01 Sep 2010
Anxieties over the rising cost of food are bothering consumers in rich and poor countries alike, and stoking fears of social unrest in impoverished, unstable parts of the world once again.
On Wednesday, at least six people – including two children – were killed during violent demonstrations over soaring prices for basic necessities, including bread and fuel, in and around the capital of Mozambique, one of Africa’s poorest countries, sources told Reuters. The government has just increased bread prices by 30 percent.
“I can hardly feed myself. I will join the protest because I’m outraged by this high cost of living,” said Nelfa Temoteo, who lives in Maputo’s crowded Malhazine suburb.
The violence echoes the food price crisis of 2007-2008, which helped push the number of hungry people in the world above a billion, and sparked protests and riots in nearly 40 countries, including Mozambique, Egypt, Haiti and Lebanon.
In Britain too, shoppers will have noticed their supermarket bills going up again. The overall price of food and non-alcoholic drinks rose by 1 percent from June to July, the biggest single monthly rise ever recorded in government figures, the Daily Telegraph newspaper reported. And in Pakistan, where the worst floods in decades have damaged 3.6 million hectares of maize, rice, cotton and sugar cane, the U.N. Food and Agriculture Organisation (FAO) is warning the next wheat harvest is at risk as the disaster has destroyed more than 0.5 million tonnes of seed stocks ahead of the planting season, which starts this month.
“Food aid alone will not be enough. If the next wheat crop is not salvaged, the food security of millions will be at risk,” said Daniele Donati, FAO’s regional emergency operations chief.
In late August, Pakistan’s Dawn newspaper criticised the government-subsidised Utility Stores Corporation for hiking the price of certain foodstuffs like oil, ghee, pulses and gram flour by more than 20 percent, wiping out discounts it had earlier announced for the holy, fasting month of Ramadan.
The paper said the price of wheat flour is also creeping up in Asia’s third-largest wheat producer, and the higher cost of food is likely to hit the poorest hard.
“We must ask if this is just the beginning of a series of nasty shocks for the low-income consumer. Though far from perfect, the utility stores are a lifeline for those with limited means,” Dawn said in an editorial, urging the government to keep essential items at affordable levels in the shop chain, which is meant to sell staples at below-market prices.
People in crisis are also suffering in the Somali capital of Mogadishu, where food prices have reportedly shot up since Ramadan began, as Islamist rebels renewed their military campaign against the fragile government. One butcher told Associated Press he’s selling a kilo of meat for $3, up from $2 before Ramadan, and a sugar importer said supplies are dwindling in markets because traders have left or stopped importing food because of the fighting.
WHEAT THE MAIN CULPRIT
Ramadan may be a contributing factor in Muslim countries, as people stock up for holidays and special occasions. But across the world, food prices jumped sharply last month, which is likely to exacerbate local causes like floods, conflict and religious customs.
Surging wheat prices – mainly due to Russian restrictions on sales following a major drought there – drove international food prices up five percent in August, the biggest month-on-month increase since November 2009, the FAO said on Wednesday. The FAO’s Food Price Index – a basket of meat, dairy, cereals, oils, fats and sugar – has reached its highest level since September 2008, but is still 38 percent below its peak in June 2008.
The U.N. food body says the forecast for world cereal production this year has been lowered by 41 million tonnes to 2,238 million tonnes since June, but that would still be the third highest annual amount on record and above the five-year average.
Expected global rice production for 2010 has also been revised downward – mainly due to Pakistan’s floods – and now stands at 467 million tonnes, 5 million tonnes lower than June’s forecast but still 3 percent more than in 2009 and a historical record.
The FAO says the disturbances in cereal and rice markets will be tackled at a special inter-governmental group gathering it’s holding on Sept. 24.
No doubt both international and national policy makers will be keen to avoid a repeat of the crisis two years ago, and work done by researchers who analysed their responses back then should help prevent the same mistakes being made again.
Julia Compton of the Overseas Development Institute described in a blog earlier this year how bad government action can make the situation worse, citing the example of one Asian country that stoked fears of a national rice shortage, sending better-off consumers scurrying out to the shops to buy as much as they could, leaving the shelves empty.
And even though cash payments were recommended by international agencies as one of the best ways to help poor people afford expensive food, many countries found they couldn’t set up national welfare systems just like that, she wrote.
WHEN TO ACT?
Prices may not yet be spiralling as severely as in 2008, but how bad should things get before those in power start taking action?
In Pakistan, politicians know they can’t afford to upset a population mired in crisis any further, with an official indicating to Reuters last week the government would likely scrap plans to export 2 million tonnes of wheat.
Given it’s a staple food, any shortages or steep price hikes would further inflame public anger towards the government, which has faced mounting criticism over its handling of the catastrophe.
Pakistan banned wheat exports in 2007 because of shortages and high domestic prices – but some experts say such restrictions are a short-sighted response because they tighten supplies on world markets, pushing international prices even higher.
Wheat futures – financial contracts for supplies to be delivered at a later date – hit two-year highs earlier in August after Russia slapped on an export ban.
It’s too early to tell exactly what trouble today’s international price developments spell for the world’s poorest a little further down the line, but the alarm bells have started ringing.
The Financial Times reported on Monday that Egypt has seen small, localised public protests against high food price inflation.
Ministers have reassured voters there won’t be a rise in the price of the country’s subsidised loaves – sold for less than 1 US cent each – fearing social upheaval. So rather than hitting poor people’s pockets for now, the budget deficit is set to swell as the government absorbs the growing cost of wheat imports for its citizens’ daily bread.
While countries will respond differently, depending on their existing food policies and poverty levels, no one can say they haven’t been warned this time.