Food: The big fright

Qatar Today | 23 February 2011

"The era of low-food price is over, worldwide" says Dr Mahendra Shah, Director of Programme International Affairs, QNFSP.
When the whole country is baking in the Ephoria of the 2022 Bid win and the Fine show of Qatari footballers at the Asian Football Cup 2011, Food security seems like an implausible topic to ponder over.

But not if you look at recent reports from around the world on escalating food prices and the mounting tension and disrupting occurrences in some parts of the world. Though we have not seen the wave of riots that rocked countries such as Haiti and Bangladesh three years ago, when prices of agricultural commodities jumped, it is still a possibility, caution experts UN.

The increase in food costs will also hit developed economies, with companies from McDonald's to Kraft raising retail prices. Finan cial Times in a recent report emphasised that higher food prices boosts overall inflation, which is above the preferred targets of central banks in Europe.

UN's Food and Agriculture Organisation has given the global food market 'critical' status and says that immediate measures have to be put in place to stave off a repeat of the 2007/2008 crisis, when food prices doubled in just a week.

Earlier, addressing the UN Summit on Food Security at the Food and Agriculture Organisation (FAO) headquarters in Rome in 2009, HH the Emir, Sheikh Hamad bin Khalifa Al-Thani pledged Qatar's commitment to contribute in eradicating hun ger and malnutrition. The urgency of the situation was reflected in HH the Emir's words and subsequent actions.

The Qatar National Food Security Programme (QNFSP) was established in 2008.

"Qatar believes that national food security is part of the regional and international food security," said HH the Emir.

But what does Qatar have to do with riots and hunger in other parts of the world? A country which has never had a food crisis so far?

"Here is a country, one of the wealthiest in the world that could buy food at any price, no matter what the price, from the world market. There has been concern in Qatar as there has been concern in the rest of the world. From 2007, we entered a new era in world food. Until then price of food commodities was go ing down. The era of low-food price is over, worldwide" says Dr Mahendra Shah, Director of Programme International Affairs, QNFSP.

And this is so, "because of increasing world demand," says Dr Shah. "Only 5% of the world's food is traded. And international food trade will increase rapidly due to a number of factors including population growth, urbanisation and rise in incomes. At the same time biofuel requirement mandated in a number of coun tries will also affect land availability for food cultivation resulting in high food prices. The food demand cannot be met in some countries and hence there is higher dependence on exports."

But the export market is very sensitive. Countries can stop the export of food based on local reasoning. India banned the export of rice and Russia banned the export of wheat in recent times. "On the one hand, the world needs free trade and on the other countries can refuse to export food commodities due to many reasons - a drought in the country being just one. All this puts pressure on commodities, a fact that countries are painfully aware as food is a essential need."

Understanding this need, Qatar has set up a comprehensive national programme that takes into account the challenges that are the country's alone.

And thus under the direction of HH the Heir Apparent Sheikh Tamim Bin Hamad Al-Thani, the QNFSP was established with the objective of creating a sustainable Food Security road map, by introducing structural reforms to address the problems that affect the sustainability of energy, water, agriculture and food supplies.

Heading the QNFSP taskforce is Fahad Al-Attiya, Chairman of QNSFP, who says that this nationwide initiative will make Qatar food secure in 10 years.

"The global risk is high and food is a critical component for the existence of any civilisation, which then makes QNFSP one of the highest of national priorities," says Al-Attiya.

The Arab challenges

While food security is a worldwide issue, the challenges that the Gulf countries face are much higher.

"GCC with a total population of approximately 40 million, of whom 40% are foreign workers, are endowed with oil and gas reserves estimated at some QR130 trillion ($35 trillion). This puts the region's nationals among the world's richest peoples in terms of per capita wealth. However, although the region's eco nomic and energy security are assured, the GCC countries are the world's most water insecure and food deficient, importing 60-95% of their food requirements," says Dr Shah.

The limited land and water resources in the GCC pose a sub stantial technological challenge to increasing domestic food pro duction.

