Read at : The Economist
http://www.economist.com/world/international/displaystory.cfm?story_id=14926114
Feeding the world
If words were food, nobody would go hungry
Nov 19th 2009 | ROME
From The Economist print edition
Investment in agriculture is soaring. So, worryingly, is distrust of markets and trade
“THE world’s attention is back on your cause.” That was Bill Gates talking to agricultural scientists gathered recently to honour the late Norman Borlaug, father of the Green Revolution. The tycoon-turned-philanthropist was right. This week, the world—in the guise of 60-odd heads of state including the pope—held the first United Nations food summit since 2002. As the world’s attention turns from the receding financial crisis, it is switching to one emerging in agriculture.
The UN conference on food security took place at a point of relative calm between two storms. The first occurred in 2007-08, when world food prices experienced their sharpest rise for 30 years. Food riots swept through three dozen countries and two governments (Haiti’s and Madagascar’s) were overthrown by the events that the price rises set in train.
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The next storm is likely within a few years and everyone fears its arrival. The price spike of 2007-08 was the result of structural imbalances in the world food chain, not just temporary fluctuations like bad weather or government mistakes. These imbalances have not gone away: food demand is still rising because of changing appetites and rising incomes in emerging markets; biofuels are still competing with food crops for available land; yield growth in cereals is declining.
In 2008-09 food problems were masked for a while by the financial crisis. But as Jacques Diouf, head of the UN’s Food and Agriculture Organisation (FAO), said this week, “when the recovery picks up, we will be back to square one.” Jeffrey Currie of Goldman Sachs argues that while most recession-hit industries in the rich world are operating at 60-70% of capacity, agriculture is at full capacity, in the sense that last year’s cereals crop was the largest on record and there is little fallow land ready to be taken under the plough. If there were another supply or demand shock, the farm-trade system would not cushion the blow.
It may not be many years away. In the first ten months of this year, food prices rose by 9.8%, prompting fears of a resumption of the surge that began in 2007, the first of the two years of crisis (see chart, left). The “breakfast commodities” (tea, cocoa, sugar, important sources of calories in some parts of the world) are trading at their highest levels for 30 years. Worse, the price respite, while it lasted, did nothing for the poorest and most vulnerable. According to the FAO, the number of malnourished people in the world rose to over 1 billion this year, up from 915m in 2008 (see chart, below). Economists at the World Bank reckon that the number living on less than $1.25 a day will rise by 89m between 2008 and 2010 and those on under $2 a day will rise by 120m. A quarter of a century after a famine in Ethiopia which dramatised failings in the food system, famine is again stalking the Horn of Africa. Has anything been done to prepare for future food shocks?
Certainly, say most governments. Money is starting to pour into agriculture after 30 years of neglect. There has been a spasm of institutional reform. And public and private sectors are doing more to help farmers than ever.
At their meeting in L’Aquila in July, the Group of Eight (G8) large rich economies promised to increase spending on agricultural development by $20 billion over the next three years. Not much of this was new money (probably $3 billion-5 billion) and it is not clear how much, if any, has been delivered. The amount also falls far short of the $44 billion that the FAO guesses will be needed each year to end malnutrition (and even shorter, aid agencies reflect, of the $14 trillion poured by rich countries into their banks). Still, the amount is not trivial. It would finance for three years the annual $7 billion that the International Food Policy Research Institute (IFPRI), a think tank in Washington, DC, estimates will be the bill for developing countries to protect agriculture from the impact of climate change. And it excludes the far greater sums developing countries themselves are promising to farming.
Agriculture and food security have become “the core of the international agenda”, as the G8 called it. In 2009, the World Bank increased its spending on agriculture by 50%, to $6 billion. The Islamic Development Bank is creating an agriculture department for the first time.
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