The High Costs of Dining at the Global Dinner Table!
The Culprits of the Global Food Crisis!
Dr James Warren 21 February 2011
As public discontent and unrest spreads across Northern Africa and the Middle East, the common perception is to look to military and ruling dictatorships and their lack of democratic principles and proponents of social change as the primary catalysts. But, let’s scratch beneath the surface? Could the current wave of riots in countries such as Tunisia, Egypt, Yemen and Jordan (to name a few) be partly due to soaring food prices? Indeed, rising food prices are a so called ‘culprit’ on the bumpy road to economic recovery, further fuelled by hefty oil prices. But are these the only culprits that warrant the high cost you’re likely to pay to dine at the global dinner table or, worse still, you could be left with an empty plate?
More Mouths to Feed
Statistics indicate that the world population growth peaked at 2 per cent per year around 1970, and dropped below 1.2 per cent in 2010. However, the world population has almost doubled since 1970, adding an estimated 80 million people each year. The harsh reality is that every day an additional 219,000 mouths need to be fed at the global dinner table. Maybe there will be no seconds as many will be greeted with empty plates. So who is likely to be left hungry? Poor countries have to import large quantities of food to feed their populations are also vulnerable if they already have high inflation, have limited foreign currency reserves and if their local currencies are depreciating against the US dollar. The problem is that developing economies spend up to 80 per cent of their household income on food.
The Grain Giants
Let’s not underestimate the importance of grain as a basic foodstuff and many countries have to import this food staple from the grain giants, Russia, USA and Canada. Russia is one of the largest global exporters of grain after the USA and Canada, accounting for some 17 per cent of global grain output and exporting 20 per cent of its 100m tonne production in 2009 to markets in the Middle East and North Africa. However, in 2010, after suffering severe droughts and wildfires, Vladimir Putin cancelled exports in a bid to keep Russia's domestic market well supplied. Not much has changed since last year. At the end of January, Andrei Klepach, Deputy Minister of Economic Development and Trade for the Russian Federation declared that the ban will only be lifted if grain production exceeds 80m tonnes. Seemingly, such a cancellation would have a knock-on effect as the quantities of grain involved are so large. As such, are we already witnessing the consequences of this grain export ban manifested in the recent unrest on the streets of Cairo? On the surface, such a statement may seem a little far-fetched but Dmitry Rylko, head of the Moscow based Institute for Agricultural Market Studies has echoed this sentiment. According to the Russian News agency, RIA Novosti, Egypt is one of the largest importers of grain with about 14.3m tonnes in 2009 - 2010. Russia's share of the Egyptian grain market has reached 60% since it began exporting there in 2003. With Russia's export ban on grain, Rylko claims that the subsequent “withdrawal of 15m tonnes of the cheapest grain from that market could have triggered the crisis”. So, does Russia withholding grain affect us globally?
High Food Prices
Currently there’s a frenzy of statistics on soaring food prices, the World Bank argues that food prices are at dangerous levels, with the latest edition of Food Watch stating that over the last four months food prices rose by 15%. The global food price index produced by the UN Food and Agriculture Organization (FAO) reached 231 points in January, higher than the previous peak of 213.5 reached in 2008. It’s the highest value recorded since the FAO first developed this index in 1990. The UN fears 'wheat hoarding' is likely to be widespread in 2011 raising demand and prices. The FAO Food Price Index rose for a second consecutive month in January, fuelling inflation in emerging countries and one can only speculate what effect these ever growing prices have beyond Egypt and the Middle East. Hence, soaring world food prices have contributed to the growing concerns of unrest. Bloomberg stated on 5 January 2011 that world food prices on sugar, grain and oilseed costs rose to a record in December 2010, exceeding those that sparked terrible riots from Haiti to Egypt in 2008. Furthermore, 13 people died in Mozambique in 2010 in protests against plans to raise bread prices. The knock-on effect is hard to calculate but the omens don't look favourable. The heady mixture of political unrest coupled with food shortages and high prices is a potentially volatile cocktail and one wonders how far the current wave of unrest will spread, particularly if Russia does not meet its self-imposed 80m tonne quota and the other grain exporting countries are unable to take up the slack.
Politics Over Food
Russia has her own agenda for bread over issues surrounding grain harvesting. Not least is the fact that Vladimir Putin is keen to avoid any spread of the social discontent and unrest that has begun to permeate into the big Russian cities, ahead of presidential elections in 2012. The Caucasus have been a troublesome region for Russia for much of Russia's post-Soviet history and responsible for countless acts of terrorism and two wars in the 1990s and 2000s as a result of ethnic tensions delicately entwined with claims to secession and issues of Islamic Fundamentalism. Ethnic tensions have already been raised in recent months with violence spilling onto the streets of Moscow and St Petersburg after a Russian football fan was shot in a brawl with several men from the North Caucasus. So, any unrest in the grain-producing region would be unwelcome. Indeed, the world, as we enter the second decade of the 21st century is an uncertain place, but one certainty exist; there is no other choice than to dine at the global dinner table. The dominant diners such as Russia and the USA will likely decide who eats cake or who will be left fighting over the crumps….Ultimately are the dominant diners such as Russia upsetting the global dining table merely for political gain?
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