"Of the region's total land area of approximately 259 million hectares, only 1.7% is currently under cultivation, mainly with groundwater irrigation. Although about one-fifth of the total land area is potentially cultivable, the region's arid climate and constraints caused by heat, salinity, limit the levels of food suffi ciency that can be achieved."

Some of the GCC states have established fossil fuel-driven water-desalinisation plants, contributing approximately 15% of the total available water resources in the region.

"However, current concerns about climate change, and the fact that the GCC has one of the highest carbon footprints in per capita terms, limit this option. Investment in research into the use of renewable energy, particularly solar power, in future desalination plants offers a means to increase domestic food pro duction," he reveals.

And this is one of the options that is being explored by QNFSP and once that comes into process will provide the much needed impetus for the whole region to follow this prototype of success.

"From my point of view, every country in the world should produce the maximum amount of food it can, in a manner that is environmentally, economically and socially sustainable."

GCC should give the highest priority to establishing a regional centre of excellence for solar-energy research for water desalination, greenhouse solar cooling and greenhouse hydroponic-technology development, says Dr Shah.

Furthermore, a dedicated GCC agricultural research centre for dry-land crops, livestock and aquaculture development, and adaptation to future climate change should also be established.

Regionally relevant research into protected agriculture, solar energy for desalinisation and greenhouse hydroponics has the potential to enhance domestic food self-sufficiency in the GCC countries.

All these are steps taken into due consideration by the QNFSP.

"However, some crops, such as wheat, require as much as 1,400 kg of water to produce 1 kg of yield. This calls for strategic decisions about which crops to produce locally and which to secure through international GCC investments," says Dr Shah.

A proposed partnership model

Over the past few years, GCC states have begun to consider investing in farmland overseas. However, there is growing worldwide concern that such international agricultural investments must be environmentally, economically and socially responsible and sustainable. "They must also be well-structured and legally executed. Otherwise, there is a risk that the burden of food insecurity in the investing GCC countries might end up being transferred to the host coun tries," says Dr Shah.

Dr Shah has identified a solution that would give the oil-rich Arab countries an edge while improving the living conditions and economies of those countries that they lease contract land to use for food produce.

"A shared-benefits model that would best meet the needs of the investor and the local community in currently cultivated land areas where the yield gaps are large could provide the basis for responsible and sustainable agricultural development partnerships," he says.

Dr Shah illustrates his point.

"Consider a situation in which 100 units of land area farmed with poor management and low agricultural tech nology produces 100 tonnes of a food commodity. With foreign investment bringing in sophisticated technologies and management, the production on this piece of land is boosted to 500 tonnes. The local community receives 200 tonnes, while the investor receives a similar share. The remaining 100 tonnes is then sold by the investor into the local market. The market sale would be important in terms of host-country food security, and the sales income would be reinvested for the benefit of the local community through infrastructure and social-services development. The investor's share would need to be acceptable in terms of return on investment.

"Such an innovative partnership arrangement could be further structured as an official development aid (ODA)," says Dr Shah.

Sub-Saharan Africa (SSA), with its fertile land, ample water resources and the world's lowest agricultural productivity, is the biggest hot spot for agricultural land acquisition by public and private investors from the GCC, China, India and Europe. The agricultural sector in SSA countries is in urgent need of invest ment capital.

However, decades of poor government commitments to agriculture and low investments have resulted in stagnating productivity and food-production levels.

In his research papers, Dr Shah has shown how the GCC countries have a real opportunity to invest in Sudan as a development aid partner, not only to assure their own food security but also to contribute to sustainable agricultural development.

"The potential through a shared partnership model, as described above, is substantial. For example, current maize yields of approx 1.2 tonnes/hectare can be increased to more than 7 tonnes/hectare with high agricultural technology and management."

Responsible agricultural investments can contribute to sustainable agriculture development towards achieving food security and an end to the hunger that today affects one-third of the population in SSA.

The GCC's challenge is to adopt a scientific, knowledge-based and policy-relevant integrated agro-ecological and socio-eco nomic approach to enhancing its domestic food production. This can be done only by forming sustainable and responsible development partnerships that can put the SSA countries on a path of progressive and sustainable development.

