AGFLATION is a word coined to describe recent food price increases. Canadian consumers paid 3.8 percent more for food in April than they did a year before, up from a 1.7 percent increase last year at the same time.
The situation is similar in the United States, where higher food prices are reaching popular consciousness through front page headlines such as the June 6 Chicago Sun-Times: “Ouch! Grocery Prices Soar.”
The simple analysis provided in these stories blames biofuel’s demand for corn and higher transportation costs. But a more accurate analysis should recognize the problems of food production developed long before the biofuel craze.
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In the last 10 years, global production of key crops such as corn and wheat hasn’t kept up to rising consumption fueled by Asia’s prosperity.
The result: stocks have fallen dangerously low.
The root causes of this predicament were low grain prices, inadequate investment in agriculture and poor government policies. Biofuel demand was simply the last straw and we are now paying for years of neglect.
The burden is light for most in the developed world where food makes up only about 10 percent of the cost of living.
An assessment from the Center for Agricultural and Rural Development at Iowa State University said that rising corn prices have increased retail food costs by $47 US per person per year.
That is less than $4 per month and if it was a concern most people could compensate by foregoing a coffee or two.
But in developing countries, where people spend a third or more of their income to eat, agflation is worrisome because it causes hardship and political unrest.
China and India, together home to about 37 percent of the world’s population, long focused on booming industrial growth and have only recently begun to address lagging agricultural productivity and grinding rural poverty.
The agricultural system in India is so unprofitable and dysfunctional that 40 percent of farmers say that given a choice, they would take up another occupation, according to a report from India’s Central Statistical Organization.
The only way to stop rising food costs in these countries is to make farming a profitable and sustainable business through improved transportation, communication, farm credit, marketing, education, trade and environmental policy.
Countries that struggle to feed themselves should not stimulate biofuel development, but it is not wrong for places with enormous agricultural surplus capacity to support biofuel.
Biofuel development, if pursued sustainably, should not be blamed for rising food costs. It has simply made it impossible to ignore fundamental problems of global food production shortfalls and inadequate farm income that policymakers must address.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
