. Our refusal to find a way to put the brakes on global capitalism means that we're in for a rough few years. A lot more people are going to fall from "working poor" into "destitute poor" and none of it needs to happen. I don't want to go off on a rant here, but really people:

 
 Is it really going to have to take a revolution to get the comfortable to pay attention?

Regional Food Security 1

Xinhua News, on their English news site, is reporting that "China, South Korea and Japan will each provide up to 200,000 tons of rice for a contingency plan of the Association of Southeast Asia Nations (ASEAN) plus three, out of total allocation of 787,000 tons" destined for an ASEAN +3 stockpile. The idea is to manage price volatility and ensure emergency stocks of rice. Indonesian Agriculture Minister Suswono said "We will propose that it wouldn't be only for emergency situation but also for price stability. It means that we should increase the reserves in case of price volatility so that we could conduct market operation." 
It's interesting that  ASEAN has taken this action now, as International prices, Thailand: Bangkok, Rice (Thai 100% B) , Export, US Dollar per Tonne have dropped considerably since peaking in 2008 (peaking at $962.60, prices have since dropped to $507.25--which is still double the 2000 price of $243.50/ton according to the FAO). It means that the collective governments of the Association of Southeast Asia Nations (+3, of course) are concerned about continued price volatility in their collective markets.
The FAO is also showing that, worldwide, prices are climbing again, after having spiked in 2008 and dropping last year. Meat and dairy products have either almost recovered or have (in the case of meat) exceeded their 2008 price highs. Cereals are still down--lower than last year, even--but oils and fats have showed increases. All in all, this brings the global food price index to 164--the second highest point it's achieved this century; having started at 90 and peaked at 191 in 2008.
We can expect continuing volatility over the next several decades; global climate change has shown us increased agricultural impacts in (for example) Australia with drought, flooding, and brush-fires, and according to a recent report [.pdf] (reported by the CBC) expected sea level rise on the BC coast of a half metre by 2050, which will put a great deal of our local agricultural land at risk.  If in fact the report is correct when it says: "At the present time, scientific information on the expected changes in storms approaching British Columbia coastal waters and their characteristics, specifically on the intensity of the storms, their related wave conditions and the associated storm surges in the future, is only starting to emerge. Based on the available information it appears reasonable to conclude that no significant change is expected in coastal BC waters," one would expect that if sea levels have increased by a half-metre, any storm activity will have greater effect on coastal areas.

Having A Hard Time Facing The Future

Report on Business Magazine (May 2011) is running an article this month called “How Do We Feed Seven billion People—and Counting?” In it, reporters interview various people, looking for their take on what is evolving into an international food crisis.

The range of opinions and suggestions is much broader than expected—mostly because several of the interviewees are pushing for more of the same discredited policies that we've been pursuing. Sometimes dressed in new rhetorical clothes, but the same solutions nonetheless.

Jeffrey Sachs, the director of the Earth Institute and special adviser to UN Secretary-General Ban Ki-moon, takes on one of the elephants in the room by saying simply that we can't afford to reach nine billion. And its true, we can't. We could, if we took agriculture and feeding people very seriously indeed, manage—just!—to feed nine billion. But it would be incompatible with the international economic order as it is currently constituted. And, as Sachs is quoted as saying:

“This crisis cannot be solved just by food aid or short-term tricks. We have to look at the basic issue: that politicians are locally oriented and cynical, that they make announcements they don't follow through on, and that they're in the pockets of lobbyists intent on preventing solutions.”

As long as the focus is on maximizing return on investment, and not on farmers making a living by feeding people, we will continue to starve both poor people and poor nations. It will be a brutal way to keep population pressure under control—after all, we are increasing by 80 million people a year at this point—but famine will be a very effective method of international social control. But famine does appear to be the weapon of choice at this time.

Abby Abassian is the senior grains economist at the FAO in Rome, and he mentions the other elephant in the room—if only obliquely. When asked “What caused the latest surge in food prices?” his reply is “In one word—weather. This is not like 2007 and 2008, where we had so many other factors mixed in.”

Tough Times Ahead

     The headline on the front page of the 08 February 2011 Globe and Mail reads "A Warning to Canada: Start Growing", and opens with:

Canada has lost its statue as a food-producing superpower and needs a drastic overhaul of its agricultural policy if it hopes to compete in world markets and feed more of its own people.
The country, hobbled by out-of-date policies and a continuing battle for scarce government dollars, has dropped from third-largest global exporter of food to No. 7 at a time when we can least afford it: Climate change and population growth are putting enormous pressure on the food system while diet-related healthcare costs are weighing on the national economy.

     The article is by Jessica Leeder, the full time "global food reporter" at the G&M. Leeder also reported on the cuts at NSERC a while back. And I've gotta say, she's doing a bang-up job of reporting on global food issues. But that the G&M has felt it necessary to appoint a full time reporter shows that we're about five years past the tipping point on the issue.
The problems we face here in Canada can, according to Leeder, be boiled down to three points:

• Farm incomes have stagnated over the last two decades, debt levels are "soaring", even with direct government subsidies tripling to $8 billion over the same time period.
• "Food processors have also struggled, squeezed by demanding retailers who have been lured by higher margins they can reap by selling cheaper imported food."
• "Consumers, in turn, have grown used to spending only a fraction of their income on food and demand cheap prices--at any cost."

Funnily enough, these three problems look familiar. They look exactly like the problems being encountered by other producers and manufacturers in a globalized neo-liberal economic regime.