Article by David Steven published in World Politics Review on scarcity of resources in Pakistan and what it means for the country. Available from World Politics Review here (subscription should not be required)  (May 2011)

As if to mark the start of the new decade with an indication of what we can expect from it, the FAO’s Food Price Index has just surpassed its 2008 peak (it’s now at 214.7, compared to 213.8 in June 2008), putting it at its highest level since its launch in 1990. FAO is now warning of a new “food price shock” that could lead to a “food crisis”, and its senior economist Abdolreza Abbassian warns that “it will be foolish to assume this is the peak”.

But if the Index is at its highest ever level, why aren’t we seeing riots on the scale of 2008, when (according to the International Food Policy Research Institute – pdf), 61 countries experienced unrest, with protests turning violent in 23 of them? And should we expect to see the global total of undernourished people climb back over the one billion mark next time the UN figures are compiled?

A few things make this food spike different from the last one.

First, this one is – so far – about a somewhat different set of food commodities. Whereas the 2008 spike was heavily concentrated in key grains – rice, corn, wheat, soya – this one is being driven more by meat, sugar and vegetable oils, which are less fundamental as staple foods in low income countries. Admittedly, corn has been rising strongly too – but rice, in particular, has so far not spiked (it hit $1,000 a tonne in 2008; it’s at $535 a tonne today – see the FT graph below).

Second, many African and Asian countries have actually had good harvests over the last year. As the FT points out, “while the international export price for corn jumped 45 per cent between May and November [last year], it declined by up to 10 per cent in parts of Africa”. Part of the backstory here is how well many African countries have done at investing in their agriculture sectors since 2008, through programmes such as CAADP - an interesting datum to stir in to the argument over whether low income countries should scale up endogenous production capacity and seek to reduce their reliance on international markets to meet their needs.

Third, while oil prices are high at the moment (around $95 a barrel), they’re certainly not at their 2008 peak level of $147 a barrel – a factor that helped drive food prices much higher as costs rose for fertiliser, transportation, processing, on-farm energy use and so on. (On the subject of what drove the 2008 spike, incidentally, this new IFPRI report is worth a look – it raises a sceptical eyebrow at those who argue the role of biofuels in that spike was overstated.)

Fourth, and perhaps most importantly, we haven’t yet seen a slide into panic measures that amplify the problem. The last food spike was a story in two acts, with the first part of the spike driven by fundamentals like rising demand for biofuels and the depreciation of the US dollar, and the second, steeper part of the spike driven in particular by export bans or restrictions imposed by over 30 countries. Although Russia imposed an export ban on wheat last summer, and India has recently restricted the export of some staple vegetables, we’re not in the trade meltdown scenario of 2008 – thankfully.

 But don’t breathe a sigh of relief just yet. The oil price may well rise higher over the year ahead, as emerging economy growth continues to power onwards. Further depreciation in the dollar would be likely to increase commodity prices. And above all, don’t forget climate change. Extreme weather could cause poor countries’ food outlook to darken substantially this year – as Oxfam’s Gawain Kripke puts it, the latest rise in food prices is “a grave reminder that until we act on the underlying causes of hunger and climate change, we will find ourselves perpetually on the knife’s edge of disaster”.

The FT’s big front page splash today (“Fears grow over global food supply“) has sent a ripple of interest through the wider media – expect to hear a lot about the issue on the broadcast media over the course of the day. So is this a repeat of 2008? In a word, no – though it could yet become one, and even if it doesn’t, we need to regard this as a wake-up call. Here’s a quick summary.

What’s going on? Wheat prices are soaring. A year ago, a tonne of wheat cost €141; today, it costs €231, and most of the rise has happened over the last few weeks. Meanwhile, meat prices have hit their highest level in 20 years. The overall FAO Food Price Index rose 5% during August, and is back to where it was in late autumn 2007 (when the food price spike was well underway) – though it’s still some way off its peak during summer 2008.

