FOOD CRISIS

Food Is Different

Globalization has made more food available worldwide to more people at lower prices. But the current crisis demonstrates the limits of globalization and that the market for food may not be the same as for other products.

National Journal
Bruce Stokes
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Bruce Stokes
June 6, 2008, 8 p.m.

Robert Zoel­lick, head of the World Bank, warns that the un­fold­ing food crisis could force 100 mil­lion people deep­er in­to des­ti­tu­tion and set back ef­forts to re­duce world poverty by sev­en years.

In the midst of this crisis, the im­me­di­ate hu­man­it­ari­an chal­lenge is to feed the hungry. But the sud­den­ness and breadth of the emer­gency has raised fun­da­ment­al ques­tions about the fu­ture of ag­ri­cul­tur­al policy that will drive de­bates in Wash­ing­ton and oth­er world cap­it­als for years to come. The ques­tions be­ing posed about ag­ri­cul­tur­al policies are com­plex and hard to an­swer.

Was it a mis­take over the past gen­er­a­tion to in­creas­ingly trust mar­ket forces to feed the world? Or are the prob­lems that be­dev­il farm­ers today the residue of con­tin­ued gov­ern­ment in­ter­fer­ence in ag­ri­cul­tur­al mar­kets? Are cur­rent food prices a prob­lem or the ul­ti­mate solu­tion to fu­ture food needs? Does the world food sys­tem suf­fer from too much glob­al­iz­a­tion or not enough?

In the search for an­swers to these ques­tions, Wash­ing­ton is a Tower of Ba­bel. Par­tis­ans of all stripes have seized on the crisis to jus­ti­fy their long-stand­ing ideo­lo­gic­al po­s­i­tions on ag­ri­cul­ture. Free-mar­ket pro­ponents sup­port a swift com­ple­tion of the Doha Round of mul­ti­lat­er­al trade ne­go­ti­ations, which would cut Amer­ic­an and European farm sub­sidies and al­low de­vel­op­ing coun­tries to in­crease their food ex­ports to rich coun­tries. “The solu­tion is to break the Doha De­vel­op­ment Agenda im­passe in 2008,” Zoel­lick said in April.

Some re­cent ex­per­i­ence bol­sters this ar­gu­ment. Since the early 1970s, when the world last en­dured a food crisis, pro­duc­tion has soared, to the point that, un­til a few years ago, food ex­perts wor­ried that grain prices were too low to ad­equately re­ward farm­ers’ ef­forts. The glob­al trade in grain de­livered cheap food to the poor in the bur­geon­ing cit­ies of the de­vel­op­ing world. Mal­nu­tri­tion rates fell in many parts of the globe.

But skep­tics con­tend that leav­ing the sup­ply of food solely to the mar­ket’s whims is a mis­take. “The mind­less lib­er­al­iz­a­tion men­tal­ity at the World Bank, the U.S. Agency for In­ter­na­tion­al De­vel­op­ment, and among my fel­low eco­nom­ists misses the fact that food is a bio­lo­gic­al ne­ces­sity as well as a com­mod­ity,” said Peter Tim­mer, a vis­it­ing pro­fess­or at Stan­ford Uni­versity’s Pro­gram on Food Se­cur­ity and the En­vir­on­ment.

With its short-term ori­ent­a­tion, the free mar­ket has fre­quently failed the long-term in­terests of con­sumers around the world, crit­ics con­tend. Gov­ern­ments have been pulling back from in­vest­ing in the un­der­ly­ing in­fra­struc­ture that sup­ports ag­ri­cul­ture. As a res­ult, fund­ing has at­rophied for the de­vel­op­ment of new high-yield­ing seeds, for the build­ing of bet­ter farm-to-mar­ket roads, and for loans to small cul­tiv­at­ors. In­ter­na­tion­al grain traders and spec­u­lat­ors have gained un­pre­ced­en­ted in­flu­ence over com­mod­ity mar­kets. And world grain stocks have been al­lowed to dwindle to mod­ern lows.

