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East-West
End of Cheap Food or Beginning of GM Revolution?
Tuesday, January 6, 2009
With Philip Shaw M.Sc.
In December 2007, The Economist cover story was called "The End of Cheap Food". Supplying food for the growing number of people of the world has been a major problem for all the countries of the world. In the seventies, a group of economists predicted (using highly sophisticated mathematical models) that the world was heading for a big crisis in food production. According to this group, the world would soon lose its ability to feed its population and so the famous Malthusian catastrophe was imminent. The warning was very strong and countries like China, India, Bangladesh and also many Asian countries were expected to live in permanent famine like conditions for years to come. Unfortunately, shortly after this forecast, the price of food increased dramatically. Bangladesh experienced a famine and many thought that the modelers were correct and so the world is in for a permanent crisis. In reality, we had quadrupled food production within a decade but many are still haunted by this situation.
Since 1974, the growth of agricultural production was tremendous. Countries like India instead of being chronically dependent on food imports became a food exporter. Europe and USA in order to retain its food production capability began to provide subsidies in food production. The developing countries launched the "green revolution" and converted millions of acres of land under paddy or crop production, converted forest land into agriculture, reduced fallow, and so on. The process led to increased use of pesticides, water and fertilizer in crop fields. The costs of such programs are huge for many of the poor countries.
Many economies at a later stage realized that subsidies in agriculture were essentially eating away the competition and people are increasingly using more resources to produce less and less. The external effect of food subsidies includes the overuse of energy in agriculture, creation of a water crisis, reduction of floral and fauna diversity and so on. At the end, some people also argued that the lop-sided emphasis on food production effectively reduced the pace of development in these countries. Yet it is difficult to deemphasize the issue of food subsidies. The argument to provide subsidy, in developing countries including Bangladesh, is not based on efficiency of resource utilization but is based on political feasibility of having a trust on the food exporters.
In 2007, the world eventually faced the food price spirals. Some argued that food production is being affected by demand for land to produce feed and fuel (bio-fuel), others like President Bush argued that "Indians are eating more rice" and so prices are going up because of demand. On the other hand, some even argued that increased energy prices led to increased food prices because food production today has become more energy intensive than before.
Against this backdrop, the Economists ran the following cover story -
" FOR as long as most people can remember, food has been getting cheaper and farming has been in decline. In 1974-2005 food prices on world markets fell by three-quarters in real terms. Food today is so cheap that the West is battling gluttony even as it scrapes piles of half-eaten leftovers into the bin.
That is why this year's price rise has been so extraordinary. Since the spring, wheat prices have doubled and almost every crop under the sun—maize, milk, oilseeds, you name it—is at or near a peak in nominal terms. The Economist's food-price index is higher today [Dec 2007] than at any time since it was created in 1845. Even in real terms, prices have jumped by 75% since 2005."
However, it is also true that the 2007 crisis has further shown the weakness of the world food market in terms dealing with demand and supply. Imposition of temporary bans on exports of food from several food exporting countries further weakened the argument that a free market based on free trade principles as well as efficient utilization of resources can be trusted. Many now think that meeting food demand domestically remains a prime policy target. To me this situation is going to increase pressure on scarce resources of the developing countries. Many developing countries including Bangladesh are likely to pursue a second revolution – called a GM revolution – in food production. The food production will increase further but it will weaken the efficient utilization of resources.
Some would argue that the cost of such a crusade will be borne by our ecology and environment and that the very survival of the mankind will be in trouble in future. On the other hand a freer, simpler and a non-protectionist food trade regime (internationally) would have been a much better choice for all of us. For the time being, however, we see no alternative but to emphasize in the production of food. It is popular and so will be pursued by every democratic government.
In the West, Food Is Taken For Granted
By Philip Shaw M.Sc.
