Food prices face a welcome perfect storm
It’s a lethal cloudscape of high energy prices and climate change that threatens to send prices soaring – but this may not be a bad thing: Provided the world’s poorest are insulated from its effects.
Today’s historically low food prices will end soon with significant and, for some, catastrophically high, rises in the years ahead. That means food policy-makers and food companies should plan now how best to mitigate the effects of this building storm.
It’s a readjustment many companies and government bodies at various junctures in the food supply are welcoming – if its resonances can be contained within the developed world. With the hyper competition that typifies many western retail markets driving food prices to historic lows, a reality check spurred by an energy crisis and environmental concerns is no bad thing.
The food industry must remain profitable or the innovation required to feed ever-more mouths (nearly 10 billion by 2150) won’t be forthcoming.
Search at the storm’s heart and you will find high energy prices. Last week the price of crude oil reached $80 a barrel following US statistics revealing a sharp fall in US stockpiles. According to the US Petroleum Institute, stockpiles fell by 4.4m barrels instead of the predicted 1.2m. The reports sent US light crude prices up 90 cents to $80.
News like that can only sharpen the US’s apparently ravenous appetite for fuel crops.
And acres devoted to fuel crops are, by definition, not being tilled for food.
Earlier this year the United States Department of Agriculture published an outlook suggesting that for the period 2007-08, global consumption of wheat exceeded production by 14.7m tons, leaving global wheat stocks at their lowest in 30 years.
In Europe, lower plantings and adverse weather have also lowered harvests in some of the major producing and exporting countries.
In Australia, a significant world wheat producer, drought has slashed wheat yields by 52 per cent, according to the Food and Agriculture Organisation.
Dr Sushil Pandi of the International Rice Research Institute has warned: “Shortfalls in production and subsequent price rises are being exacerbated by increasing competition for land, labour and water for biofuel production.”
China has shifted more than three million hectares out of rice production and into biofuel crop production, he added.
It’s not just competition for land, high energy prices are having a powerful impact on the costs of food transport. Increasingly Western distribution systems depend on transporting food vast distances from producer to consumers.
In some cases, food is shipped around the world simply for processing, to take advantage of low labour costs, and then shipped back again for consumption. These practices appear increasingly unsustainable.
Meanwhile, there is the greatest threat of all – climate change. Its precise impact is impossible to predict. But William Cline, senior fellow at the Institute for International Economics and the Center for Global Development in Washington, suggests global warming will cause a 16 per cent decline in global agricultural gross domestic product (GDP) within 11 years.
Time is running out for policy-makers and food companies to plan a response to these threats. A good starting point is UN secretary general Ban Ki-moon’s call for a “single global vision” to address the problems of world hunger. In a chilling warning he said there can be “no food security without climate security.”
As part of that process food companies can and should reduce their energy consumption to sustainable levels. This applies both to the production of food and to its distribution.
It may be innovation in this area that offers the greatest hope for food production to maintain a price befitting to its true costs – and to the benefit of individuals and the planet they inhabit.
The perfect storm for food prices may be impossible to avoid. But it could be a good thing if it makes Western nations value food more appropriately.
Mike Stones has written on food and farming topics for 20 years. He lives in Southern France and co-owns a small family arable farm in northern England. If you would like to comment on this article please email michael.stones ‘at’ decisionnews.com.