So why are prices rising? For wheat, the main driver has been adverse weather – principally in Russia, but also in parts of the EU, Kazakhstan, Australia and Ukraine. The effect has been compounded by export restrictions, again with Russia (which has banned wheat exports outright) the main driver. On meat, the issue’s more to do with demand (especially in emerging economies, where people are increasingly shifting to meat-rich ‘western diets’) – though the supply side has also lagged.

But why the sudden spike in media coverage? Media interest has stepped up over the last 24 hours because of two things that just happened: a food price riot in Mozambique that left 7 dead, and Russia’s announcement that it will extend its export ban on wheat for 12 months.

Is this 2008 all over again? No. Despite the adverse weather in Russia and other countries, the world as a whole is on course for a bumper crop this year – the third highest on record, according to the International Grains Council. Stock levels are also much more comfortable than they were in 2008, providing more of a buffer. And the 2008 food spike was greatly amplified by a concurrent oil price spike (reaching $147 at the top), which made food more expensive by upping fertiliser, energy and transport costs, as well as making it more attractive to put crops into biofuels. Today, by contrast, oil is at $76 – still high, by historical standards, but a long way off 2008 levels.

So there’s nothing to worry about? No, that’s not the case either. The situation could still get a lot more serious – if more harvests get damaged by extreme weather, if price bubbles develop through investors going long on futures markets, if the oil price starts rising, or if more countries start implementing export bans or restrictions.

Looking to the longer term – with food demand forecast to rise 50% by 2030, even as trends like water scarcity, climate change, intensifying energy security risks and competition for land constrain supply growth – there are strong reasons to think that 2008 wasn’t “just a blip”.

Most of all, remember that for many poor people, the food price spike didn’t end in 2008. The number of undernourished people in the world was 850m before the food spike; today, it’s over a billion – not surprising, when you reflect how high food prices have been since then by historical standards (again, see the FAO Food Price Index), or on the fact that poor people typically spend 50-80% of their household income on food.

So what do we need to do? See The Feeding of the Nine Billion for a full answer to this – but the short answer is, a) invest in a 21st Century Green Revolution that produces more food, more sustainably, more resiliently, and in a way that works for small farmers; b) scale up targeted social protection systems to protect people like the ones rioting in Maputo (and which make a lot more sense than price controls or economy-wide subsidies); c) start getting serious about making international agricultural trade more resilient, especially through better crisis management mechanisms and probably including new rules against sudden export restrictions; and d) do a serious global deal on climate change. And get a move on. (more…)

This year’s OECD / FAO agricutural outlook, which looks ahead over the period from 2010 to 2019 (news release; summary), didn’t get terribly extensive coverage in the media – unsurprisingly, given that its key message (“real commodity prices to remain below recent peaks but well above recent decades”) is exactly the same as it was in last year’s report. 

But as soon as you start to delve into the quant projections, you see that there’s actually a big difference between this year’s and last year’s report - and not an encouraging one.

Last year, the 2009 to 2018 outlook (summary) projected that over the decade ahead, ”average crop prices are projected to be 10-20% higher in real terms relative to 1997-2006, while for vegetable oils real prices are expected to be more than 30% higher”.

This year?  “Average wheat and coarse grain prices are projecte to be nearly 15-40% higher, while for vegetable oils real prices are expected to be more than 40% higher”. Most media coverage didn’t pick up on this (though the FT, as usual, did).

That’s a big deterioration of the outlook in just twelve months. So what explains it? I can’t immediatelymake out the reason, so I’ve emailed FAO’s press office to see if we can get some more detail for them. But as I noted in The Feeding of the Nine Billion (pdf), the OECD / FAO outlook is in some ways unduly optimistic – as in the past it has “largely overlooked the potential impact of long-term resource scarcity trends, notably climate change, energy security and falling water availability”.

World Food Programme report on the state of the science on what climate change means for hunger, plus policy recommendations. Authored by IPCC Impacts Chair Martin Parry with Mark Rosengrant, Tim Wheeler and Global Dashboard’s Alex Evans (December 2009)

Download Report

I’ve said before that the easing of oil and food prices that followed the credit crunch and the global downturn gave policymakers a window of opportunity to take preventive action on scarcity issues. Now, alas, I think that window is starting to close – without their having done much about it.