These changes in the world­wide food mar­ket are com­poun­ded by what eco­nom­ists like to call “ex­tern­al­it­ies,” factors that are not sus­cept­ible to mar­ket dis­cip­line but that are rap­idly shap­ing the fu­ture of ag­ri­cul­ture: rising en­ergy prices, wa­ter short­ages, and, ul­ti­mately, cli­mate change.

“We are look­ing at di­min­ish­ing re­turns in a num­ber of areas,” said Lester Brown, pres­id­ent of the Earth Policy In­sti­tute in Wash­ing­ton. “We spend a lot of money on re­search, with dis­ap­point­ing res­ults. We are us­ing more fer­til­izer, but that does not in­crease yields. We look [for] but don’t find much new wa­ter.”

In the face of these chal­lenges, said Gawain Krip­ke, dir­ect­or of policy and re­search at Ox­fam Amer­ica, “there are no sil­ver bul­lets. We need a mat­rix of solu­tions.”

The prop­er bal­ance between gov­ern­ment and the private sec­tor will be at the cen­ter of the emer­ging de­bate over ag­ri­cul­ture. “Some pub­lic in­ter­ven­tion is needed,” said Kim­berly El­li­ott, a seni­or fel­low at the Cen­ter for Glob­al De­vel­op­ment in Wash­ing­ton. “The ques­tion is, what is the right in­ter­ven­tion?”

The ul­ti­mate mat­rix may in­clude less dir­ect gov­ern­ment in­ter­fer­ence in the short-term work­ings of glob­al food mar­kets through sub­sidies and tar­iffs, coupled with great­er gov­ern­ment re­spons­ib­il­ity for provid­ing a stra­tegic grain re­serve, fund­ing ba­sic re­search, and stew­ard­ing the en­vir­on­ment to help com­pensate for in­ev­it­able mar­ket hic­cups and ex­tern­al­it­ies that can cripple food pro­duc­tion.

Change in For­tunes

Just a dec­ade ago, hu­man­ity’s age-old race to stay one step ahead of fam­ine seemed fi­nally won. Grain sup­plies were boun­ti­ful and grow­ing. Food prices were low.

Then, world cer­eals pro­duc­tion fell two years in a row, thanks in part to bad weath­er. This fal­loff came at a time of re­cord low food stocks. With poor har­vests and low re­serves, the mar­ket was vul­ner­able to shocks that could send prices spiral­ing. That is just what happened. Des­pite a re­bound in har­vests in 2007, the U.S. di­ver­ted most of the ex­tra corn it raised in­to mak­ing eth­an­ol to fuel its cars and trucks. U.S. corn prices tripled. And, with cro­p­land be­ing di­ver­ted from wheat to corn pro­duc­tion, wheat prices more than doubled.

In Oc­to­ber 2007, spooked by mush­room­ing food prices, In­dia, one of the world’s largest ex­port­ers of rice, banned most of its rice ship­ments. Vi­et­nam fol­lowed with ex­port re­stric­tions in Janu­ary 2008. Rice prices rose sharply.

Not sur­pris­ingly, con­sumers rap­idly felt the pain in Amer­ica, yes, but all over the world, too. Food prices rose 11.4 per­cent in In­done­sia, 11.6 per­cent in Guatem­ala, and 18.3 per­cent in Bot­swana in a year. In such so­ci­et­ies, where the poor may spend more than half of their in­come on food, this was a severe ad­di­tion­al bur­den.

Nev­er­the­less, a bit of light has ap­peared on the ho­ri­zon. High­er prices have already spurred farm­ers around the world to plant more this spring. And the U.N. Food and Ag­ri­cul­ture Or­gan­iz­a­tion ex­pects har­vests to im­prove this year. World prices have already be­gun to fall from their re­cent highs as a res­ult. Still, over the next dec­ade, ex­perts pre­dict that crop prices will re­main well above the mean for the past dec­ade. The days of cheap food may be over.

High Prices: Prob­lem or Solu­tion?

In the midst of so much want, it may seem heart­less to ques­tion wheth­er high food prices help or hurt the poor. But that is ex­actly the de­bate ra­ging among de­vel­op­ment eco­nom­ists.

