Rising food prices may blight post-Olympic 'hunger summit'

THOSE IN Britain enjoying the euphoria over an undoubtedly successful Olympics will hear a discordant note tomorrow when the 2012 Games come to a close. British prime minister David Cameron has planned a one-day “hunger summit”, with the goal a renewed international effort to tackle malnutrition and starvation.

Charity Save the Children says this would be a fitting legacy of the 2012 Games, an international mobilisation of resources to reduce the burden of hunger.

NGOs estimate that almost a billion people around the world have too little food, and starvation kills up to 2.5 million children a year.

Even before the initiative gets under way, however, it looks set to plough into a storm that will likely sink it before leaving port: a possible food crisis driven by rising world food prices.

The UN Food and Agriculture Organisation’s monthly food price index rose 6 per cent in July, reaching levels higher than those pertaining during the food crisis of 20007/08.

Back then, the rise sparked violent protests in countries including Egypt, Cameroon and Haiti. Now, prices are expected to climb as the storm continues to gather. While commodity market speculators and nationalistic export bans helped to drive the 2007 crisis, nature has become a major contributor to the 2012 price rises.

The US midwest is struggling with its worst drought in more than 50 years, causing the department of agriculture to slash its maize crop estimates by 12 per cent in June and by an estimated 15 per cent further yesterday.

The predictable result is record prices for maize, with a 60 per cent price rise since June pushing costs to about €6.80 per bushel.

Wheat prices have doubled over the past two months and drought-driven yield reductions in the soybean harvest are also driving costs for this commodity.

Nature looks set to intervene elsewhere, based on reports from both the US and Japanese meteorological offices.

They indicate that the El Niño weather phenomenon has taken hold in the Pacific Ocean and will persist for at least six months.

This affects climate on a global scale, kicking off monsoon rains in some regions while feeding drought in others.

Staple food producers in Australia and along the western Pacific Rim are expected to face crop yield reductions as a consequence, which is also likely to ratchet up international food prices.

High prices fuelled by anxious commodity markets can trigger protectionist policies like export bans, such as the wheat restrictions imposed in 2010 by Russia.

There were no grounds for a wheat ban given the current situation, the Russian deputy prime minister Dmitry Rogozin said earlier this week.

“There is a potential for a situation to develop like we had back in 2007/08,” said a sanguine Abdolreza Abbassian, the Food and Agriculture Organisation’s senior economist and grain analyst.

There was an “expectation this time around we will not pursue bad policies and intervene in the market by restrictions”, he said.

If that proved to be the case then things might not be so bad. “But if those policies get repeated, anything is possible,” he warned.

Even without interventions, the normal exigencies of market supply and demand will have their way and prices will follow an upward trajectory in response to rising scarcity.

There are also underlying factors, for example a stronger dollar that will make it increasingly difficult for developing countries to purchase food commodities.

This is particularly true in areas where up to 50 million face severe food shortages such as Sudan, South Sudan, Somalia, the Democratic Republic of Congo, Afghanistan, Kenya, Zimbabwe and Yemen, the NGOs say.

Price rises could push millions more into hunger amongst the poorest in these countries, who already spend two- thirds of their incomes on staple foods, says Save the Children.

Add to this financial burden the costs of transporting food to the places where it is most needed, with fuel costs already very high and rising internationally.

We have already seen squalls breaking out, perhaps an uncomfortable prelude to the rising storm.