I produce food for a living. I farm 850 acres or 350 hectares of highly productive soil in Canada and I do it mostly by myself. Each year I produce about 25,000 bushels (680 metric tonnes) of soybeans, 40,000 bushels (1000 metric tonnes) of corn and approximately 20,000(544 metric tonnes) of wheat. Each winter the land freezes solid and is covered with snow. Nothing grows; in fact, almost every living plant outside is dead or dormant. Nonetheless, in the spring of every year I commence producing food for this world and compete in global markets.
"Producing food" to me is not the same thing as I see in Bangladesh. For instance I marvel at how food is distributed in Bangladesh. I have often seen trucks coming into Dhaka at night full of fresh vegetables that have been picked that day. I have seen the markets full of rice where people can bargain for good prices. However, I also know there are many hungry stomachs in Bangladesh. There is also hunger in Canada. In fact, it's everywhere, more or less. Getting our global agricultural industry working to eliminate that hunger might be a lofty goal. However, as Dr. Haque implies, it's not easy. Every country regardless of their production efficiency has its priorities. Food security surely is one of them.
It might be hard for you to imagine my way of life with you living, working and enjoying life in Bangladesh. For instance "the food" I produce isn't shipped on the back of a truck through Dhaka streets at night. Think of it this way. The agricultural prices I receive are determined by an agricultural New York Stock Exchange, commonly referred to as a commodity market. The grain and oilseeds I produce are priced on what's called a "futures exchange" where traders set prices based on some perceived future value on a set volume delivered at a specific time. It all gets to me in a very public way, over a computer or announced on a radio station. There are millions of sales all based on the fair exchange between buyers and sellers. At the end of the day, I get paid, and the much of the world eats.
Canada of course is a very big country with very few people. In fact at the present time, it's frozen solid. So across this big country there are many crops grown and much livestock produced. Unlike Bangladesh, we don't have a lot of people, so we have to rely on export markets to buy our crop and livestock. At the same time, we import produce, which can't be grown in Canada, like citrus fruit and rice. Having a global market is important to Canadians too. Without it, everything would grind to a halt.
Dr. Haque writes about subsidies and how they affect food production and he also talks about the great rise in food prices in 2007 and the first part of 2008. It's interesting to see how all of this is perceived in Asia. That's because in the western world millions are spent subsidizing agriculture. Also too, many western agricultural commodities have been diverted into biofuels, fuel made from food crops. This might seem very foreign to students in Bangladesh, but to many western governments, this was an answer to their growing dependence on Middle Eastern oil.
Some agricultural economists maintain this emphasis on biofuels led to the increase in food prices in 2007 and 2008. Many other observers in developing countries looked at the diversion of food into fuel as immoral. At the same time people like myself were benefiting as the prices I received as Dr.Haque illustrated, doubled and sometimes tripled in price from where they were two years ago. As you might imagine, it was a good time to be me.
Dr. Haque emphasized new directions in food policy, for instance a renewed emphasis on domestic food production and the introduction of genetically modified foods to help satisfy this goal. That is diametrically opposite of what western countries are doing. Here in Canada as well as the United States, there is lots of food and most of it is genetically modified. In fact food is so taken for granted and so cheap, western countries have an increasing obesity problem. Eating in western society has become like sport.
So when Dr. Haque suggests, "On the other hand a freer, simpler and a non-protectionist food trade regime (internationally) would have been a much better choice for all of us", it is not so simple. In western society there are many stakeholders throughout the agricultural and food system who want to protect their interests. To them it's not about empty stomachs, poverty elimination or anything like that.
There lies the paradox. Mankind has the capacity to feed this world but invariably, something gets in the way. It's a big world, much bigger than most of us can imagine. However, empty stomachs are empty stomachs. At some point in the future, we need to find a better way.
East/West is a joint column written by A.K. Enamul Haque and Philip Shaw. Dr. A.K.Enamul Haque Ph.D, is a Professor of Economics at United International University. Philip Shaw M.Sc. is farmer, writer and broadcaster in Dresden, Ontario, Canada. Each month they will bring their uniquely East/West perspectives to specific topics of world interest.