To see why, first take a look at what the oil price has been doing over the last year (Brent crude futures, $/barrel; h/t BBC):

Then, put that against the longer term background of what’s been happening since 2000 (slightly older data here, via Mongabay, but usefully puts the BBC graph above in context):

As the second graph shows, today’s level of just under $80 per barrel already brings us back to where we were in around July 2007 – and that’s during a still shaky recovery from what’s generally agreed to have been the worst global recession since the early 1930s.

This is a striking rebound in such weak economic conditions – and calls to mind the consistent warnings from the IEA over the past 18 months that the collapse in investment in new supply during the financial crisis and subsequent downturn has set the stage for a new oil price crunch as soon as recovery gets underway (not to mention the fact that IEA’s chief economist thinks we’re looking at peak oil as soon as 2020).

With the oil price headed upwards, food prices can be expected to follow – because higher oil prices make biofuels more attractive, and raise the prices of on-farm energy use, fertilisers, transportation, distribution and various other elements of our energy-intensive food supply chains.

Sure enough, if we take a look at the latest FAO food price index, we find that it too has been quietly heading upwards over the last few months – and is now likewise back at where it was in July 2007. At that point, of course, the food spike was already well underway, with the tortilla riots in Mexico City that served as a wake-up call for many policymakers having come almost six months earlier.

On top of this, remember the really key point that the fall in food prices that took place during the global downturn gave minimal respite to the world’s poorest people – precisely because even as prices fell, they were also getting hammered themselves by the downturn.

The starkest indication of that is in the global total of undernourished people (shown here in a graph from the FT); when you realise that we haven’t just lost the progress of the last few years, but are in far worse shape that at any time since the last 60s, you start to see just what a catastrophe the combination of  food / fuel price spike followed by global downturn has been for development:

As I’ve argued in numerous previous posts, we were never out of the woods on the food / fuel pincer movement; it was the collapse in prices following the credit crunch that was the blip, not the price spike that preceded it. And what’s most frustrating now is the extent to which policymakers have frittered away the chance we had to get onto a more secure footing.

(more…)

- With the news that President Obama has nominated Ben Bernanke for a second term, over at the New Republic Noam Scheiber assesses the merits of continuity at the Fed. Stephen Roach, meanwhile, examines the case against the incumbent chairman, arguing that Obama’s decision should open a “broader debate over the conduct and role of US monetary policy”.

- Taking us back to the depths of last September’s financial meltdown, Faisal Islam has some interesting insights into the collapse of Lehman Brothers as viewed from British shores.

- Elsewhere, debate continues apace about the rights and wrongs of releasing the Lockerbie bomber. Suggesting that “cock-up offers as convincing an explanation as conspiracy for the handling of Mr Megrahi’s release”, Philip Stephens argues that the decision highlights the “price of realism” in foreign policy.

- Speaking of which, in the latest edition of FP Magazine none other than Paul Wolfowitz assesses the realist credentials of President Obama; providing at once a telling insight into the mindset of a man at the heart of foreign policy making during the Bush years.

- Mark Easton’s BBC blog, meanwhile, takes a look at how the British government is looking to influence public behaviour in light of the Chief Scientist’s warning of a “perfect storm” of energy, food and water scarcity by 2030.

- Finally, as President Obama holidays on Martha’s Vineyard, the White House announces what he’ll be reading on the beach. Slate offers its take here.

