Cheap food not good answer

June, 2009

I recently saw a story about farmers reducing fertilizer use in response to high prices.

The story warned that this was dangerous, as farmers should not be reducing inputs in an age of food shortages. It went on to argue that farmers will benefit from maximizing production.

Another news report the same day pointed out that the food crisis was far from over, despite being overshadowed by the world economic crisis. While farm products have declined in value, they are still priced beyond what many in poor countries can afford.

As if to reinforce the point, we are now being told that the number of malnourished citizens of Earth has topped one billion.

While the American Declaration of Independence may have declared that all men are created equal, the same can no longer be said of all hungry people.

The hungry, it seems, can be divided into two classes – those with money and those without.

That you can be hungry without money is self-explanatory. But being hungry with money requires some elaboration.

It is the fate, or at least the fate they anticipate for themselves, of people who don’t have enough arable land or perhaps water to grow sufficient food for their needs.

The obvious examples are the Arab Gulf states, swimming in oil but singularly lacking water. Saudi Arabia, for example, used to grow a great deal of barley and wheat. It stopped doing that when it became apparent it would thereby consume all its fresh water.

Other countries in the same boat include Japan and China.

Wealthy but hungry countries have a solution to their problems. They are buying land in poor countries that are willing to sell or lease land to produce food, which then belongs to the wealthy country, or at least to the company that represents that country.

A ludicrous example of this is Sudan, a country that relies on food aid to feed its people, but which is willing to allow its land to be taken over and food to be exported.

In the end, this technique simply takes food out of international markets and will likely result in lower prices for all foods, as demand is reduced in importing countries.

Prices to the farmer will decline and this will undoubtedly be seen as positive by folks concerned with world hunger.

You don’t need to be a farmer, with a whole lot of skin in the wringer, to see that this isn’t a good thing. (It does help, though.)

Farmers, the few that remain, know full well they do not receive enough for their products to make farming sustainable over the long run. They also know the conundrum food producers and consumers face.

Without more money, farmers will reduce fertilizer use, limit other inputs, and production will fall.

The result will be catastrophic for poor people. So, what to do?

First of all, international agencies and governments should quit using the simple argument that food prices are too high.

Opponents of ethanol argue, for example, that using feed grains to produce ethanol has raised the price of food in the U.S. and around the world. This, apparently, is a strike against ethanol.

Bad argument. There are better ones to use. What it says is that farmers should produce cheap food. That is the way to combat hunger.

As I argued earlier, farmers can’t and won’t produce crops for inadequate returns forever. That ethanol production is a better deal for farmers than selling to food markets is simply an indictment of the international economic system.

Those who care about the hungry should be glad for higher food prices in one sense. These ought to insure farmers will continue to produce food.

The real question is not how high food prices should be. They should be high enough to ensure farmers a reasonable living.

The real question is, how will the hungry be fed? That leads to a different set of answers than simply eliminating the things that keep food prices high.

Now, to head off the critics I can already hear in my head, let me be clear that I don’t think higher crop prices necessarily lead to more income for farmers.

In most cases, that greater value is simply eaten up by input makers and service providers.

Just as those concerned with the poor need to reframe the question of how people will be fed, farmers and politicians need to reframe the question of how farmers can be sustained.

Good prices alone will not do it, in a system when market power is concentrated in a few hands. The temptation is to forget this when times are good. Times will not be good forever.

by Paul Beingessner