While heads of government of the G8 plus 5 countries are meeting in Japan, I get a beef on rising prices of crude contributing to inflation and ever higher costs for mobility, energy and heating – Gas prices are beyond € 1,60 a liter [a gallon is almost 4 liters], and the prices for foodstuffs are up well beyond inflation. But annoying as I might find my way to the gas station and the grocery store, inflation in foodstuffs for the products relevant for poorest and most vulnerable people on the planet is quite a bit more dramatic. Yet German media seem to take little note of rising food prices on a global scale. They have released a few articles back in April, and recently, they seem to be more concerned with the Sommerloch („summer hole“) than with the widespread and deepening economic crisis and potential long term consequences for economic development.
In a study as old as 1999, International Food Policy Research Institute (IFPRI, Washington D.C., USA) has projected an average rise of world population by 74 million people per year well beyond 2020, thus a continuous rise in need for basic foodstuffs worldwide. The research institute explains the current current food crisis with rising demand for food and feed, biofuels, high oil prices, climate change, and stagnant agricultural productivity growth.
At the end of June 2008, an internal World bank study leaked to the British Guardian, which was immediately taken up by Spiegel International. It presents a blow to the plant energy drive and fundamentally questions the Policy introduced by the European commission as to foster biofuels (see Nouvel Observateur). The World bank study holds that biofuels have forced up food prices up 75 Percent (more information over at Global Sociology).
IFPRI identifies a malfunctioning of world grain markets as an additional driver of the world food crisis. Given the thinness of major markets for cereals, the restrictions on grain exports imposed by dozens of countries have resulted in price increases. Several countries have adopted retail price controls, creating perverse incentives for producers. Speculative bubbles have built up, and the gap between cash and futures prices has risen. It stimulates overregulation in some countries and causes some commodity exchanges in Africa and Asia to halt grain futures trading. Some food aid donors have defaulted on food aid contracts. The World Food Programme (WFP) has even had a hard time getting quick access to grain for its humanitarian operations. Developing countries are urgently rebuilding their national stocks and re-examining the „merits“ of self-sufficiency policies for food security despite high costs. (IFPRI, „Physical and Virtual Global Food Reserves to Protect the Poor and Prevent Market Failure“ June 2008). A traditional approach to coping with the market failures would involve building up a physical, public, globally managed grain reserve. These reserves could be released to cope with excessive price increases. This reserve has the disadvantages of high storage costs and slow transactions. Instead, IFPRI suggests a different institutional arrangement for the exchange of commodities: (1) a minimum physical grain reserve for humanitarian assistance, and (2) a virtual reserve and intervention mechanism to calm markets in situations of increased speculative activity, backed up by a financial fund.
Hopefully, the G8 will consider IFPRI director Joachim von Braun (video below) and the various other warning voices and resolve this man-made crisis and the European Union will take responsibility for its failed environmental policy. Cereals are needed to feed the poorest and most vulnerable people on the planet, they do not belong in the tank of your car.
Joachim von Braun – U.S- Senate Testimony