I’ve just been having another look at FAO’s seminal 2006 report about the environmental impact of meat consumption, Livestock’s Long Shadow. I figured I knew most of the stats about meat’s massive contribution to scarcity issues – but nope, I found myself astonished once again by the report’s headline stats.  Livestock:

• Uses 26% of the ice-free terrestrial surface for grazing, and 33% of the planet’s arable area for feedstock – in total, 70% of all agricultural land, and 30% of the land surface of the planet;
• Accounts for 70% of previously forested land in the Amazon (and that’s just the pasture – feedcrops are another big chunk again);
• Are responsible for 18% of greenhouse gas emissions in carbon dioxide equivalent – that’s larger than transport – and for 37% of methane emissions (23 times as potent as CO2 in its warming effect);
• Uses 8% of global human water use, mostly in irrigation for feedcrops, and is probably the single largest sectoral source of water pollution;
• Accounts for 20% of total terrestrial animal biomass – squeezing out space for other species and hence contributing massively to biodiversity loss, mainly through destroying habitats (30% of the land surface of the planet, remember)?

I love eating meat, but since I wrote The Feeding of the Nine Billion, I’ve been aiming to cut it out for 3 days a week.  Having re-read FAO’s report, I’m going to up that to four or five – as ways of reducing your carbon footprint and wider environmental impact go, this is a very low hassle,high impact option (especially if you have Sophie Grigson on your shelf).

Also, if you haven’t seen coverage of Tristram Stuart’s new book on food waste, then take a look…

From a post here last October:

[We can expect] a reduction in commodity prices for the duration of the global downturn (however long that may be) as demand for them falls.  As I’ve mentioned, futures prices for grain crops are already falling; we can expect that trend to be supported by falling energy prices, which will reduce some of the pressure on food that’s come via fertiliser prices, transport costs and demand for crops as biofuels.

That said, let’s be clear: the fall in commodity prices due to a global downturn does not mean that we’re out of the woods for good on high food and fuel prices. As Javier Blas notes in the FT today, the downturn also means that necessary investment in increasing supply will be put off.  As soon as we’re out of the dowturn and demand starts going up again, we’ll discover that there’s been no shift in the underlying supply fundamentals – and hence that the stagflation drivers we were all worrying about until the credit crunch really began in earnest are just waiting where we left them.

Latest oil price data (Jul 08 – now, courtesy of BBC News):

Latest FAO Food Price Index:

Food historian Tristram Stuart has a piece in the Guardian this morning asking the question: what’s one person’s fair share of meat consumption? 

After all, meat (especially red meat) and dairy products have a disproportionate impact on climate change – the livestock industry is responsible for 18% of all greenhouse gas emissions – as well as on land use, grain consumption, water consumption and other issues besides.  So if by now we’re all used to the idea that we can quantify our carbon footprint and compare it to what our personal share would be if we had a safe global emissions budget that was shared out equitably between the world’s people, then what would the meat equivalent - the sustainable ‘Big Mac footprint’, if you like – work out at? 

As Tristram acknowledges, it’s not as straightforward as ‘meat bad, vegetables good’, given that

no two pieces of meat are the same. A hunk of beef raised on Scottish moorland has a very different ecological footprint from one created in an intensive feedlot using concentrated cereal feed, and a wild venison or rabbit casserole is arguably greener than a vegetable curry. Likewise, countries have very different animal husbandry methods. For example, in the US, for each calorie of meat or dairy food produced, farm animals consume on average more than 5 calories of feed. In India the rate is a less than 1.5 calories. In Kenya, where there isn’t the luxury of feeding grains to animals, livestock yield more calories than they consume because they are fattened on grass and agricultural by-products inedible to humans.

Nonetheless, encouraged by the declaration of a meat-free day a week in Ghent, Tristram’s got his calculator out and made a guesstimate of the kind of consumption changes we might be talking about.  Here’s the deal:

Global average consumption of meat and dairy products including milk was 152kg a person in 2003. Average EU and US consumption, by contrast, was over 400kg, while Uganda’s was 45kg. In order to reach the equitable fair share of global production, rich western countries would have to cut their consumption by 2.7 times – and this doesn’t include the fact that the butter will have to be spread even more thinly if the global population really does increase by another 2.3 billion by 2050.

