FOOD CRISIS - a myth or reality..!!

A lot is being said and written about food shortage in various parts of the globe. Varied reasons have been cited for this crisis depending upon one’s intuition and ideology. An environmentalist will blame global warming i.e. droughts, floods and other calamities lowering food production; a communist will point towards capitalism as the main culprit (capitalist concepts like commodity trading etc. CPM in India is one such communist party); others blame hoarding; developing countries outright put the onus on developed countries (policies like the great hike in biofuel production etc). Although all these factors are to be blamed in some way for the current food crisis, no reason can be single handedly held responsible for the same. in this fairly entertaining blame game…someone who losses out is the common man. He is unsure whom to trust...what to do...and above all how to do. I did my analysis to burst all the myths regarding the current food crisis. I hope it helps the innocent soul.

Biofuel Production:

Indeed the current global warming has made people more environment conscious and governments more serious towards alternate fuels. But has it really benefited us the way it was suppose to? While renewable energy sources like wind, hydro, solar are really great non polluting energy sources, the same cannot be said about biofuels. While biofuel generated from sugarcane is indeed less polluting as compared to conventional gasoline, the same cannot be said about biofuels derived from corn, soyabean and other sources. If all environmental effects of biofuel production from corn is considered its probably more polluting than traditional gasoline. This is after one considers deforestation done to grow corn, the fertilizers consumed, water consumed and all. The initial hypothesis that biofuels will drastically cut environmental pollution was based on the assumption that no deforestation would be done for biofuels and that the corn needed would probably be grown on non cultivable land lots. Apart from the environment crisis, this new found fantasy of politicos around the world has led to drastic increase in biofuels production throughout the world. Investment in biofuels has increased from $5 billion in 1995 to $ 38 billion in 2005 and is expected to top $100 billion by 2010. Now that’s huge, greater than the GDP of most countries and 1/14 of expected Indian GDP in 2010. If was to be done on non cultivable land, it would have been great but looking at the huge profits to be made in biofuel farming, large tracts of forest land and cultivated land is being directed towards biofuel production. The amount of corn required to produce enough biofuel to fill one SUV tank is sufficient to feed one person for a year. US produced 7 billion gallons (26.5 l) of biofuel in 2007 and is targeting a production of about 60 billion gallon by 2030. Rice price has increased from $360 per metric ton in late 2007 to about $760 as on March 2008, a whopping 110% increase in a span of about 4-5 months. I have never heard of such a ROI ever in my life. High corn prices have sparked riots in Mexico city, skyrocketing flour prices have destabilized Pakistan, high inflation threatens to bring Indian government down, also food shortage in under-developed countries like Senegal have led to violence killing many. Although last tracts of farmland have been transferred towards producing biofuels, it doesn’t justify the huge increase in food prices. Only a small part of price rise can be justified as due to biofuels. The current scale of biofuel production is still small to make any significant dent in food production. But the projected biofuel production by different countries does raise an alarm as such a huge biofuel production has the potential to drastically curtail food production leading to acute food shortage throughout the world. Developed countries will anyways have surplus production but it is the developing and under-developed countries that will bear the brunt.

Global Warming:

Australian farmers have cut rice production by as much as 97% in the last 5 years. Australia from being the largest rice exporter has today become just self sufficient in rice. Global warming has led to acute droughts in many parts of Australia forcing farmers to switch from water intensive crops like rice to not so water intensive crops like Grapes for wine production. The effects of global warming are increasingly being felt in more and more countries and have the potential to paralyze the World food production. The current Australian crisis may have a cascade effect and other countries may follow suit.

Hoarding & commodity trading:

Hoarding by itself doesn’t really have the potential to justify the steep rise in commodity prices. A hike of about 5-10 would have been justified because of hoarding. People blaming hoarding as a menace are only trying to pass the buck. Hoarding can’t justify because a trader or anyone indulging in hoarding has to eventually sell the commodity leading to decrease in prices. Also such steep increase in price requires large amounts of commodity to be hoard which again requires investment in storage facilities which very few traders in India can afford. In fact hoarding is something that amplifies the price rise but by itself doesn’t really initiate it. After a high rise in commodity prices, consumers expecting a further increase in prices begin to store grains and other food items leading to a amplified shortage of food leading to a further rise in food prices. Commodity trading may have been new to India but has existed in developed countries for hundreds of years now. Chicago commodity exchange is older than any exchange in Asia. In fact experts argue that commodity trading help in better discovery of commodity prices and help to some extent the farmer in getting a fair value for his produce. The recent demand from CPM and other quarters of the society calling for Commodity trading to be banned is completely unfounded. This demand defies logic. Just because commodity market is a capitalist concept, can we ban it???

Supply chain wastage & logistics:

As much as 10 % of total food produced in our country is lost during transport and storage. That loss if curtailed has the potential to solve all of India’s food problems. As argued before, Indian traders and retailers simply don’t have the capital and expertise required for world class storage facilities. Organized retail with its ultra modern organized supply chain and storage facilities has the potential to cut down these losses to less than 2%. Anybody listening??? Our politicians are more interested in playing the blame game, auctioning off cricket franchises and policing cheerleaders but grossly fail to focus on real issues. The current food crisis has the potential to bring down Indian GDP to shambles. Our honorable agriculture minister please make sure that all Indians have sufficient chappatis rather than blaming south Indians for eating more chappatis…!!! People are hereby welcome to put forth their opinion about the article and hereby have a healthy discussion to the benefit of all of us.