Price of rice leading edge of disaster Apr 04, 2008 04:30 AM Richard Gwyn
Compared to all the headlines about the financial crisis, climate change and the wars in Iraq and Afghanistan, it's likely that most readers missed the recent small story tucked inside most newspapers underneath the heading, "Rice hits $760 a tonne."
For 3 billion people around the world that was the most important news report of today and will almost certainly be the most important story for years to come.
For all these people, the great majority of them poor, rice is their staple food. Just a few weeks ago, its price was one-third lower at $580 a tonne. The higher the price of rice, the less gets eaten by those now spending 50 to 70 per cent of their meagre incomes on food.
As goes rice, so go many food staples. Corn prices have hit a 12-year high. In one month early this year, wheat prices jumped 90 per cent.
What's happening is the agricultural equivalent of a perfect storm. At one and the same time, demand is rising and supply is shrinking.
Demand is pushed up inexorably by the world's annual population increase of 70 million. It's pushed up far faster, though, by the fact that many more people are eating a whole lot more.
The big change is in China, although the same phenomenon caused by a rapidly expanding middle class is happening in India and elsewhere. In China, consumption of meat per person has increased 1 1/2 times since 1980. Beef is no longer a rare delicacy; in parallel, pork prices have soared by two-thirds in the past year.
Demand, therefore, is going to go on going up and up.
The reverse is happening on the supply side. Some of the causes are temporary. In Bangladesh a cyclone last summer destroyed $600 million worth of its rice crop. In Australia, a prolonged drought, which may now be ending, has reduced its wheat exports by half.
High oil prices push food prices upward. Fertilizer costs are up by 80 per cent. Transportation costs have jumped.
More troubling are some of the longer-term trends that are limiting the food supply. Urbanization and industrialization are chewing up agricultural land everywhere.
The worldwide drive to reduce global warming has encouraged many farmers to switch to growing biofuels. In the U.S., the amount of corn grown as a biofuel has doubled since 2003.
Remedies aren't easy to identify. Higher prices will encourage farmers to expand their output. But the amount of land will remain limited.
One possibility attracting attention is that of the sometimes controversial genetically modified foods. Many environmentalists, though, have strongly opposed GM foods for a long time.
Nevertheless, cultivation of GM crops increased last year to 114 million hectares throughout the world. Moreover, "second-generation" GM crops may be not only resistant to herbicides and pesticides but be drought-resistant and so able to cope with some of the effects of global warming.
The outlook for the world's poor remains sombre. The UN World Food Program warns that unless given another $500 million it will have to reduce its food distribution.
According to the UN, 37 countries face food crises. There have been food riots in a dozen countries in Asia and Africa, and in Haiti. In Pakistan, rationing cards are about to be introduced. Major rice exporters like India, Egypt, Thailand and Vietnam are now limiting sales abroad.
The world community has given little attention to this crisis. Other issues like climate change and war do matter. But nothing matters more than mass hunger and malnutrition. And that almost certainly is what will happen.
