Addressing the Food Crisis: Let’s Get Our Facts Straight

Coverage of the U.S. drought and the run-up in corn, soybean, and wheat prices has been extensive and welcome. It has also been prone to the repetition of falsehoods and the perpetuation of myths about the causes of the food crisis – and the solutions. A recent Guardian article, “The era of cheap food may be over,” is a case in point. Specifically, it perpetuates the myth that the main driver of food price increases is demand for meat in fast-growing developing countries, downplaying the full impact of biofuels and ignoring two problems underlying price volatility: financial speculation and the lack of publicly held food reserves.

Give Larry Elliot credit for posing the issue in terms of the difficult policy choices the world faces. He’s certainly right to pose the challenge. “The current assumption seems to be that the world can have a rising population, ever-higher per capita meat consumption, devote less land to food production to help hit climate change targets and eschew the advances in science that might increase yields” he writes. “This is the stuff of fantasy.”

It sure is, but so are the policy choices he discusses. First of all, the trend toward meat-based Western diets is certainly worth resisting, for health and environmental reasons. But it’s been pretty clearly shown that rising demand for meat-based protein, particularly in India and China, is not the main cause of recent price increases. As Jayati Ghosh and I have separately pointed out, an FAO study documented quite conclusively that cereals demand rose more slowly since 2000 than it had in previous decades. So demand in india and China may have grown, but it did not create a “demand shock” that is precipitating more recent price surges.

What is the demand shock that occurred since 2000? The dramatic expansion of biofuels production, under a range of government incentives, particularly in the United States with corn-based ethanol and in the EU with biodiesel. This has truly been a shock to tight commodity markets. U.S. ethanol consumes 40% of the country’s corn, fully 15% of global corn production. Estimates vary widely on the impacts, but the National Academy of Sciences concluded that 20-40% of the price increases in 2008 were due to biofuels expansion.

That impact couldn’t be clearer than in today’s looming food crisis, triggered by the widespread drought in the United States. Corn output is down dramatically, but ethanol refiners keep gobbling up the corn, driving global prices to new records. Elliot for some reason discusses this as a supply-side issue, but it’s pure demand, created by government programs that seemed good at the time, as he points out, but are now a disaster. Or, more to the point, a set of recurring disasters as the world suffers its third price spike in five years.

To be sure, there has been one other demonstrable boost in demand since 2000, and it does implicate the rising demand for meat-based diets. Chinese demand for soybeans has jumped dramatically, mostly to feed its own growing meat production. This puts pressure on agricultural land and certainly contributes to rising food prices. But not on the order of magnitude accounted for by biofuels expansion in general and U.S. ethanol expansion in particular.

As Elliot points out, it is not easy to reduce the rising demand for meat-based diets in developing countries. He fails to point out that it is much easier to reduce the demand for biofuels, since they began largely as the product of government policies. Stop the further expansion of biofuels and you’ve saved millions of tons of grain for food. Reverse its recent growth, by introducing a more flexible mandate that is triggered by tight supplies, and you’ve placed people over cars in the great global food chain.

Elliot also fails to mention four solutions that are very much under discussion internationally and far more practical than the high-tech miracles he cites:

1. Expand food reserves – U.S. reserves are virtually non-existent thanks to government policies to just let the market do its magic. The market has given us three price spikes in five years, and the absence of food reserves has left us no flexibility to handle a drought as severe as the current one.
2. Regulate financial speculation in commodity markets – The financial sharks are circling as prices spike, hungry to play the volatility for their benefit. Regulations are still not in place to get them out of our food. Governments can act to reduce speculation-driven food price volatility.
3. Address waste – An astonishing one-third of food is wasted all along the food chain. Public investments – in water systems, storage, roads, and markets – can save more food for the hungry. This is a demand-reduction comparable to reducing biofuels use. (So too is the related goal of more equitably distributing the food we produce.)
4. Expand sustainable smallholder food production – Elliot trots out tired and long-disproven clichés about “low-productivity organic” vs. “high tech, intensive farming.” The current consensus recognizes that the “yield gaps” are greatest among small-scale farmers, and that they can expand their food production through “sustainable intensification.”

Elliot puts his finger on the urgent crisis facing the global community in the ongoing food crisis, but he misses the mark on his diagnosis and the cures.