No lessons learnt from food crises of past

When Dr Qu Dongyu, Director-General of the UN Food and Agriculture Organisation (FAO), said on May 4 that a record 193 million people are faced with acute hunger and food insecurity, he actually was trying to draw attention of the international community to how severely the destruction of rural livelihoods has pushed vulnerable populations to slide below the hunger line.

In fact, many believe that the world is already in the grip of what can be called as the third global food crisis.

In a special report titled ‘Another Perfect Storm?’, an International Panel of Experts on Sustainable Food Systems (IPES-Food) makes an attempt to address the critical food situation arising from the Russian invasion of Ukraine and seeks answers on how a failure to reform food systems has led to the third global food crisis erupting in the past 15 years. Ever since the first world food crisis of 2007-08, when 37 countries were faced with food riots and that too at a time when there was no drop in the global food production, the world hasn’t drawn any lessons.

Even prior to the Ukraine war, food prices had elevated to a new high, reaching its peak since the days of the 2007-08 food crisis. The FAO’s food price index rose to 140.7 points in February, a jump of 20.7 per cent from the previous year. The prices of maize, cereals, vegetable oils, cotton, soybean, sugar etc showed an upward trend.

In other words, even before the war began, with food prices at a record high, the world was fast headed towards a food crisis. Unfortunately, for the same reasons that sparked the first world food crisis, the failure to address the structural causes was leading to yet another crisis.

“A new generation is once again facing mounting food insecurity, and it seems no lessons have been learned since the last food crisis,” says Olivier de Schutter, co-chair of the IPES-Food. Jennifer Clap, vice-chair of the IPES-Food, adds: “Evidence suggests financial speculators are jumping into commodity investments and gambling on rising food prices and this is pushing the world’s poorest people deep into hunger.”

Monitoring futures markets and fighting against speculative behaviour had been talked about by G-7 agriculture ministers earlier, but, somehow, it had failed to restrict speculation in commodity pricing, what to talk of banning it.

At the time the 2007-08 food crisis happened, the UN Human Rights Council was informed that excessive commodity trading and speculation were driving the international prices high. Accordingly, futures markets were blamed for at least 75 per cent of the crisis. Democracy Now, a popular TV show in the US, had a detailed programme on how speculation had brought in a huge fortune for the agribusiness companies while millions went to bed hungry. There was no slump in global food production and yet the prices were ruling high. All food majors were raking in profits.

In another report in The Wire (May 6, 2022), an investigation by the Lighthouse Reports, a non-profit, showed that “excessive speculation by investment funds and firms in the commodity markets has contributed to the spike in prices.”

This only shows that no lessons had been learnt from the first food crisis. Instead of rebuilding sustainable food systems and encouraging food self-sufficiency, the effort has been to enhance global market provisioning, which means letting the market forces operate at will. This has, instead, shifted the focus to building international agri-supply chains, thereby increasing dependence on a handful of companies, which raise prices whenever convenient.

The Guardian reports that Cargill, one of the world’s biggest food companies, has already achieved record profits this year, and so is the case with two other giants — ADM and Bunge.

Earlier, US President Joe Biden had remarked: “In too many industries, a handful of giant companies dominate the market. And too often they use their power to squeeze out smaller competitors and stifle new entrepreneurs, making our economy less dynamic, giving themselves free reign to raise prices, reduce options and exploit workers.” He cited the example of the livestock industry, which is effectively in the hands of four big companies, dictating the market prices at will. But strangely, there is no outrage over the predatory pricing being followed.

While the number of investment funds in commodity trading activities had grown, at least seven of the 10 buyers of futures trading in wheat contract reportedly were speculators. This provided a fillip to the commodity prices. No wonder, as per the World Bank, the Agricultural Price Index has already risen by 41 per cent over the prices prevailing a year ago. Wheat prices have risen by 60 per cent and maize by 54 per cent.

This does not, however, indicate any direct link between the rising food prices and speculation, but it certainly points to the growing trade interests in India, for instance, to export as much wheat as possible. The trade certainly wants unbridled exports to be allowed. They can see the growing profit margins, expected to rise still further.

The rise in global food prices hits poor countries the hardest, and at the same time makes imports costlier. Already, the poor in 53 countries — from Sudan to Afghanistan — are hit by acute food insecurity. “This is hunger that threatens to slide into famine and cause widespread death,” the FAO had said.

Over the years, and despite some countries facing continued conflict, not enough international effort has been made to encourage others to be food-secure. Similarly, creating regional food reserves — that could address any drop in food supplies — did not take off.

Although soaring food prices are generally considered to be resulting from a deadly combination of war, climate change, poverty and economic shock (including soaring food prices from speculation), what has been overlooked is the overdependence on food imports. For instance, the Russia-Ukraine region supplies wheat to 30 countries and many of these food-importing nations can, in any case, become self-reliant. There is a lesson here.