High­er prices re­ward farm­ers, who re­ceive more for their har­vests, and pun­ish con­sumers, who must pay more to feed their fam­il­ies. Many people in the poorest parts of the world—Africa, Asia, and Lat­in Amer­ica—sell more food than they con­sume.

A re­cent FAO study found that half of the house­holds in Mad­a­gas­car and two in five house­holds in Ghana, all clas­si­fied as ex­tremely poor, were net sellers of food and stood to be­ne­fit from high­er prices. A re­cent Carne­gie En­dow­ment study of In­dia found that “the poorest house­holds and the most dis­ad­vant­aged groups saw the largest gains” from a rise in rice prices, thanks to great­er de­mand for their land and their low-skilled labor to pro­duce that staple.

But the vast ma­jor­ity of poor house­holds in Bangladesh and Pakistan are net buy­ers of food. Over­all, con­clude World Bank eco­nom­ists Maros Ivan­ic and Will Mar­tin, in a re­cent pa­per, “even though many rur­al house­holds gain from high­er food prices, the over­all im­pact on poverty re­mains neg­at­ive.”

The fact is, high­er prices cre­ate both losers and win­ners, even among the poor. And the dis­tri­bu­tion of win­ners and losers var­ies from coun­try to coun­try. Nor is the mar­ket for food the same from coun­try to coun­try. Thus, warned Sandra Po­laski, dir­ect­or of the Trade, Equity, and De­vel­op­ment Pro­gram at the Carne­gie En­dow­ment, gen­er­al­iz­ing from the ex­per­i­ence of par­tic­u­lar coun­tries about the ef­fects of food price in­creases on poverty can lead to in­cor­rect one-size-fits-all policy pre­scrip­tions. Today’s food crisis is highly dif­fer­en­ti­ated, re­quir­ing tailored solu­tions.

Too Much Glob­al­iz­a­tion

Cur­rent food short­ages are also a re­mind­er that what glob­al­iz­a­tion gives, it can take away.

Since the food emer­gency in the early 1970s, world trade in ag­ri­cul­tur­al products has in­creased sev­er­alfold (see chart, p. 26). The glob­al­iz­a­tion the­ory was that in­creased trade in food crops would lead to more pro­duc­tion at lower prices. The no­tion that coun­tries had to be self-sus­tain­ing in ag­ri­cul­ture would fade away.

But the cur­rent crisis sug­gests to some crit­ics that glob­al­iz­a­tion may not have worked as in­ten­ded. “Re­mov­al of tar­iff bar­ri­ers has al­lowed a hand­ful of north­ern coun­tries to cap­ture Third World mar­kets by dump­ing heav­ily sub­sid­ized com­mod­it­ies while un­der­min­ing loc­al food pro­duc­tion,” said Anuradha Mit­tal, ex­ec­ut­ive dir­ect­or of the Oak­land In­sti­tute, a Cali­for­nia-based think tank that ad­voc­ates food sov­er­eignty.

The Doha Round of trade talks threatens to make this situ­ation worse, the crit­ics con­tend. To safe­guard their food se­cur­ity, some de­vel­op­ing coun­tries de­mand the right to ex­empt “spe­cial products” from tar­iff cuts, with each coun­try’s list tar­geted to its in­di­vidu­al needs. In ad­di­tion, they want to slow un­ex­pec­ted surges of food im­ports.

“Let’s not put policies in place that make the cur­rent situ­ation worse,” said Po­laski, who ar­gues that farm­ing in the de­vel­op­ing world can be nur­tured only be­hind trade bar­ri­ers. “You can’t do it in the face of glob­al com­pet­i­tion,” she said.

Trade lib­er­al­iz­a­tion is part of a broad­er set of mar­ket-ori­ented eco­nom­ic re­forms that the World Bank and In­ter­na­tion­al Mon­et­ary Fund began to im­pose on many de­vel­op­ing coun­tries in the 1980s in re­turn for loans. These re­forms were in­ten­ded to bal­ance gov­ern­ment­al budgets. But crit­ics com­plain that they of­ten harmed farm­ers. In 14 de­vel­op­ing coun­tries, farm spend­ing fell from an av­er­age of 6.9 per­cent of gross do­mest­ic product in 1980 to 4 per­cent in 2004, ac­cord­ing to a re­cent World Bank sur­vey.

