What do rising food prices mean for Africa? Alex Evans

January 26, 2008 | More on Africa, Climate and resource scarcity, Economics and development | No comments

The FT’s consumer industries correspondent, Jenny Wiggins – who along with commodities correspondent Javier Blas deserves a medal (or at the very least a rise) for excellence in covering the food prices story over the last year – is looking at changing patterns of food consumption in India in the paper’s Saturday magazine today.  The whole story is a terrific piece of feature journalism, but it was this passage towards the end that got me thinking in particular:

India, which is still trying to lift millions of people out of poverty, is having problems satisfying its appetites. One of the reasons the Punjabi dairy farmers are doing so well is that demand for milk, and milk-derived products, is increasing so quickly that farmers can’t keep up. India, despite being the world’s largest producer of milk, temporarily halted exports of milk powder last summer to try and stop domestic milk prices from rising too fast after some dairy farmers were tempted by record high global prices and sold their product to exporters rather than local food producers.

Milk isn’t the only hot commodity. After restarting wheat imports in 2006, for the first time since the late 1990s, India banned wheat exports last year. The country can, of course, try and produce more food. But Ajay Shankar, a government secretary in the ministry of commerce and industry, says that while India wants to increase its agricultural yields (which are low compared with the rest of the world), expanding the amount of land farmed is difficult in a country already struggling to support more than one billion people. In Punjab, the state that produces a hefty chunk of India’s wheat, rice and milk, decades of intensive farming and heavy fertiliser use have taken a heavy toll on the land, and water tables are falling sharply.

Although India’s economy is expanding at about 9 per cent a year, its agricultural sector is slowing, with growth declining from 4.7 per cent between 1992-1997 to just 1.5 per cent between 2002-2006. If India can’t produce enough of its own food, it will have to import more. Shankar says it is unclear how much more food India will need, but acknowledges that significant increases in imports would affect the global economy. ”If we become a major importer of food grains as some fear, clearly it will have an impact on global prices,” he says over tea in his Delhi office.

And India is not the only country expected to import more food in coming years. Over the next decade, per capita income in China is expected to triple, which means the Chinese will be eating more – and better. They are already each eating twice as much meat as they were in 1990 and the country now accounts for one third of all meat eaten in the world, according to research by Goldman Sachs.

Now as Wiggins explains earlier in the article, it’s changing consumption in the BRIC countries, more than falling grain stocks or increasing government support for biofuels, that’s really been driving rising food prices.  But if the two most populous of those four nations, India and China, are having to import more and more of their food, that raises the question: who’s going to be growing the supply to meet all this extra demand?

And the thing that struck me, as I pondered this, was that if there’s one region that by rights out to be making a mint out of rising food prices, it’s Africa.  Africa, after all, is the continent that the green revolution forgot.  While productivity was going through the roof in Asia in the 1960s and 1970s, African agriculture remains stubbornly unproductive.  Now that agricultural commodities appear finally to be heading out of their interminable slump, there’s a powerful case for investors to tackle the productivity gap, you’d think. So is lady luck finally smiling on Africa’s people?

Well, a big part of the answer to that question depends on whether you’re looking at those of her people in her mushrooming cities, or alternatively those of her people still working the land.  If you look at the global statistics on hungry people, most of them are in rural areas.  Fully 50 per cent of the world’s undernourished people (400 million souls) are in low income farm households.  Another 22 per cent, 176 million people, are rural landless and low income non-farm households; and a further 8 per cent, 64 million people, are poor herders, fishers or forest people dependent on community or public resources. 

In fact, only 20 per cent of the world’s undernourished people are in low income urban households – 176 million people - and a great many of them are to be found in China and India rather than Africa.  [All stats from John Shaw's masterly World Food Security: a history since 1945.]  So presumably, rising prices for agricultural goods ought to spell good news for all those rural poor in Africa, especially if rising prices also incentivise investment in improving productivity – right?

As I blogged back in October last year, development economist legend Dani Rodrik’s answer is that it depends - but that “it depends in predictable ways on household and country characteristics”:

…it depends on whether a poor household is a net seller or buyer of food (that is, whether it grows more or less food than it consumes). This means that the rural poor generally tends to benefit from higher food prices, whereas the urban poor generally get hurt. How large the impact is depends, in turn, on the size of the food account as a share of total expenditures or income of a household. And whether the change is good or bad for a nation’s poor as a whole depends on the geography of poverty in a country.

But there’s a factor that Rodrik overlooked: climate change.  While northern latitude global breadbaskets like Canada and Russia stand to be net beneficiaries from climate change in the short to medium term, the outlook for Africa is not good at all.  Falling yields as a result of climate impacts risk increasing Africa’s needs for imported food, rather than its opportunities to export food.  For countries already dependent on imported oil – which, as I noted in December, have already seen all their increases in aid and debt relief from the last three years wiped out by higher fuel import costs – it’s a vicious spiral, especially given that biofuels mean that energy and food prices are now linked.

The irony and injustice here is heartbreaking.  Just when one major global trend – rising food prices – looks set finally to offer Africa some kind of a break, we find that in fact other trends – climate change and energy scarcity – may convert higher food prices instead into yet another problem, that despite being created elsewhere, somehow ends up in Africa’s lap.

(For more on the international implications of rising food prices, see my briefing note from December last year.)

Update: see also

- On collision course: scarcity and African patronage systems - 5 March 2008

- Food prices: where to get briefed – 2 March 2008

- Third world debt (the sequel) – 1 March 2008