Food crisis being felt around world

http://www.nationalpost.com/news/story.html?id=412984

Food crisis being felt around world
Market Chaos, Riots
Peter Goodspeed, National Post
Published: Tuesday, April 01, 2008

Sharply rising prices have triggered food riots in recent weeks in Mexico, Morocco, Senegal, Uzbekistan, Guinea, Mauritania and Yemen, and aid agencies around the world worry they may be unable to feed the poorest of the poor.

In the Philippines, officials are raiding warehouses in Manila looking for unscrupulous traders hoarding rice, while in South Korea, panicked housewives recently stripped grocery-store shelves of food when the cost of ramen, an instant noodle made from wheat, suddenly rose.

The shadow of "a new hunger" that has made food too expensive for millions is the result of a sudden and dramatic surge in food prices around the world.

Rising prices for all the world's crucial cereal crops and growing fears of scarcity are careening through international markets, creating turmoil.

Last Thursday, as world rice prices soared by as much as 30% in one day, Egypt decided to suspend rice exports for six months to meet domestic demand and to try to limit price increases.

That was bad news for its main rice customers -- Turkey, Lebanon, Syria and Jordan.

Egypt's move was matched by Vietnam, the world's second-largest rice exporter after Thailand, which cut exports by 25% and ordered officials not to sign any more export contracts this year.

India and Cambodia also rushed to curb their exports in order to have enough supplies to feed their own people.

With crude oil soaring above US$100 a barrel, higher fuel prices have driven up the cost of production and increased transportation costs for all foods.

Pests in Southeast Asia, a 10-year drought in Australia and a 45-day cold snap in China have combined to aggravate the situation.

At the same time, millions of people in China and India have suddenly become relatively wealthy and are changing their eating habits, consuming more meat and chicken, which places a huge demand on cereal stocks.

In China, per-capita meat consumption has increased 150% since the 1980s. But producing more meat requires more feed to raise more animals.

"You simply feed less people on maize [corn] via cattle than you do in maize direct," said John Powell, the UN World Food Program's (WFP) deputy director of external programs in Rome.

Also influencing the food crisis is the move in North America and Europe to biofuel in an effort to ease global warming and reduce reliance on imported energy.

A surge in demand for biofuel has resulted in a sharp decline in agricultural land planted for food crops. About 16% of U.S. agricultural land formerly planted with soybeans and wheat is now growing corn for biofuel.

"For the first time in history, there is a clear link between the price of fuel and the price of food," Mr. Powell said.

"If there were a miraculous 20% increase in the quantity of food production, we would not know what would go toward increased food consumption and what would go to biofuels.

"Where it would go is where the prices are best."

Rice is a staple food for half the world's population. But the sudden surge in prices and restrictions on exports come at a time when stockpiles of rice are at their lowest level in decades.

At the moment, world rice inventories are said to stand at a mere 72 million metric tonnes -- about 17% of what the world consumes annually.

The low stockpiles create a market in which any supply disruption will result in radical price swings.

They also complicate delivering foreign aid to those most in need.

The WPF, which feeds 73 million of the world's most destitute each year, says its costs have increased 55% since June. Unless it gets US$500-million in emergency funding, it may soon have to reduce feeding programs.

Experts predict world food markets will be locked into an inflationary spiral for at least four years, but some say the crisis could linger for a decade or more.

"There is pretty much a sense that what we are seeing is a step change or a structural change and not a peak to be followed by a trough," Mr. Powell said.

"In other words, we are into an era of high food prices. It's not just volatility, it's a step increase."