Friday, August 01, 2008

World hunger and your farm...

The Economist has an intriguing on-line debate in progress:

Proposition: There is an upside for humanity in the rise of food prices.

From the "pro" side, an excerpt of the opening statement.
Consider India, which has a long history of subsidising agricultural input and output prices. According to the ADB, this has led to a system which is “unproductive, financially unsustainable, and environmentally destructive; … (it) also accentuates inequality among rural Indian states.” Higher world food prices might be just the push needed by India, along with many other countries, to persuade it to reform its agricultural pricing system and provide new opportunities for its desperate farmers.

The ADB report also analyses China in some detail. It concludes that rural households in China should enjoy a significant reduction in the incidence of poverty as a result of high food prices. Although some urban households will be made worse off, these are the same households which have seen steady growth in wages in the last few years and have a middle-class living standard. In fact, a short while ago many analysts claimed that the greatest risk to China’s development was the growing gap between income levels in urban and rural areas. With today’s food prices, that problem has receded.

The outcome in Indonesia appears to be more mixed. Urban low-income and landless labourers would become poorer, while small and medium farmers would be better off. Indonesia has large numbers in both these groups, so many people would be affected. On average, the ADB simulations suggest that there would be about the same number of winners and losers, so average national poverty would remain unchanged.

It is surely true that high food prices will cause hardship to many. The suffering of those in Cairo, Haiti and much of Africa is real. The spectre of hunger is ugly. That cannot be denied and should not be forgotten. Nor should we leap to the conclusion that food prices at today’s levels are here to stay. But for the majority of the world’s poor, to be found among the 1.7 billion rural residents of India, China and Indonesia, the dream of a “chicken in every pot” is becoming more attainable because world food supply is rising again. That is the upside for humanity from today’s high food prices.  [More]

And from the "con" camp this rejoinder.

At first glance, one might assume that the world’s about 400 million small farmers are among the winners from rising food prices. In fact, however, most small farmers in developing countries are actually net buyers of food, so they feel the pinch from rising food prices. Even many farmers who are net food sellers during and after harvest time must buy food for the rest of the year. Theoretically, high food prices increase profits from farmers’ products, but most small farmers in developing countries will miss out on this opportunity because they cannot achieve sufficient economies of scale or they lack access to efficient markets. Even for farmers who can boost production, higher profits are far from guaranteed. With rising energy prices, farmers are paying much more for fertilisers, high-yielding seeds, livestock feed and transport.

Biofuel production from grains and oilseeds is a major contributor to high food prices and likely to remain so. Increased demand for biofuels—stemming from overly ambitious mandates and large subsidies in industrialised countries—accounts for at least 30 percent of the total increase in the real world price of cereals up to 2007 and probably even more in 2008.

What started as a hike in food and energy prices has turned into general inflation and severe strains on the economy as a whole. Most affected are net food-importing countries, the majority of which have low incomes. Even food-exporting countries have “imported” food price inflation. Now central banks try to address the inflation trends with general interest rate and monetary policies which, however, do not help address the root causes of food-price inflation, which was a key driver of general inflation in many countries in the first place. [More]

Most importantly, please run through the comments - and add yours.  As American producers especially react to consumer kickback by pointing the finger at other factors, the reality of consumer anger becomes apparent.

We told them for years that food prices were low because of farmers.
The success of agriculture contributes to the strength of this nation. It is in our national interests, in our national security interests that we have a strong farm economy.  And the farmers of America contribute to the values of our nation, and to the generosity of our nation.  As we speak, trucks and planes are delivering American food to the hungry in Afghanistan.  Those rations say, "A gift from the people of the United States."  This gift is made possible by the farmers in our country, and I want to thank you for it.  [More]
They bought it then.  They believe it still.

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