Important news about the global food crisis!

Summary — this post contains three sections (also note the updates at the end)

1. Reporting indications of a global food crisis.
2. Research suggesting it could become much much worse.
3. Analysis on the scope and significance of the problem.

It is not now clear if we have a serious problem, or just a temporary abundance of bad news.  With global grain stockpiles at 30 year lows, even minor temporary disturbances can have serious effects.  Or we might have a combination of serious commodity inflation, increased demand (third world prosperity) and long-term supply problems (e.g., climate and/or pest cycles).  This deserves close attention, as the geopolitical effects could be severe. 

One lesson learned should be obvious:  it was imprudent to reduce global grain stockpiles because of the minor financial costs of maintaining them.

I.  Recent reports indicating we may have a global problem with the global food supply

“ High Rice Cost Creating Fears of Asia Unrest“, New York Times (29 March 2008) — Excellent summary!  Excerpt:

HANOI – Rising prices and a growing fear of scarcity have prompted some of the world’s largest rice producers to announce drastic limits on the amount of rice they export.  The price of rice, a staple in the diets of nearly half the world’s population, has almost doubled on international markets in the last three months. That has pinched the budgets of millions of poor Asians and raised fears of civil unrest.

Shortages and high prices for all kinds of food have caused tensions and even violence around the world in recent months. Since January, thousands of troops have been deployed in Pakistan to guard trucks carrying wheat and flour. Protests have erupted in Indonesia over soybean shortages, and China has put price controls on cooking oil, grain, meat, milk and eggs.

Food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen. But the moves by rice-exporting nations over the last two days – meant to ensure scarce supplies will meet domestic needs – drove prices on the world market even higher this week.

This has fed the insecurity of rice-importing nations, already increasingly desperate to secure supplies. On Tuesday, President Gloria Macapagal Arroyo of the Philippines, afraid of increasing rice scarcity, ordered government investigators to track down hoarders.

… Vietnam’s government announced here on Friday that it would cut rice exports by nearly a quarter this year. The government hoped that keeping more rice inside the country would hold down prices.

The same day, India effectively banned the export of all but the most expensive grades of rice. Egypt announced on Thursday that it would impose a six-month ban on rice exports, starting April 1, and on Wednesday, Cambodia banned all rice exports except by government agencies.

Governments across Asia and in many rice-consuming countries in Africa have long worried that a steep increase in prices could set off an angry reaction among low-income city dwellers.

… “There is definitely the potential for unrest, particularly as the people most affected are the urban poor and they’re concentrated, so it’s easier for them to organize than it would be for farmers, for example, to organize to protest lower prices,” said Nicholas W. Minot, a senior research fellow at the International Food Policy Research Institute in Washington. …

Here is a typical incident, of a type appearing across the globe.

“Cote d’Ivoire: Food price hikes spark riots“, UN Integrated Regional Information Networks, (31 March 2008)

At least a dozen protestors were wounded during several hours of clashes with police on 31 March as they demanded government action to curb food prices. 

A serious global crisis usually requires multiple causes for drivers (there was no single cause for the Titantic’s sinking).  Now we have global inflation, a 30 year lows in global gain stockpiles, increased diversion of food crops to biofuels, and some critical areas hit with bad weather.  Here is one candidate that could push this into a global disaster.

II.  It could get much worse

“Killer wheat fungus a threat to global food security?“, UN Integrated Regional Information Networks  (27 March 2008) — Excerpt:

The Ug99 strain of the killer wheat fungus (stem rust), which recently infected wheat farms in western Iran, is a serious threat to global food security, agricultural scientists have warned. They have said the fungus may affect additional wheat-producing countries.

Mahmoud Solh, director-general of the International Centre for Agricultural Research in the Dry Areas (ICARDA), was quoted in a 20 March ICARDA press release as saying that he and his fellow scientists were convinced that Ug99 would quickly spread beyond Iran and that, with the long distance travel of rust spores, Ug99 would soon affect farms in the Middle East, Central Asia, South Asia and East Asia.

Richard Brettell, director of the Biodiversity and Integrated Gene Management Programme at ICARDA, told IRIN on 26 March that halting the spread of the stem rust spores is difficult since they are dispersed by the wind. “The fungus can to some extent be controlled by the application of fungicides [as a spray]; however, these need to be applied at an early stage of infection before the disease takes hold,” he said.

Brettell said the most effective way of controlling the disease is to grow resistant varieties. But he warned: “The problem is that almost all the wheat varieties grown in West and South Asia are known to be susceptible to Ug99. It will take time and coordination to replace them with resistant varieties.”

III.  Analysis

As usual in the early stages of an event, we have much reporting but little analysis.  Here is one of the rare early reports, an analysis of conditions in China but also providing a global context.  I strongly recommend reading this! 

“The China-Tibet Inflation Black Swan and Global Implications“, Philippa Malmgren, Asymmetric Threats Contingency Alliance (19 March 2008)

We are grateful to the distinguished ATCA Contributor, Dr Philippa Malmgren — a former Presidential Advisor to the White House and now founder of The Canonbury Group and the online publication Policy and Markets — for her submission, “The China-Tibet Inflation Black Swan,” having just returned from China.

Dear DK and Colleagues

The most dramatic change on the landscape is neither the recent failure of Bear Stearns nor the dramatic action taken by the Fed in response to it. The most important development on the global economic landscape is that the inflation problem in China is now so great that it is giving rise to social unrest on a scale that requires a military response.

Update from Indonesia

Kevin O’Rourke, Jakarta-based author of the Reformasi Weekly report on Indonesian politics, provided a local perspective on the food situation.  It has been moved to its own post:  A view from Indonesian of the food crisis.  It is worth reading!

Update

The causes of the current problems with our food supply are probably cyclical.  Normal cycles, like winter following summer.  The problem results from our failure to prepare for these cycles, as in the story of the ant and the grasshopper.  Such as maintaining large stockpiles and a modest surplus (“excess”) production capacity.  Note that doomsters greet every arrival of winter (down cycles) as the end of life as we know it, which is an error as serious as failure to prepare winter.

Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

For more information about this subject

1. A view from Indonesia of the food crisis  (3 April 2008)
2. Stratfor warns about the global food crisis  (18 April 2008)
3. What you probably do not know about China’s food crisis  (21 April 2008)
4. Higher food prices, riots, shortages – what is going on?    (29 April 2008)
5. A modest proposal for solving the global food crisis  (30 April 2008)
6. Weekend reading about the Food Crisis  (17 May 2008)

This archive shows all posts about the food crisis, plus reports from from major international agencies.