The Water Challenge

Dr Patrick Linke, Chief Engineer at QNFSP and the Associate Professor of Chemical Engineering at Texas A&M University Qa tar is of the opinion that water issues in the region are critical.

Ground water resources cannot be touched as it cannot be re plenished given the climatic conditions of the region and hence alternative resources have to be worked out for the food security programme.

"Basically the idea is to desalinate the sea water. The other alternative is to recycle waste water and reuse. But there are health and hygiene issues to deal with while using recycled water for irrigation, not to mention the large quantity needed for this."

QNFSP is considering using non-fossil energy for producing renewable resources, and as a concept, wind and solar energy is to be put to use. Reusing energy is another option and all this is being explored too. "All the issues will be explored, the energy infrastructure, the location of the station, how to transmit the energy from it, to final feasibility of the desalination project, the economies of subsidies, all this will have to be looked into and by 2013, and the picture will be in place."

"For this whole value chain to be economical, at some point of the chain subsidies will have to be put in place. It could be energy, water, or both or just the crop," says Dr Linke.

Global food prices plummet, UN reports

The cost of the average food basket is 69 per cent higher than six years ago

3 June 2010 – International prices of key food staples dropped in the first five months of this year, driven largely by plummeting prices of cereals and sugar, according to a new United Nations Food and Agriculture Organization (FAO) report.
The FAO Food Price Index – the average of commodity prices, including meat and dairy – averaged 164 points in May, down from 174 in January and substantially less than its peak of 214 reached in the spring of 2008.

Sugar prices have plunged by half from their peak earlier this year due to possible significant production increases.

But the Food Outlook report said that despite the fall in the Index, the cost of the typical food commodity basket globally today is still nearly 70 per cent higher than it was between 2002 and 2004.

“The 2008-2009 food prices boom spurred plantings and production of many crops, which has resulted in a recovery in inventories and boosting stocks-to-use rations, a tendency likely to prevail in 2010/11,” the publication said.

The global drop in prices, it cautioned, masks the ongoing high costs of food imports due mainly to higher expenditures on non-cereal products, including dairy products and vegetable oils.

The new report also predicted continued growth in cereals, with world production this year on target to match the record set in 2008.

World food price rises to hit consumers

By Javier Blas and Chris Giles in London and Hal Weitzman in Chicago

Published: December 16 2007 22:08 | Last updated: December 17 2007 07:45

Global food prices were under further pressure on Monday as benchmark prices for cereals at much higher levels came into operation, making it almost inevitable that a second wave of food price inflation will hit the world’s leading economies.

In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time record, soyabean prices are at a 34-year high and corn prices at an 11-year peak.

Knock-on price rises are set to hit consumers in coming months, raising inflationary pressure and constraining the ability of central banks to mitigate the slowdown in their economies.

A first wave of surging cereal prices hit the wholesale market during the summer and has fed through the supply chain and contributed to rising inflation.

The increase of eurozone food price inflation to 4.3 per cent in November was one of the main reasons for the jump in the zone’s annual inflation rate from 2.6 per cent in October to 3.1 per cent, the highest in six years. In the US, annual food price inflation of 4.8 per cent in November contributed to a rise in the inflation rate to 4.3 per cent.

In the UK, food inflation was already running at an annual 5.1 per cent in October and analysts expect higher food prices to push overall inflation up in November. The UK figures are due to be published tomorrow.

In early trading on Monday, the new benchmark price of wheat for March delivery rose 30 cents to $10.09½ a bushel, more than 7.5 per cent higher than the expiring December contract of $9.39 and first time it has traded over $10 a bushel. The December contract expired on Friday and the March 2008 contract became the market’s benchmark on Monday.

New benchmark prices for corn are also more than 5 per cent higher than previously. Corn for March 2008 rose to $4.43¼ a bushel, the highest level in 11 years for a front-month contract.

The benchmark prices for soyabeans delivered in January rose on Friday to a fresh 34-year high of $11.92¼ a bushel.

Rice, also for January, has jumped to an all-time high of $13.310 a hundredweight.

