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Global food crisis: new report highlights causes & solutions

5 June 2008

“UP TO 100 million people will be added each year to the world population in the lead up to 2030,” National Farmers’ Federation (NFF) President David Crombie said. “While available agricultural land will remain limited, clearly we will need to feed a lot more mouths from those finite resources.

“The NFF raised this very concern some time ago, so we welcome today’s launch of The Centre for International Economics’ report: High Food Prices – Causes, Implications and Solutions, commissioned by the Rural Industries Research and Development Corporation, as timely analysis of the drivers and remedies for mounting world food supply shortfalls and ever-escalating prices.

“Over the past 18 months, the global price of staple foods has spiralled upwards – rice has tripled, maize increased by two-thirds and wheat has doubled.

“That said, overall, the current level of real food prices is low, and still well below the levels recorded during the early 1970’s spike – so worse is likely to come before supply increases and, therefore, prices come down. In fact, real prices are now approaching quarter-century highs for rice, beef and grain crops.”

The Causes

In a nutshell, the rapid price hikes are due to several factors, including:

  • sustained growth in food demand – due to population growth and encroachment on arable lands, economic growth fuelling demand for new foods (i.e. traditional rice- and cereal-based Asian diets have shifted to include more protein and dairy goods);
  • below average harvests or weak growth in production in several countries causing a reduction in global stocks due to various climatic conditions around the world;
  • a burgeoning biofuels sector – that is, competing for traditional foods (such as wheat, corn, canola and sugar) for fuel production;
  • rapid growth in agricultural input prices, including fuel, fertiliser and chemicals; and
  • government restrictions on production and trade in agricultural products – namely, trade distorting barriers, such as subsidies, tariffs and quotas, which actually force world farmers to produce less food.

Global demand for food is expected to keep growing with the world population growing by 1.5%, or around 100 million people, per year. The Earth’s population is expected to grow from around 6 billion at present, to over 8 billion by 2030. Further, according to the World Bank, current global food prices are plunging some 100 million people in low-income countries deeper into poverty.

The Solutions

“The best policy response is to let the market operate,” Mr Crombie declared. “If the United Nation’s stated goal of a 30% increase in global food production by 2030 is to have any hope of coming to fruition, the paramount objective of food policy must be to encourage a workable system of production, distribution and consumption.

“This means a global re-commitment to agricultural research and development investment in pursuit of higher farm productivity – including technologies, new plant varieties (including genetically-modified crops), new farming systems and irrigation systems, with a focus on climate adaptation. While farm productivity in Australia has been growing at 2.8% a year, globally it has been running at just 1.5%.

“Foreign governments must leave their domestic politics at home and, once-and-for-all, abandon their trade distorting subsidies, tariffs and other artificial barriers, which only mire production by sending the wrong market signals to farmers as food producers.

“Amid distorted market signals caused by world agricultural domestic support policies and trade barriers – especially in the European Union, the United States and other developed countries – the global farming community is actively prevented from responding to the food crisis in a timely fashion.

“Now, government intervention restricting exports to meet domestic food shortfalls is only further exacerbating the problem. This bizarre set of events starkly highlights the critical need for governments to get serious about, and genuinely re-ignite, the World Trade Organization’s (WTO’s) Doha Round of global trade reform. Ending their farcical and dangerous charade is now critical.

“The WTO’s Doha Round must dramatically boost market access, significantly reduce agricultural domestic support (currently at $A280 billion in OECD countries) and eliminate agricultural export subsidies.

“Governments must not intervene to impose limits on food exports, nor distort the flow of food stocks to the production of biofuels.

“The only workable policy response is to facilitate an open, market-oriented system for the production, distribution and consumption of food that enable farmers to respond to genuine market demands and ensure consumer needs are met.

“This new report should be a key component in Prime Minister Rudd’s armoury to press his international counterparts on the absolute imperative of serious global trade reform when the G8 meet in Japan next month.”

[ENDS]

Media Enquiries: Brett Heffernan on (02) 6273 3855 or 0408 448 250.

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