Feuding over food and fuel

The Food and Agriculture Organisation summit in Rome was deadlocked on the policy measures needed to alleviate the crisis over the rise in food prices, despite strong evidence that the situation will persist for some years. The outcome is not entirely surprising, given the wide divergence of opinion even on the factors that underpin the spike in prices. But there is a worrisome prospect of the cynical play of national interest and one-upmanship delaying any meaningful dialogue on the challenges ahead. The FAO points out that the current hike in world prices is different from earlier instances and reflects a structural change in the agricultural commodity markets. The hike covers all food and feed commodities and prices could stay at that level even after short-term shocks dissipate. The price volatility, especially in the cereals and oilseeds markets, is higher, and has already lasted longer, than on earlier occasions. Moreover, strong inter-market linkages have been noticed between individual agricultural commodities as well as between them and fossil and biofuels, besides financial instruments. The above phenomenon is of immediate relevance to the current disputes over the impact of the diversion, mainly by the United States and European countries, of maize and rapeseed for the production of ethanol and biodiesel respectively.

According to the FAO, of the nearly 40 million tonne additional utilisation of maize in 2007, ethanol plants, mostly in the U.S. (the largest producer and exporter of maize), absorbed 75 per cent. Similarly, the European Union’s biodiesel sector is said to have consumed about 60 per cent of the rapeseed oil output from member states. Besides the diversion of production to more lucrative crops, this drive for alternative energy, with no substantial gains to the environment, entails change of use of cultivating land from food grains to feedstock for biofuels. Given the target of 50 per cent increase in food production by 2030, the only biofuels that can justifiably be advocated are the second-generation varieties such as algae that do not entail appropriation of land meant for the cultivation of grains. On the other controversy relating to trade policy restrictions, rich countries that heap blame on developing countries for imposing curbs on food exports cannot expect to be taken seriously. Some of them resorted to such measures as early as last September to contain inflation close on the heels of their own general elections. Their complaints amount to no more than pleas to ignore strong domestic pressures and increase supplies in the global markets.