Glob­al­iz­a­tion also en­cour­aged a more ef­fi­cient food mar­ket, in which grain moved around the world rap­idly. Sur­pluses in one re­gion eas­ily re­plen­ished short­ages in an­oth­er. There seemed little need to main­tain large, costly grain re­serves. China, the European Uni­on, and the United States let their food stocks dwindle as a res­ult.

Re­cent price volat­il­ity sug­gests that the glob­al food sys­tem now lacks flex­ib­il­ity be­cause food stocks de­clined too far. In 2007, re­serves equaled 54 days of world con­sump­tion, down from a high of 130 days in 1986.

The United States and oth­er coun­tries main­tain stra­tegic pet­ro­leum re­serves. Through the In­ter­na­tion­al En­ergy Agency in Par­is, they have agree­ments to share sup­plies dur­ing an emer­gency. So why not a stra­tegic grain re­serve?

It is a ques­tion of cost and con­trol. Amer­ic­an and European tax­pay­ers have bad memor­ies of out-of-con­trol gov­ern­ment spend­ing to main­tain grain and but­ter “moun­tains” in silos and ware­houses. Re­cent rice ex­port bans sug­gest that hoard­ing by pro­du­cer na­tions does more harm than good—it just drives prices even high­er.

With the FAO now pre­dict­ing that grain prices could re­main high for a dec­ade, res­ult­ing in­creases in pro­duc­tion may re­build re­serves on their own. But to be prudent, Stan­ford Uni­versity’s Tim­mer sug­gests new in­ter­na­tion­al in­cent­ives for pro­du­cing coun­tries to hold great­er stocks, coupled with agree­ments on what mar­ket con­di­tions would trig­ger their re­lease. Ox­fam ar­gues for vil­lage-level cer­eal banks that would en­sure ad­equate loc­al sup­plies dur­ing hard times.

Glob­al­iz­a­tion, driv­en by the the­ory of com­par­at­ive ad­vant­age, has also en­cour­aged ag­ri­cul­tur­al spe­cial­iz­a­tion. “This led to the ded­ic­a­tion of good land to ex­port crops with food crops forced in­to less suit­able soil, thus ex­acer­bat­ing food in­sec­ur­ity,” wrote Walden Bello, a pro­fess­or of so­ci­ology at the Uni­versity of the Phil­ip­pines, in a re­cent is­sue of The Na­tion. In years when spe­cialty crop prices were high and food staple prices low, this was a ra­tion­al trade-off for farm­ers to make. It was a bet that many coun­tries are now los­ing.

Fi­nally, glob­al­iz­a­tion of the world food sys­tem ex­acer­bates the ef­fects of sud­den policy shifts, such as the re­cent U.S. rush to use corn to in­crease eth­an­ol pro­duc­tion. In 2006, the ap­prox­im­ately $6 bil­lion in U.S. sub­sidies for eth­an­ol pro­duc­tion spurred de­mand for corn, trig­ger­ing chain-re­ac­tion price rises around the world for corn, wheat, and soy­beans. Nev­er has the en­ergy policy of a coun­try that is not a mem­ber of OPEC had such a dev­ast­at­ing glob­al im­pact. (See “Is Eth­an­ol Really the Cul­prit?” p. 30.)

Not Enough Glob­al­iz­a­tion

It is no sur­prise that de­fend­ers of glob­al­iz­a­tion hold a quite dif­fer­ent view. They con­tend that a stronger, more open mar­ket is part of the solu­tion to the food crisis.

