Tuesday, June 03, 2008

A beneficial (food) crisis

Like vultures waiting for the dying man to expire, the great and the good of the tranzie world have been gathering in Rome today under the auspices of the chief tranzi kingdom, the United Nations, prop. Sec Gen Ban Ki-moon (pictured).

And, true to form, the UN's Food and Agriculture Organisation (FAO) immediately launched an appeal for $30 billion a year to "re-launch agriculture and avert future threats of conflicts over food".

This came from FAO Director-General Jacques Diouf, opening the beanfest summit on the "world food crisis", who wanted his budget increased tenfold so that his munificent organisation could "buy poor rural farmers the seeds, fertilisers, animal feed, infrastructure and irrigation they need to feed themselves, their communities and their countries."

There followed a discussion on the factors which had caused the crisis, amongst which were cited low stocks and a weak dollar, soaring energy prices, a hunger for richer foods and the thirst for biofuels – and, of course, global warming.

Inevitably, the United States took a hit for its biofuels policy, unsurprising given the FAO's previous pronouncements.

As the day developed, this developed into something of an anti-American rant, with US subsidies for biofuel – estimated at $11-12bn for corn ethanol – roundly condemned by Diouf, who said they were depriving people of food.

But the most fatuous comments of the day, relayed by the BBC were from Joachim van Braun, of the Washington-based agricultural think-tank the International Food Policy Research Institute (IFPRI).

He complains about the lack of a "single, efficient mechanism" to deal with the challenges of a volatile international commodities system remains an unresolved problem, criticising the current "global governance architecture for agriculture" which, he says, "is not what the world needs".

There, writ large, is the tranzie agenda – global governance on the coat-tails of the global food crisis, with the UN at the centre in its "coordination" role, masterminding the "single, efficient mechanism" to deal with the crisis.

The problem though, is that there is not so much one crises, as many different crises. And, as we have pointed out, while in many cases, local food shortages are the proximate cause of the episodes of unrest currently being exploited by the tranzies, often these are the symptoms of wider problems, usually related to poor economic management and structural problems.

Equally to the point, while nations with food supply problems often have similar problems, it is most often the combination of different failures or inadequacies which do the damage and, in each country, the particular combinations are unique.

Progressively, we have looked at some of those countries, specifically Colombia, Afghanistan, Egypt and Malawi, and what comes over is precisely the phenomenon upon which we remark – that each country is unique. Each, therefore, must be treated differently and needs a different range of solutions. The idea of a "single, efficient mechanism" to deal with the complexity and variety of problems encountered is so unrealistic as to be laughable.

Adding further to our thesis, we have been looking at the interesting situation developing in Thailand, where farmers are protesting about the low prices they are getting for their rice.

Here, the government's support system is to set a minimum price which the millers must pay farmers. But, not only do the farmers complain that this is set too low to cover rising input costs – not least of fuel and fertiliser – they are finding that millers are refusing to buy at the "guaranteed" price and are offering considerably less.

To add to the farmers' discontent, a government "crop mortgage scheme" has also been abandoned – a system where farmers can borrow against the coming harvest, in order to finance their production. This is having the effect of forcing farmers sell their crops to millers early, who are able to drive down prices still further.

However, the government is responding to farmers' demands to raise the guaranteed price, raising it to £220 per ton - compared with £100 in 2004/2005 – to allow financing of increasing input costs. However, as an added twist, this is leading to fears that this could lead to "additional government financial burdens to offset loss to state-owned banks" who lend money to farmers.

This is because an expected fall in rice market price caused by an inventory release by Japan and US in the near future could lead farmers to default on their loans.

As we wrote when we discussed this "inventory release", if market mechanisms are allowed to work, agriculture is well able to feed the current world population, and accommodate population growth for the foreseeable future. The only thing standing in the way of that are the politicians. We do not have a food crisis – we have a political crisis.

In fact, we have political crises - and the tranzies are not even on the same planet when it comes to understanding – much less dealing with – their complexities. But then, solving problems was never really on the agenda.

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