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Food prices out of control?
23/06/2008 10:21 - (SA)
Cape Town - Food prices are on the increase, compounding problems for the world's poorest, already hit by rising fuel costs and rising inflation.
In South Africa, the seemingly spiralling cost of food is adding to our economic burdens brought on by massing petrol price hikes, interest rate increases and electricity price jumps.
Prof Sheryl Hendriks, a member of the Academy of Science of South Africa's (ASSAf's) Science for Poverty Alleviation Committee and Head of the University of KwaZulu-Natal's African Centre for Food Security School of Agricultural Sciences and Agribusiness, spoke to News24 about global food shortages, rising food prices, biofuels, and agricultural production in the country:
News24: What has sparked this global food shortage?
Prof Hendricks: The global food shortage has been sparked by consumer demand for food, fuel, and fodder, which has pushed up the price of fuel and driven the demand for alternative energy and competition for food crops for fuel/alternative energy.
This problem is compounded by increasing population pressures for food and stagnant production that is not keeping pace with this demand, and the global recession wreaking havoc on economic growth world-wide.
This is a unique crisis where we see a global food shortage caused by consumer demand and poor policy, rather than the traditional production crises brought on by natural disasters (drought, floods, etc.) that cause regional or local food shortages, which can be addressed by large-scale shipment of food stock from one area to another.
This global shortage also comes at a time when the world has neither sufficient food stock nor the liquidity to move stock, due to high food and transport prices.
For households, the crisis brings considerable stress as they struggle to cope with not only high food but also high fuel prices, which negatively impact on transport costs, and in fact the price of all commodities.
Does global warming have anything to do with these food shortages?
Not necessarily at this stage; global warming is a concern but it is not manifesting in reduced food production. The issues above are the key drivers of food shortages.
Has an increase in demand for biofuels contributed to food shortages as well?
Yes, as previously explained, the drive for alternatives to fossil fuels has led to counties using staple food crops, such as maize, for the production of ethanol (the result of the fermentation of sugar).
Maize is the most inefficient source of biofuel, so yes, the demand for maize for use in biofuel production means that any excess maize is being diverted for fuel production, while the production of maize is being routed for biofuel purposes in countries supportive of this initiative. This reduces the overall availability of maize as a staple food, and drives up prices through demand, but is not the reason for high rice and wheat prices.
While biofuel demands contribute to high prices they are only one of many factors linked towards the contribution of food shortages.
What countries/continents are worst affected by this crisis?
The effect is global but countries that are net importers of food are hardest-hit, as well as urban consumers, with high demand for products such as bread. African countries are hard-hit but are not the only ones. The food crisis is affecting the rest of the developing world in particular, Asia, Latin and Central America, and Africa.
The negative consequences of the crisis are clearly visible, with 40 of Africa?s 53 countries having requested international assistance to ease the burden of high food and fuel prices.
Which countries/continents consume the most food per person?
Developed countries, with highly commoditised and commercialised food chains, and generally high per capita incomes, are responsible for the highest food-per-person consumption ratios.
How are rising food prices contributing to inflation in South Africa?
Inflation is the general decrease in the value-per-unit of currency and cannot be attributed to an increase in one consumption good, such as food. Inflation is estimated by the general rise in prices of goods and services over time, and is related to the demand for money in the economy.
Increased demand for commodities pushes up prices, thereby increasing inflation in situations where more money is available rather than goods to purchase. Increased production costs also affect inflation, as producers pass higher input and production prices onto consumers. Other factors such as exchange rates, oil prices, wages and salaries, also affect the rate of inflation.
While there is no general shortage of food in South Africa, high global food prices, fuel costs and a global recession, are all impacting on inflation in the country. The government has been trying to keep inflation in check over the past 18 months by increasing the lending rates in an attempt to reduce consumer over-extending via borrowing.
High food prices exacerbate high inflation but may help moderate consumer spending.
What solutions are there for the consumer? How can the consumer fight rising food prices?
The options for South African consumers are limited. The first reaction is to cut-back on luxury items for those who are able to do so. Those whose food baskets are already lean, and amounting to more than half of their overall household income, have even fewer available strategies.
Typically, households make small adjustments to the kinds of foods they eat; as the situation worsens or is prolonged, households typically start cutting-back on food variety, switching to cheaper brands and cheaper foods and begin consuming less or eating less frequently. None of these strategies are beneficial, as dietary quality and energy consumption become compromised. Instead, households should try conserving money rather than borrowing to buy food.
Clearly, a home vegetable and fruit garden is helpful. Households should be more selective when shopping for food, by comparing food prices in supermarkets, markets and select shops. Buying in bulk, with friends and neighbours, can also help reduce the cost of basic food items and contribute towards transport cost-saving through reducing multiple trips to purchase smaller amounts of food.
For those simply unable to feed their families, assistance should be sought from the many charity and philanthropic centres that provide for the needy in South Africa.
How can South Africa fight back? Are we under-producing agriculturally? Is it possible for us to increase production?
The medium- to long-term solution to high food prices lies in creating incentives for farmers to increase production. South Africa already produces surpluses of maize, sorghum and other commodities, so the country itself is not short of supply. The exception, however, is wheat, where imports for bread-making have always been relatively high.
Nevertheless, South African farmers, at all scales, could benefit from high food prices. We have additional production capacity and potential but the incentives have to be created for farmers to gamble the various risks and thus increase, intensify and expand production.
In order for expansion to take place, South Africa should urgently address the great uncertainties created by land issues, crime and inadequate markets for smaller producers in particular.
Will food prices ever come down again? If so, for how many years
will we be struggling with higher food prices?
It is unlikely that food prices will drop, and certainly not in the long-run. Production would consequently lag behind and take considerable investment to significantly increase food production in the short- and medium- terms. We are facing a structural adjustment in prices rather than a typical covariate shock.
When should we start to panic? How high can prices really go?
The world is already panicking and so are consumers! While food prices seem to have levelled for now, fuel prices continue to rise and until there is a change in global politics, this is unlikely to change.
Food prices could rise as fuel prices increase, thus driving-up production, marketing and input costs, eating into producer profits.
Prof Hendricks, thank you very much.
The Academy of Science of South Africa (ASSAf) was inaugurated in May 1996 in the presence of then President Nelson Mandela, the Patron of the launch of the Academy. It was formed in response to the need for an Academy of Science consonant with the dawn of democracy in South Africa: activist in its mission of using science for the benefit of society, with a mandate encompassing all fields of scientific enquiry in a seamless way, and including in its ranks the full diversity of South Africa's distinguished scientists. ASSAf is the official Academy of Science of South Africa, recognised by government and representing South Africa in the international community of science academies.
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