However, still further reductions would be necessary because global meat production is already at unsustainable levels. The IPCC among other bodies, has called for an 80% reduction of greenhouse gas emissions by 2050. Since high levels of meat and dairy ­consumption are luxuries, it seems reasonable to expect livestock production to take its share of the hit. For rich ­western countries this would mean decreasing meat and dairy consumption to significantly less than one tenth of current levels, the sooner the better.

More evidence of increasing awareness of scarcity issues (and the consequent need for integrated policy approaches to managing them) over in the US: this presentation on ‘environmental challenges and global security’ from a colonel on the joint chiefs’ staff, given at a Department of Agriculture meeting on the food crisis held last week. 

Intriguingly, it includes a recommendation for a new National Security Council inter-agency policy committee on environmental security – which would develop a strategy to “utilize all elements of national power (diplomatic, information, military and economic)” so as to prevent conflict and promote regional stability.

The Department of Defense isn’t the only part of the US government where there’s innovative thinking happening on this area.  As I noted here last November, the National Intelligence Council’s report on global trends to 2025 placed a good deal of emphasis on scarcity issues,which was thanks to NIC’s Director of Analysis Mat Burrows.

Another key player in all of this is Carol Dumaine – like Mat, a career CIA analyst (where the Washington Post called her one of “the CIA’s dissidents”)  – who’s now over at the Department of Energy’s Office of Intelligence and Counterintelligence as their Deputy Director for Energy and Environmental Security. Carol describes herself as an “intelligence ecologist” and argues that current global challenges require “generalists who are specialists of the whole” – see this excellent presentation that she gave at an Institute for Environmental Security conference in DC in March.

The signs are also positive that National Security Adviser James Jones recognises the importance of scarcity issues and the need for changes to machinery of government in pursuit of more effective approaches to them.  As a Washington Post profile of Jones published this morning observes,

Although the administration is barely more than 100 days old, Jones has launched an ambitious restructuring of the White House national security apparatus so it can focus on modern issues such as energy and climate change.

Although the food price crisis has slipped from the agenda as the credit crunch has gathered pace, for poor people around the world it hasn’t gone away – and may now be set to worsen again. 

While the FAO’s food price index has fallen by around 30% since its peak last summer, that only takes it back to May 2007 levels: still well above recent norms.  Meanwhile, the global total of undernourished people is now over a billion, up from 850m just a couple of years ago. Now, FAO officials say privately that they expect the next findings from the index to show a new increase. 

If that’s right, then we’re really moving in to worst case scenario for developing countries, who are already reeling from the credit crunch. So what’s happening here at the London Summit on this front?

I asked that to Douglas Alexander, the UK’s international development secretary, in a press conference he did an hour or so ago.  He pointed to the £200m the UK has committed to a new ‘rapid response social fund’ to provide safety nets for the most vulnerable people, and applauded the work of the World Bank and WFP in particular. On increasing supply, meanwhile, he suggested that infrastructure investment is crucial (which it is).

I also caught up with Peter Mandelson, the UK’s business secretary, and asked him how the trade system could be proofed against the kind of crazy security of supply perturbations that caused such problems last summer, when over 30 countries had export restrictions in place. He stressed that what’s needed is to keep markets open, and that any impediments to this would harm supply by undermining incentives.

In analytical terms, I can’t fault anything either of them said. But note the lack of specifics about what this summit should be doing: there’s no getting round the underlying fact that preventing a resumption of the food price spike isn’t on the agenda here.  It should be.  As a senior IMF official put it to David and I when we were over in DC recently: “the last thing we can afford now is another crisis creeping up on us”.

Earlier this week, I noted that the Daewoo land lease deal in Madagascar – under which the South Korean conglomerate secured the lease to one half of Madagascar’s arable land for, er, no money - had emerged as one of the main reasons for Madagascar’s recent coup d’etat, and that one of the first acts of the new President had been to cancel the deal.

Good for Madagascar, you might think: with luck, this will lead to food importing countries becoming a bit more intelligent about getting the politics and the social dimensions right when they negotiate such sensitive food security deals.