Paul Col­li­er, a pro­fess­or of eco­nom­ics at Ox­ford Uni­versity and the au­thor of the re­cent award-win­ning book The Bot­tom Bil­lion, cri­ti­cizes the se­duct­ive no­tion of peas­ant-based, food self-suf­fi­ciency as hope­lessly ro­mantic. “We laud the pro­duc­tion style of the peas­ant,” he wrote in a re­cent blog. “In man­u­fac­tur­ing and ser­vices we grew out of this fantasy years ago, but in ag­ri­cul­ture it con­tin­ues to con­tam­in­ate our policies. Un­for­tu­nately, peas­ant farm­ing is gen­er­ally not well suited to in­nov­a­tion and in­vest­ment.”

Trade, these glob­al­iz­a­tion de­fend­ers ar­gue, has been the sal­va­tion of con­sumers in poorer coun­tries, not their bane. “If you are for self-suf­fi­ciency, you must be will­ing to live with high prices,” wrote Dani Rodrik, a pro­fess­or of in­ter­na­tion­al polit­ic­al eco­nomy at Har­vard Uni­versity in his blog. “If de­vel­op­ing coun­tries had all kept their im­port pro­tec­tion, the glob­al sup­ply of food would have been lower today, not high­er.”

Glob­al­iz­a­tion ad­voc­ates con­demn con­tin­ued gov­ern­ment in­ter­ven­tion in ag­ri­cul­ture. Farm sub­sidies in rich coun­tries have long boos­ted pro­duc­tion there, hold­ing down world prices and un­der­min­ing mar­ket in­cent­ives for farm­ers in poor coun­tries to grow more food. High in­dus­tri­al-coun­try tar­iffs, mean­while, have kept out food im­ports from de­vel­op­ing coun­tries. If Afric­an, Asi­an, and Lat­in Amer­ic­an food pro­duc­tion is to in­crease, U.S., European, and Ja­pan­ese sub­sidies need to be elim­in­ated and their tar­iffs slashed, the glob­al­iz­a­tion ad­voc­ates ar­gue.

If they are right, the path ahead will be long. The 2008 U.S. farm bill ac­tu­ally in­creased per­miss­ible Amer­ic­an farm pay­ments. If high prices con­tin­ue, much of that money may nev­er get spent. But the very avail­ab­il­ity of those sub­sidies re­duces farm­ers’ risk, en­cour­aging more plant­ing. And some of the highest re­main­ing in­dus­tri­al-coun­try trade bar­ri­ers ap­ply to some of the very products, such as sug­ar and cot­ton, that farm­ers in de­vel­op­ing coun­tries may be most com­pet­it­ive at grow­ing.

The Doha Round, if it is ever com­pleted, will not sig­ni­fic­antly cut farm sub­sidies or im­port tar­iffs in rich coun­tries. Doha ne­go­ti­at­ors also seem un­likely to lib­er­al­ize some of the most im­port­ant ag­ri­cul­tur­al com­merce, trade between de­vel­op­ing coun­tries. Cut­ting im­port bar­ri­ers between de­vel­op­ing coun­tries—spur­ring more South-South trade—would be far more im­port­ant to the eco­nom­ic wel­fare of such na­tions than re­duc­tions in farm sup­port or ex­port sub­sidies in de­veloped coun­tries, ac­cord­ing to World Bank stud­ies.

So if glob­al­iz­a­tion is to ease food sup­ply prob­lems, pro­ponents ar­gue for more of it, not less.

Deal­ing With Mar­ket Break­downs

However the world ul­ti­mately re­solves the de­bate about glob­al­iz­a­tion, the food crisis is a re­mind­er that mar­ket forces are no­tori­ously short­sighted and gov­ern­ments too of­ten scrimp on the kinds of long-term in­vest­ments that can sus­tain pro­duct­ive ag­ri­cul­ture.

Between 1960 and 1970, thanks to the green re­volu­tion, glob­al grain yields grew by 2.6 per­cent per year on av­er­age. From 1990 to 2007, the an­nu­al in­crease had slowed to only 1.2 per­cent. Ap­par­ently, the reser­voir of ag­ri­cul­tur­al tech­no­lo­gies that farm­ers can read­ily rely on to boost har­vests is shrink­ing.

