Monday, April 21, 2008

THE NEW FACE OF HUNGER

ECONOMIST "World agriculture has entered a new, unsustainable and politically risky period," says Joachim von Braun, the head of the International Food Policy Research Institute in Washington, DC. To prove it, food riots have erupted in countries all along the equator. In Haiti, protesters chanting "We're hungry" forced the prime minister to resign; 24 people were killed in riots in Cameroon; Egypt's president ordered the army to start baking bread; the Philippines made hoarding rice punishable by life imprisonment. "It's an explosive situation and threatens political stability," worries Jean-Louis Billon, president of Côte d'Ivoire's chamber of commerce.

Last year wheat prices rose 77% and rice 16%. These were some of the sharpest rises in food prices ever. But this year the speed of change has accelerated. Since January, rice prices have soared 141%; the price of one variety of wheat shot up 25% in a day. Some 40km outside Abidjan, Mariam Kone, who grows sweet potatoes, okra and maize but feeds her family on imported rice, laments: "Rice is very expensive, but we don't know why."

The prices mainly reflect changes in demand-not problems of supply, such as harvest failure. The changes include the gentle upward pressure from people in China and India eating more grain and meat as they grow rich and the sudden, voracious appetites of western biofuels programs, which convert cereals into fuel. This year the share of the maize crop going into ethanol in America has risen and the European Union is implementing its own biofuels targets. To make matters worse, more febrile behavior seems to be influencing markets: export quotas by large grain producers, rumors of panic-buying by grain importers, money from hedge funds looking for new markets.

Such shifts have not been matched by comparable changes on the farm. This is partly because they cannot be: farmers always take a while to respond. It is also because governments have softened the impact of price rises on domestic markets, muffling the signals that would otherwise have encouraged farmers to grow more food. Of 58 countries whose reactions are tracked by the World Bank, 48 have imposed price controls, consumer subsidies, export restrictions or lower tariffs.

But the food scare of 2008, severe as it is, is only a symptom of a broader problem. The surge in food prices has ended 30 years in which food was cheap, farming was subsidized in rich countries and international food markets were wildly distorted. Eventually, no doubt, farmers will respond to higher prices by growing more and a new equilibrium will be established. If all goes well, food will be affordable again without the subsidies, dumping and distortions of the earlier period. But at the moment, agriculture has been caught in limbo. The era of cheap food is over. The transition to a new equilibrium is proving costlier, more prolonged and much more painful than anyone had expected.

"We are the canary in the mine," says Josette Sheeran, the head of the UN's World Food Programme, the largest distributor of food aid. Usually, a food crisis is clear and localized. The harvest fails, often because of war or strife, and the burden in the affected region falls heavily on the poorest. This crisis is different. It is occurring in many countries simultaneously, the first time that has happened since the early 1970s. And it is affecting people not usually hit by famines. "