As giant Agri-food multinationals are enjoying soaring profits, global food shortage must be driving millions of people to starvation. A collection of information shown in numbers will be of interest to readers: Estimates indicate that world's poor spend about 80 percent of their income on food. Six countries export 80 percent of world's wheat.
Three billion people eat rice, while only six countries export 85 percent of world's rice to meet the global demand. There are only three countries that produce corn and export 70 percent of their produce to the globe. Another interesting statistic is that 85 percent of the global grain is controlled by only six multinational companies.
Eighty percent of the global banana trade is managed by three large multinationals and 70 percent of the global corn trade is carried out by an equal number of multinationals.
From the 1960s till 1970-71, the US was providing financial and technical support for agriculture development in various countries, which led to "Green Revolution" in various parts of the world in that period. It was also providing support in infrastructure and capacity building and inputs such as seeds, fertilisers and pesticides. This led to a sharp increase in food production in those countries.
But by 1972, the US policy makers had different ideas. Their policy outlined Kissinger's doctrine that since population growth in resource-rich less developed countries (LDC) would tend to push governments to protect their resources and develop their economies and secure sovereignty, which could become a strategic threat. Therefore, recommendations were made, resulting in a shift in its policy stance.
Presently, the greatest concern is: Why are the global food prices rising so sharply and what are the driving forces? Is it due to a weak dollar and low interest rate that provides opportunity to margin trader? Could this be one of the factors behind a shift that the market has witnessed in carry trade business against Japanese yen, which has so far fallen by almost 80 percent? Or, is speculative trading the primary culprit behind surging prices of wheat, rice, corn and other crops.
Many must be wondering whether the Fed policy of lowering interest rate to clean the subprime mess is being diverted to commodities, which is destabilising poor economies. There is no doubt, however, that funds' diversion to commodities has caused a sharp spike in food and oil prices.
This is responsible for fuelling inflation. This also means that Bank of England and European Central Banks are equally responsible and should be blamed for providing liquidity, though the ECB hasn't cut its rate. The big question that remains unanswered is whether the bankrupt global investment banks and hedge funds are equally responsible for food price spiral, as they are partners with hedge funds by investing around USD 8 for one barrel of oil, which costs USD 128 or 16 to 1 leverage?
It leads to a pertinent question: Who is providing the leverage funding of USD 120 to buy a barrel of oil. If the answer is in affirmative and it point towards the financial system it means the global financial system has become seriously flawed or it seems to be corrupt? Is this because of greed to obtain higher salaries, bonuses and perks.
According to a report emanating from the office of National Statistics (UK), bankers and financial traders were handed STG 12.6 billion bonuses in the first three months of this year alone smashing last year's record for the same period by more than STG 500 million, which means the sharp rising bonus culture is the key culprit for credit crunch and ills of financial sector.
One of the bosses of a G-7 Central Bank said to its Treasury select committee that "banks have come to realise they're paying the price for having designed compensation packages which provide incentives that are not, in the long run, in the interests of the banks."
There are reports that the Commodity Futures and Trading (CFTC) that is investigating trading in oil futures to determine the real cause of surge in oil prices, is keen and may look at price surge of wheat, rice and corn futures to know if trading in food is being manipulated.
UN Food and Agricultural Organisation (FAO) claims that enough food is produced in the world to provide 2800 calories a day to everyone. Despite, FAO estimates that in 2007 global food production rose by five percent, Agri-Food commodity prices are making record highs and yet food prices are on a continuous climb.
Then the biggest question that arises is that when so much food is available then why every day 18,000 children die of hunger? Why are, according to World Bank, over 100 million people facing severe hunger? Why are over 850 million people hungry and malnourished?
Agri-food prices are on the up due to rising demand and are evident from the fact that the food surplus is on the decline. Globally more meat, more chicken and more eggs are consumed. To produce one kg of meat, cattle requires seven kg of grain, to produce one ton of chicken, two tons of grain is required and to produce one ton of eggs about 12 tons of grain is required.
In Canada, federal government is paying Canadian $225 to people for killing one pig because of animal's high feed cost. Let's not forget that agro-fuel have been blamed as a major factor behind surging food prices. One of the UN reports blames bio-fuel as one of the major cause for the "explosive rise" in global food rise.
Last year, the US is said to have used one-third of its corn crop to create bio-fuel. European Union plans to meet 10 percent of its fuel requirement through bio-fuel. In Latin America, European banks are said to be investing billions of euros in the production and trade of soybean, palm oil and sugarcane to produce fuel.
Some of the agri-food multinationals beneficiaries are Cargill. Its three months' earnings are said to have almost doubled. Archer Daniels Midlands is one of the world's largest processors of corn and wheat and its grains merchandising profit has jumped 16-fold. The income of the largest fertiliser companies, Mosaic, is known to have jumped by more than 12-fold in three months.
Australian drought and migration from farm sector to urban areas are also said to be a major cause for good shortage, since the country is one of the largest exporter of food grain. Statistics suggest that grain harvest in Australia has fallen to 25 million metric tons from 37 million metric tons.
Similarly, a significant shift was noted in Canadian strategy. Instead of producing wheat this country is now producing canola, which offers good return. According to Food and Agriculture Organisation report, 37 countries are in urgent need of food.
With the current pace of population growth and demand for food and the threat of global warming resulting in a shift in global weather pattern, a lot of concentration in the agriculture sector and increase in agriculture produce are essentially required to avoid a possible imbalance that could arise in the near future.
For a price comparison, oil in January 1999 was $9.10, on January 2005 it was $33.79 and today it is $127. Gold in April 2001 was $255 and today it is $880. Wheat in December 2005 was $3.40, it touched all time high of $13.49 on February 29, 2008 and today wheat is $7.5. corn in September 2006 was $2.22, today it is $6.33. rice in July 2005 was $6.18, on April 2008 it was $24.35 and today it is $19.10. sugar on February 28, 2006 was $19.73 and today it is $10.11.
Comments
Comments are closed.