Underbelly of food inflation

By Gouranga G. Das

Of late, no other issue has received more attention than the problems of food insecurity, sufficiency, safety, and the spiraling of food prices. Higher food prices have been fueled by dry weather in critical growing regions (like drought in Australia and Ukraine), poor yields in countries like Bangladesh, increasing oil prices, rising production and delivery costs, among others.

On the other hand, the surge in world demand spurred by a growing world population, higher income, diet changes, and asymmetric global expansion has spurred the price hike to such an extent that with an inadequate supply, the impending crisis worsens for low-income earners.

Food inflation, commodity price hikes, economic growth, splurges in domestic consumption, oil price hike, as mentioned by Asian Development Bank in May, led to inflation hitting Asian economic growth hard. For instance, in South Korea the consumer price index (CPI) grew by 4.7 percent exceeding 4 percent-target inflation, higher than the OECD average of 2.8 percent.

Apprehensive of short-term shocks like heavy rainfall and upcoming boost in seasonal demand during the traditional Chuseok holiday, the government is concerned about taming price volatility via tightening policy buckles of traditional macro measures.

The “trilemma” of food-fuel-energy trade-off lies under the systemic crisis. Barring proximate supply-demand factors, the underlying causes are greenhouse gas emission, fuel crisis, and climate change. Agricultural crops like soybeans, sugar and corns are increasingly used to make biofuels _ biodiesel and ethanol _ as transportation fuels. Subsidizing and enforcing biofuels has led to their widespread use. In fact, people have argued about the possible contribution of food-fuel switching behind food-perils.

Viewed broadly, global unrest and upheavals has called for attention toward the food-feed-fuel trinity (for example, the abysmal condition in the Horn of Africa and Somalia’s worst famine). After the food price spike during 2007-2010, another bout of price spiraling is imminent as the world population might hit 9 billion and concomitant demand escalation is expected by 2050 or, even earlier.

While United Nations’ Millennium Development Goal No. 1 targets halving those suffering from hunger and malnutrition by 2015, there is a reversal in direction as the unfolding of the food crisis pushed the wretched from 840 million to number more than nearly 1 billion. No doubt, debt problems and joblessness in the Western world would aggrandize its global impact.

Also, rush for land acquisitions or a “land grab” followed where farm production is outsourced in land-abundant countries, mostly in Africa, from land-scarce, water-deficient countries facing price spikes. As “land grabbers” (e.g., South Korea, China, and Gulf states) are buying and leasing land in the poor host countries suffering from underinvestment in productivity, technology and market access, the bottom billion could slip into abject poverty.

In case of Korea, Madagascar’s farmland acquisition raised unrest toppling the government there. As mentioned by the World Bank in 2010 and 2011, such land acquisition is often fraught with problems of governance, violation of land rights for pastoralists, inappropriate code of conduct, and veil of secretive tactics.

Without agriculture-led growth, corruption involving local urban elites and official lawmakers could jeopardize the mission, trigger inflation, and evict the subsistence farmers. For environmentally sustainable living conditions without starvation, malnutrition, and famine, balancing the needs and rights of stakeholders are important. Otherwise, deprivation follows.

Long-term policy goals with right programs for effective social and political processes are necessary. To prove the Malthusian prediction wrong again, scientists have to come up with suggestions for biofuel production without threatening food production. Agricultural biotechnology encompasses sophisticated technologies like tissue culture, DNA-based genetic markers, DNA-chips and techniques to create new varieties of crops.

These have immense potential for developing countries where access to transgenic crop varieties can be used for mitigating hunger, malnutrition and promoting sustainable livelihood with appropriate calorie intake. The necessity of global cooperation and collaborative international research to meet the Millennium Development Goals by 2015 is felt.

Even warding off desertification via “renewable and sustainable use of land” could mitigate food shortage. Recently, the United Nations Convention to Combat Desertification has highlighted Korea’s role in such endeavors.

"The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings (Julius Caesar)." Thus, shifting to higher yields by investment in agricultural research for avoiding agricultural runoff is necessary. If the government subsidizes biotechnology research, then it could help the net food importer to become net supplier. Joining the land grab bandwagon is not an amicable solution for tsunami-like effect of food crisis.

Coordinated multidisciplinary efforts for research focused on substantial R&D strikes a balance between energy security, food security, and environmental protection. For addressing problems of food and energy security, the time is ripe to make resumption in investment in technology-induced productivity in agriculture. Inaction in channelizing resources for R&D, otherwise, will endanger the planet.

Gouranga G. Das is professor of economics, Hanyang University, Erica Campus. He can be reached at dasgouranga@yahoo.com.