Bill Lapp, analyst at US consultancy Advanced Economic Solutions, said: “We’ve already seen food prices increase this year at their fastest pace since the early 1980s, but the full brunt of those increases will begin in earnest in 2008.”

The agricultural commodities price rises are the result of high demand, poor harvests and low stockpiles of food. Emerging economies, where rising incomes are boosting consumption of meat and dairy products, have added to pressures already generated by the biofuel industry.

Cereal supply was this season lower than expected as several countries suffered weather-related losses. Jean Bourlot, head of agriculture commodities at Morgan Stanley in London, said: “High cereals prices are here to stay.”

The US Department of Agriculture has predicted that global corn stocks will fall to a 33-year low of just 7.5 weeks of consumption, while global wheat stocks will plunge to their lowest level in at least 47 years at 9.3 weeks.

The end of cheap food

Dec 6th 2007
From The Economist print edition
Rising food prices are a threat to many; they also present the world with an enormous opportunity

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 than at any time since it was created in 1845 (see chart). Even in real terms, prices have jumped by 75% since 2005. No doubt farmers will meet higher prices with investment and more production, but dearer food is likely to persist for years (see article). That is because “agflation” is underpinned by long-running changes in diet that accompany the growing wealth of emerging economies—the Chinese consumer who ate 20kg (44lb) of meat in 1985 will scoff over 50kg of the stuff this year. That in turn pushes up demand for grain: it takes 8kg of grain to produce one of beef.

But the rise in prices is also the self-inflicted result of America's reckless ethanol subsidies. This year biofuels will take a third of America's (record) maize harvest. That affects food markets directly: fill up an SUV's fuel tank with ethanol and you have used enough maize to feed a person for a year. And it affects them indirectly, as farmers switch to maize from other crops. The 30m tonnes of extra maize going to ethanol this year amounts to half the fall in the world's overall grain stocks.

Dearer food has the capacity to do enormous good and enormous harm. It will hurt urban consumers, especially in poor countries, by increasing the price of what is already the most expensive item in their household budgets. It will benefit farmers and agricultural communities by increasing the rewards of their labour; in many poor rural places it will boost the most important source of jobs and economic growth.

Although the cost of food is determined by fundamental patterns of demand and supply, the balance between good and ill also depends in part on governments. If politicians do nothing, or the wrong things, the world faces more misery, especially among the urban poor. If they get policy right, they can help increase the wealth of the poorest nations, aid the rural poor, rescue farming from subsidies and neglect—and minimise the harm to the slum-dwellers and landless labourers. So far, the auguries look gloomy.
In the trough

That, at least, is the lesson of half a century of food policy. Whatever the supposed threat—the lack of food security, rural poverty, environmental stewardship—the world seems to have only one solution: government intervention. Most of the subsidies and trade barriers have come at a huge cost. The trillions of dollars spent supporting farmers in rich countries have led to higher taxes, worse food, intensively farmed monocultures, overproduction and world prices that wreck the lives of poor farmers in the emerging markets. And for what? Despite the help, plenty of Western farmers have been beset by poverty. Increasing productivity means you need fewer farmers, which steadily drives the least efficient off the land. Even a vast subsidy cannot reverse that.

With agflation, policy has reached a new level of self-parody. Take America's supposedly verdant ethanol subsidies. It is not just that they are supporting a relatively dirty version of ethanol (far better to import Brazil's sugar-based liquor); they are also offsetting older grain subsidies that lowered prices by encouraging overproduction. Intervention multiplies like lies. Now countries such as Russia and Venezuela have imposed price controls—an aid to consumers—to offset America's aid to ethanol producers. Meanwhile, high grain prices are persuading people to clear forests to plant more maize.

Dearer food is a chance to break this dizzying cycle. Higher market prices make it possible to reduce subsidies without hurting incomes. A farm bill is now going through America's Congress. The European Union has promised a root-and-branch review (not yet reform) of its farm-support scheme. The reforms of the past few decades have, in fact, grappled with the rich world's farm programmes—but only timidly. Now comes the chance for politicians to show that they are serious when they say they want to put agriculture right.

