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Controlling the rising price of food

Sunday, May 4, 2008 | 10:00 a.m. CDT; updated 2:31 p.m. CDT, Tuesday, July 22, 2008

Stuart Loory, who holds the Lee Hills Chair in Free-Press Studies at the MU School of Journalism, is the moderator of the weekly radio program “Global Journalist.” It airs at 6:30 p.m. Thursdays on KBIA/91.3 FM or at globaljournalist.org.

Loory: The price of food throughout the world is soaring and that is not necessarily because there is a shortage. The globalization of the world’s economy is having a greater effect. A price increase on a food-related product in one part of the world can have a devastating impact elsewhere. Food-price increases have brought down the government in Haiti, one of the most impoverished countries in the world. They’ve also brought riots to other parts of the world, particularly in Africa where protestors have been trampled to death. Some food-exporting countries have stopped exports to save supplies for their own people and that has brought on hardship. India, Brazil and Thailand have banned the export of rice. Poor judgment and panic buying have caused problems. Panic buying became a problem in the United States when discount stores like Sam’s Club and Costco limited rice sales to five bags per customer. All of this means rice prices have gone way up. In Thailand, the world’s largest exporter of rice, prices have almost doubled since the beginning of the year. How did it happen, and how can it be brought under control?

Wallace Tyner, professor of agricultural economics, Purdue University, West Lafayette, Ind.: For rice and wheat, consumption has been growing faster than production. Rapidly growing countries like China and India are increasing demand, and production can’t keep up. The real price of rice, the price adjusted for inflation, had fallen since the 1960s. Since 2001, the price has increased while stocks have decreased. The same is true for wheat. Whenever you have a low stock level and any weather problem like we’ve had in the last year, prices will be volatile, and they will increase quickly. For corn and soybeans, a major driver has been biofuels. Corn has been used in the U.S. to produce ethanol. Corn and soybeans are grown in the same areas, so when the demand for corn increases and its prices increase, soybean prices increase also. Oil prices have been skyrocketing, and the decrease of the dollar is related to that. Since the dollar has fallen so quickly, everything is cheaper overseas than in the U.S. and that increases demand. So the drivers for these commodities are different, and it just happens they have all occurred at the same time.

Loory: What is happening as a result of these increases in Ghana?

Kwasi Kpodo, West and Central Africa correspondent, Reuters, Ghana, West Africa: Ghana has had its share of impact, but thankfully it came down to a question of affordability. Ghana never had problems of unrest caused by the food shortage, but the food prices skyrocketed, and we had to look for alternatives. The good thing in Ghana is that alternatives exist. If you can’t afford cereal, then, for the time being, you shift to something else. One just has to think it through, about whether one can afford something or not, and then look for an alternative.

Loory: Brazil has tried to protect itself by banning rice exports. Was that necessary?

Mark Burleigh, Brazil correspondent, Agence France-Presse, Sao Paulo, Brazil: Brazil is a major exporter of coffee, orange juice, soy and beef, so it benefits from the high prices. It also creates biofuels, so it benefits from both sides. But Brazil has a relatively large poor population, and people are feeling the hurt when it comes to rice — a staple food in many Brazilian dishes. Rice was going up in cost about one percent a day, so officials decided to stop rice exports. They weren’t trying to change the world market, but they were trying to stabilize prices in Brazil.

Loory: The world’s largest exporter of rice is Thailand, and it has also banned exports. Why are the prices going up in Thailand when it produces an abundance of rice?

Thanong Khanthong, managing editor, The Nation newspaper, Bangkok, Thailand: Thailand produces about 20 million tons of rice a year, and its residents consume about half of that. The other half is exported. But Thailand hasn’t been spared from the rise in food prices. Food demand in the emerging global economies is rapidly growing in tandem with the economic growth. Most of the countries are going for industrialization and urbanization and that has reduced the agricultural resources. Farmers have said the rising prices of transport and fertilizer also make it tough on them. Thailand has continued to export rice, but it has much more to do with the market’s behavior. Last year, the price of rice in Thailand was about $362 a ton, and now it has risen to more than $700.

Loory: The diet in China is getting better, but because China is such a big country, that has an impact around the world. Is that a matter of concern in China?

Shan Huang, deputy international editor, Caijing magazine, Beijing: Twenty years of an expanding Chinese economy has led to an entire generation that has grown up in relative prosperity. But rising food prices have made it hard for the first time during this growth period. Inflation is the top priority for the Chinese administration. The price of food is a major producer of inflation, and the government has made every effort to curb prices. In January, it imposed price controls on a number of farm products, like cooking oil and grain. The Chinese government has urged local governments to maintain stable prices on vegetables and other perishables. In order to secure grain supplies, the government has also stopped exportation of wheat, corn and fertilizers.

Loory: What impact is the relationship between the conversion from fossil fuels to biofuels having on food?

Tyner: Biofuels in the U.S. are made from corn, in Brazil from sugar cane, and in the European Union from rapeseed. The rapeseed, cane and corn are animal feeds. So when corn and oil seeds are used for fuel, part of what traditionally was used to feed animals and to make eggs, milk and meat is made more expensive.

Loory: Does that mean using these commodities for biofuels will have to be brought under some control?

Tyner: Growth of corn-based ethanol in the U.S. probably will come to an end in a year or two, so all future growth will be from cellulosic materials, which don’t compete directly for food. The U.S. will continue to produce up to 15 billion gallons of ethanol from corn, but it won’t go beyond that. There are already self-limiting factors in U.S. policies and in market forces.

Loory: To produce more food, rain forests in Brazil are being cut down. Can anything be done to control it?

Burleigh: Brazil has a large amount of farmland without cutting into the Amazon, so the industry that makes biofuels from sugar cane is fighting back hard with facts and figures saying that the Amazon isn’t under threat. President Lula’s government has also come out pretty fiercely against what he claims is an attempt by the West to portray this as a biofuels versus food debate.

Loory: The food crisis gives an idea of how the world’s economy and political makeup are changing and what a strong or even devastating impact that can have.

Producers of Global Journalist are Missouri School of Journalism graduate students Jared Gassen, Eunjung Kim, Hui Wang and Catherine Wolf.


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