Yet both the private and the pub­lic sec­tor have failed to ad­dress this mar­ket fail­ure. The pro­por­tion of World Bank lend­ing de­voted to ag­ri­cul­ture has de­clined stead­ily since the 1980s, and the pro­por­tion of all for­eign aid from all sources go­ing to farm­ers is now only 4 per­cent. As a res­ult, the seed com­pany Monsanto spends sev­en times as much on re­search and de­vel­op­ment as the 14 in­ter­na­tion­al ag­ri­cul­tur­al re­search in­sti­tutes com­bined. And that private spend­ing of­ten con­cen­trates on de­vel­op­ing seed vari­et­ies for com­mer­cial ag­ri­cul­ture, not for food staples that make up the diet of the very poor.

Sim­il­arly, the food pro­duc­tion and dis­tri­bu­tion in­fra­struc­ture has been giv­en short shrift. In much of sub-Saha­ran Africa, con­cluded the World Bank in its 2008 World De­vel­op­ment Re­port, poor mar­ket ac­cess was al­most as im­port­ant a con­straint on food avail­ab­il­ity as poor rain­fall. Trans­port costs, in part be­cause of bad roads, ac­count for about a third of the price that Afric­an coun­tries pay for fer­til­izer. A pub­lic-private part­ner­ship to build roads and ports is needed to break these in­fra­struc­ture lo­g­jams.

Oli­go­pol­ies, which con­cen­trate mar­ket share in the hands of a few com­pan­ies, may be fur­ther ag­grav­at­ing glob­al ag­ri­cul­tur­al prob­lems. The four largest agro­chem­ic­al com­pan­ies now con­trol 60 per­cent of the world fer­til­izer mar­ket, up from 47 per­cent in 1997. The four largest seed firms have cornered 33 per­cent of the mar­ket, up from 23 per­cent in the same time­frame.

This con­cen­tra­tion is also evid­ent on the dis­tri­bu­tion side. In­ter­na­tion­al traders con­trol 40 per­cent of the in­ter­na­tion­al mar­ket for cof­fee, which is the source of live­li­hood for an es­tim­ated 25 mil­lion farm­ers and farm­work­ers around the world. With great­er mar­ket power, these traders can charge high­er prices. The share of the re­tail price Amer­ic­ans pay for a pound of cof­fee beans that ac­tu­ally goes to the cof­fee-pro­du­cing coun­tries of Brazil, Colom­bia, In­done­sia, and Vi­et­nam has de­clined from about a third in the early 1990s to only about 10 per­cent in 2002.

“It is gen­er­ally be­lieved,” the 2008 World De­vel­op­ment Re­port con­cluded, “that when an in­dustry’s [mar­ket share] ex­ceeds 40 per­cent, mar­ket com­pet­it­ive­ness be­gins to de­cline, lead­ing to high­er spreads between what con­sumers pay and what pro­du­cers re­ceive for their pro­duce.” In lay­men’s terms, the middle­men win; con­sumers and farm­ers lose.

The glob­al food sys­tem might well be­ne­fit from a little Teddy Roosevelt-style trust­bust­ing.

Cop­ing With the Ex­tern­al­it­ies

A fi­nal prob­lem with the world mar­ket for food is that it is deeply af­fected by those un­pre­dict­able “ex­tern­al­it­ies” that the eco­nom­ists talk about—factors, such as weath­er, that are im­port­ant but not eas­ily con­trolled. These in­clude:

* Pop­u­la­tion growth. Strides have been made since the last food crisis in the 1970s in slow­ing pop­u­la­tion growth, a ma­jor driver of food de­mand. In the world as a whole, the av­er­age num­ber of chil­dren per wo­man has fallen from nearly five to few­er than three. Yet even as pop­u­la­tion growth slows, the sheer num­ber of wo­men of child­bear­ing age has driv­en an­nu­al pop­u­la­tion growth: About 81 mil­lion new people ap­peared on the globe in 2007, far more than in the early 1970s.

“You don’t have to be an ag­ro­nom­ist to know that if you keep adding that many mouths to feed each year, you are go­ing to be in trouble,” said Brown, of the Earth Policy In­sti­tute.