Cutting rich-world subsidies and trade barriers would help taxpayers; it could revive the stalled Doha round of world trade talks, boosting the world economy; and, most important, it would directly help many of the world's poor. In terms of economic policy, it is hard to think of a greater good.
Where government help is really needed

Three-quarters of the world's poor live in rural areas. The depressed world prices created by farm policies over the past few decades have had a devastating effect. There has been a long-term fall in investment in farming and the things that sustain it, such as irrigation. The share of public spending going to agriculture in developing countries has fallen by half since 1980. Poor countries that used to export food now import it.

Reducing subsidies in the West would help reverse this. The World Bank reckons that if you free up agricultural trade, the prices of things poor countries specialise in (like cotton) would rise and developing countries would capture the gains by increasing exports. And because farming accounts for two-thirds of jobs in the poorest countries, it is the most important contributor to the early stages of economic growth. According to the World Bank, the really poor get three times as much extra income from an increase in farm productivity as from the same gain in industry or services. In the long term, thriving farms and open markets provide a secure food supply.

However, there is an obvious catch—and one that justifies government help. High prices have a mixed impact on poverty: they hurt anyone who loses more from dear food than he gains from a higher income. And that means over a billion urban consumers (and some landless labourers), many of whom are politically influential in poor countries. Given the speed of this year's food-price rises, governments in emerging markets have no alternative but to try to soften the blow.

Where they can, these governments should subsidise the incomes of the poor, rather than food itself, because that minimises price distortions. Where food subsidies are unavoidable, they should be temporary and targeted on the poor. So far, most government interventions in the poor world have failed these tests: politicians who seem to think cheap food part of the natural order of things have slapped on price controls and export restraints, which hurt farmers and will almost certainly fail.

Over the past few years, a sense has grown that the rich are hogging the world's wealth. In poor countries, widening income inequality takes the form of a gap between city and country: incomes have been rising faster for urban dwellers than for rural ones. If handled properly, dearer food is a once-in-a-generation chance to narrow income disparities and to wean rich farmers from subsidies and help poor ones. The ultimate reward, though, is not merely theirs: it is to make the world richer and fairer.

Concerns over food inflation as harvests fail

By Javier Blas and Chris Flood in London - Financial Times

Published: December 11 2007 19:49 | Last updated: December 11 2007 19:49

The global economy is facing a second wave of food inflation after the US agriculture department on Tuesday warned of significant falls in stocks of corn, wheat and soyabean and heavy demand.

Officials forecast US wheat stocks would shrink to their lowest level in 60 years, dropping from 312m bushels to 280m by the end of the 2007-08 crop year.

The US is the world’s biggest exporter of wheat and importing countries are bidding heavily for its crops as other exporters cut supplies.

Cold weather damaged crops in Argentina and drought affected Australia’s wheat production. Flooding also damaged European crops.

Michael Lewis, of Deutsche Bank in London, said the decline in stocks and rising shortages in large parts of Asia suggested 2008 “could deliver another year of . . . price shocks”.

Corn and soyabean stocks will also be lower than expected as demand from emerging countries rises in spite of record prices.

Greg Wagner of Horizon Ag Strategies in Chicago said supplies of soyabeans and wheat had now tightened to “very uncomfortable levels”.

Chicago wheat futures for March 2008 delivery rose to $9.29 a bushel, just short of the record $9.61 last summer. Prices later fell on profit-taking.

Corn prices for March rose to $4.19 a bushel, the highest in six months, while soyabean futures for January jumped to a fresh 34-year high of $11.32 a bushel.

Gavin Maguire of Iowa Grain in Chicago said the lower stocks confirmed the view that strong global demand was eating into the world’s supplies of agricultural products.

Agricultural commodities analysts have warned that rising prices for corn, wheat and soyabean will force up feedstock costs for farmers, leading to higher meat, poultry and milk prices for consumers.

Food prices are boosting inflationary pressures just as central banks are trying to cut rates to cushion their economies from the effect of the credit squeeze.

China said on Tuesday that inflation had reached an 11-year high at 6.9 per cent in November, boosted by a 18.2 per cent jump in food prices.

Eurozone inflation recently rose to a six-year high propelled by high oil and food prices.