IN DESPERATION this week, meteorologists fired artillery shells loaded with cloud-seeding silver iodide into the skies over the parched fields of China’s wheat belt. It produced light falls of snow and rain but not yet enough to break the grip of a drought that is threatening to devastate the summer harvest of the world’s largest producer.
However, China’s wheat crop is only a small piece in the bigger, alarming story of the spiralling of global food prices for a second time in three years. In January a price index compiled by the UN’s Food and Agriculture Organisation, combining 55 export food commodities, hit its highest level since tracking began in 1990. The World Bank’s food price index had risen 29 per cent in a year to only 3 per cent below its peak of June 2008, the last food crisis when riots exploded in a number of capitals. This time the inflation has also fanned protests and, arguably, the revolution in Egypt.
The price of wheat has doubled since last summer, a response to Russia’s export curbs, dry weather in Brazil and flood damage to Australia’s crops. It is already rising again in anticipation of China’s likely harvest failure. And the general rise in food prices, predicted to persist for months, according to the bank, has pushed 44 million more people worldwide into extreme poverty. The number of chronically hungry people is approaching one billion, a level last seen in 2007-08.
When finance ministers from the G20 countries meet in Paris today it will be one of the key agenda items and the priority of the group’s French presidency. President Nicolas Sarkozy has loudly pledged action against what he calls the “extortion” of speculation in food, linking commodity derivatives trading to volatility in what some have called the “financialisation” of the food markets. “It is pillaging ...,” he told African leaders recently, arguing that speculators were directly responsible for “the sort of food riots we have witnessed”.
Measures to curb speculation and panic buying will be discussed today although they are unlikely to win broad support. The evidence that speculation is the principal factor in price inflation is contested: climate change-induced production collapses, export curbs, rising demand in an increasingly wealthy China and demand for biofuels are all among other factors blamed.
Importantly, France will also press for agreement on restrictions on export bans such as that imposed by Russia last summer which triggered a jump in wheat prices. Paris is believed too to have wide backing for the harmonisation and pooling of data on production, consumption and stocks of food commodities, a database that should help market transparency.
And France is pressing the G20 to increase financial support to agriculture, broadening the G8 L’Aquila Food Security Initiative which saw €15 billion in pledges in 2009. The welcome move reflected a new investment focus to fighting global hunger by raising agricultural productivity. It was backed by the US and Europe, and strongly supported by Ireland, reversing a two-decade policy based almost exclusively on food aid.