In nearly all de­vel­op­ing coun­tries, the num­ber of wo­men of re­pro­duct­ive age will in­crease between 2005 and 2015.

* Rising af­flu­ence. High­er in­comes en­able more people to eat high­er on the food chain. The World Bank es­tim­ates that by 2030 more than a bil­lion con­sumers in the de­vel­op­ing world will have suf­fi­cient in­come to eat a middle-class diet. China provides a fore­taste of this fu­ture. Between 1990 and 2006, per cap­ita Chinese meat con­sump­tion grew by 140 per­cent, and in­di­vidu­al milk con­sump­tion by 300 per­cent.

To pro­duce 1 pound of meat takes up to 7 pounds of grain. So with de­vel­op­ing coun­tries’ meat con­sump­tion ex­pec­ted to double in a gen­er­a­tion, de­mand for grain will grow much faster than pop­u­la­tion.

Slow­ing such con­sump­tion may prove im­possible. European and Amer­ic­an con­sumers could change their di­ets, but large-scale re­form of con­sump­tion pat­terns is un­likely. And for Afric­an, Asi­an, and Lat­in Amer­ic­an con­sumers, eat­ing rich­er di­ets is one of the long-sought be­ne­fits of de­vel­op­ment. The stresses on the food sys­tem as­so­ci­ated with rising af­flu­ence will simply have to be ac­com­mod­ated; they prob­ably can­not be re­versed.

* En­ergy prices. High­er fuel prices are also likely to fur­ther com­plic­ate the mar­ket’s abil­ity to meet the food needs for both con­sumers and pro­du­cers. It re­quires about 41.5 gal­lons of oil (in the form of fer­til­izer, gas­ol­ine for trans­port, etc.) to pro­duce 1 ton of corn in the United States. As the cost of a bar­rel of oil has skyrock­eted, so too has the price of grain. Eco­nom­ic mod­els sug­gest that for every $1 rise in the price of a bar­rel of oil, U.S. grain prices, which de­term­ine world prices, could rise by 20 cents a bushel.

The rising cost of en­ergy im­ports has also forced some de­vel­op­ing na­tions to choose between im­port­ing oil or grain. For the farm­er, high­er en­ergy prices have driv­en up the price of fer­til­izer (which can ac­count for a third of soy­bean pro­duc­tion costs in Brazil), elec­tri­city for ir­rig­a­tion pumps, and the costs of trans­port­ing pro­duce to mar­ket. Most dam­aging is the high cost of gas­ol­ine that has in­creased U.S. plant­ing of corn for eth­an­ol.

Whatever gains are made in food pro­duc­tion, they risk be­ing over­whelmed if en­ergy costs con­tin­ue to spir­al out of con­trol.

* Soil erosion. World­wide, cro­p­lands the size of In­di­ana dis­ap­pear every year, ac­cord­ing to stud­ies by Dav­id Pi­men­tel, a pro­fess­or emer­it­us of eco­logy at Cor­nell Uni­versity. “Erosion is a slow and in­si­di­ous pro­cess,” he said. “It nick­els and dimes you to death. Yet the prob­lem, which is grow­ing ever more crit­ic­al, is be­ing ig­nored be­cause who gets ex­cited about dirt?”

The cost is already ap­par­ent in South Asia and sub-Saha­ran Africa, where a com­bin­a­tion of pop­u­la­tion growth and poor land man­age­ment has led to a 40 per­cent de­cline in ar­able cro­p­land per cap­ita since 1960.

Bet­ter land-use prac­tices re­quire ag­ri­cul­ture ex­ten­sion ser­vices. Yet such ser­vices are nonex­ist­ent in many parts of the world be­cause their cost and com­plex­ity ex­ceed gov­ern­ment cap­ab­il­it­ies and be­cause they have not been in com­mer­cial farm­ers’ short-term in­terests. Moreover, the in­ex­or­able pres­sure to in­crease pro­duc­tion may over­whelm even the most-well-mean­ing soil con­ser­va­tion pro­grams.

