Interesting insights into the global food crisis from London-based consultants Independent Strategy.
The World Bank says global food prices have nearly doubled in three years. The crisis has been blamed on soaring prices on trade restrictions, poor growing weather and rising use of biofuels that rely on staples like corn. Increased fuel prices have also made transporting food more expensive. The World Bank and other agencies will meet next week to work out strategies to solve the problem.
But in its paper, The global food crisis – another Marie Antoinette, Independent Strategy says the problem is the result of food becoming another asset bubble based on speculative investment and hoarding. "There is no doubt that a rise in consumption, as a result of growing populations and incomes, has been a major driver of higher food prices,'' says the report.
"It is equally clear that a persistent drop in agricultural investment has depleted already low food stockpiles. But the current extremes in food prices are increasingly the result of speculation as investors switch from bonds and equities in the credit crunch into relatively small commodities markets."
There have already been food riots around the world but the most vulnerable country, according to the report, is Egypt as it has a very large population, a dependency on food imports and an inability to offset rising food prices with higher receipts from the export of any other commodities.
The only way forward, says the report, is to encourage fresh investment in farming, encouraging farmers to produce more and, by offering them micro-credits, to produce food more efficiently. Export tariffs must be eliminated.
But all the signs suggest that will be too hard for governments who have been given to playing the markets short.
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