Or maybe not.  Here’s the view of Chosun Ilbo, one of South Korea’s largest newspapers:

Er… nope, words just fail me.

So instead I’ll just quote what Ban Ki-moon – South Korea’s first Secretary-General of the United Nations – said when speaking to the Korean Parliament last summer:

My friends, Korea is not doing what it must … In truth, I’m somewhat ashamed as secretary-general that Korea is not doing what it should … I hope that Korea reflects on its current standing in the world and [resolves] to contribute more to the UN’s official development assistance [ODA] and its peacekeeping activities.

Looks like he has an uphill struggle on his hands…

Back in November last year, I blogged on the land lease deal agreed between Daewoo, the South Korean company, and the government of Madagascar, under which the former would lease fully one half of Madagascar’s arable land for a hundred years.  Soon afterwards, the news emerged that Madagascar would receive no payment at all for the lease – the only upside would instead be the prospect of some job creation.

Since then, of course, Madagascar’s government has fallen in a coup d’etat.  But what I hadn’t spotted until a US Department of Agriculture official mentioned it to me last week is the fact that the land deal was front and centre in what made the coup happen.  Here’s Tom Burgis in the FT on Saturday:

“Everything was a monopoly with [President] Ravalomanana,” says Naina, a 41-year-old wood chopper in one of the capital’s poorest neighbourhoods. “The country could not develop.”

The bombshell that turned the discontent into outright anger and so brought an end to Mr Ravalomanana’s rule was news of a deal between the government and Daewoo Logistics. This envisioned leasing vast tracts of Madagascar’s arable land to the South Korean conglomerate to grow crops that would be exported from a country where aid agencies were battling rural starvation. “It was the news that said Daewoo expected to pay nothing for the land that accelerated the trouble,” says one well-connected Malagasy banker who asks not to be named.

At a stroke, alienated members of the Malagasy elite found the banner to which they could rally an urban poor already struggling to cope with rice prices driven higher by the global commodity boom. They also found a figurehead in Andry Rajoelina, a 34-year-old former DJ who had married into Malagasy aristocracy and built the capital’s foremost billboard advertising operation …

Thousands took to the streets, whipped up by the Daewoo deal as the symbol of all that was ill. Protests turned to looting. Scores died as buildings burned. Then, in early February, Mr Rajoelina lead a boiling crowd from the main square to the gates of the state palace. Amid the confusion, the presidential guard opened fire.

By now we’re all well used to the idea that oil, diamonds, coltan, poppies and other high-value commodities can lead to a ‘resource curse’ in fragile states – for instance when the resource endowment ‘crowds out’ other sectors of the economy (e.g. through exchange rate rises), or props up poor governance.  Hitherto, though, only a few food crops – like coffee and cocoa – have been on the list of potential resource curse drivers.

I found myself wondering a couple of weeks ago whether the prospect of long term food price inflation and proliferating security of supply concerns  in places like China, South Korea and a raft of Gulf countries, might lead to growth in the pool of potential resource curse drivers.  Having seen the first government fall as the result of a landgrab deal, I think we now know the answer…

I shouldn’t laugh, as clearly it behoves all right-thinking people to applaud examples of UN agencies ‘delivering as one’ wherever we may find them.

But still, perhaps one may be permitted a small chuckle of surprised delight upon receiving a press release from a UN agency proclaiming its assistance to the UN’s food task force – when the agency in question is the International Atomic Energy Agency.

Apparently the IAEA has helped 24 African countries to eradicate the deadly cattle disease rinderpest. Alas, details of how this has been achieved were not provided.  But there is much enjoyment to be had in speculating.

IAEA have also provided this photo with their press release, which shows Dr. Chiklu Mba, the head of IAEA’s Plant Breeding Unit. Rather fabulously, the caption explains that he is ”examining mutant banana samples”.

Join us here again at the same time next week, when the World Food Programme will be with us to set out their ambitious plan for making a success of the Nuclear Non-Proliferation Treaty review conference in 2010.