* Wa­ter short­ages. Ir­rig­a­tion ac­counts for about 40 per­cent of the value of ag­ri­cul­tur­al pro­duc­tion world­wide. But that pro­duc­tion is of­ten be­ing bought with over­drafts at the wa­ter bank. In China, farm­ers take about 25 per­cent more wa­ter from un­der­ground aquifers than the rains re­plen­ish. In parts of north­w­est In­dia, the over­draft rate is 56 per­cent. No won­der the ir­rig­ated area per per­son around the world is shrink­ing by 1 per­cent per year. More-ef­fi­cient ir­rig­a­tion meth­ods do ex­ist and are slowly be­ing ad­op­ted. But farm­ers will also need ex­pens­ive new vari­et­ies of staple crops that use less wa­ter.

* Cli­mate change. This may be the gravest and most im­pon­der­able long-term chal­lenge the food sys­tem faces. If tem­per­at­ures in­crease mod­er­ately over the next half-cen­tury, ag­ri­cul­tur­al pro­duc­tion losses in trop­ic­al de­vel­op­ing coun­tries may be par­tially off­set by pro­duc­tion gains in tem­per­ate zones. But if tem­per­at­ures rise by more than 3 de­grees Celsi­us, an in­creas­ingly likely pro­spect sci­ent­ists say, har­vests could be severely af­fected every­where, fall­ing by a fifth in South Asia alone. The cost of ad­apt­ing the food sys­tem to cli­mate change could be tens of bil­lions of dol­lars in de­vel­op­ing coun­tries alone, far ex­ceed­ing avail­able re­sources.

Long-Term, Not Stop­gap

The cur­rent food crisis is a product of bad weath­er, high­er en­ergy costs, com­mod­it­ies spec­u­la­tion, and policy shifts that have had un­in­ten­ded con­sequences, not­ably U.S. eth­an­ol sub­sidies and wide­spread ex­port bans. It is also a har­binger of more-ser­i­ous food chal­lenges rooted in the in­ab­il­ity of the food sys­tem to deal with mar­ket break­downs, such as in­vest­ment short­falls in re­search and de­vel­op­ment and in­fra­struc­ture, and with ex­tern­al­it­ies, such as rising af­flu­ence and cli­mate change.

Some of today’s prob­lems may even­tu­ally self-cor­rect through a cyc­lic­al up­turn in pro­duc­tion and a down­turn in prices. To­mor­row’s food is­sues are more chal­len­ging.

“Food se­cur­ity will de­teri­or­ate fur­ther,” Brown pre­dicted, “un­less lead­ing coun­tries can col­lect­ively mo­bil­ize to sta­bil­ize pop­u­la­tion, re­strict the use of grain to pro­duce auto­mot­ive fuel, sta­bil­ize cli­mate, sta­bil­ize wa­ter tables and aquifers, pro­tect cro­p­land, and con­serve soils.”

To ac­com­mod­ate this change, glob­al in­sti­tu­tions may need to be re­struc­tured to cope bet­ter with in­ev­it­able fu­ture ag­ri­cul­tur­al mar­ket volat­il­ity.

“The IMF needs ad­di­tion­al au­thor­ity to provide bridge fin­an­cing for coun­tries faced with sharply rising food im­port bills,” said Gus Schu­mach­er, a former U.S. un­der­sec­ret­ary of Ag­ri­cul­ture. “It needs power to over­see hedge funds spik­ing com­mod­ity prices and to dis­cour­age food em­bar­goes by wheat and rice ex­port­ers. And there needs to be some in­sur­ance fa­cil­ity to pro­tect im­port­ing and ex­port­ing coun­tries when drought and storms dis­rupt food sup­plies.”

World lead­ers will re­view the food situ­ation at the G-8 sum­mit in Ju­ly and at a United Na­tions food con­fer­ence in Septem­ber. The danger is that food prices may be re­ced­ing by then and lead­ers, dis­trac­ted by some new crisis, will be temp­ted to pur­sue stop­gap meas­ures in­stead of long-term solu­tions.

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