G-20 Farm Ministers Hope to Combat Rising Food Prices
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France is the 2011 G-20 chair, and so leading today’s talks is French Agriculture Minister Bruno Le Maire, who has called for a centralized crop database, limits on export bans, international market regulation, emergency stockpiles, and a plan to raise global output.
In the last year, Russia and Ukraine decreased exports of wheat after drought decimated crops, driving the price of the commodity (NYSE:RJI) up nearly 100%, and the World Bank blames that and other increasingly high global food prices for driving 44 million more people into poverty just this month. The UN estimates that nations will spend $1.29 trillion on food imports, 21% more than last year and a new record.
Le Maire said in an interview that, if the G-20 ministers cannot all agree on his main proposals, there will be no accord, and the next world crisis could be a fate far worse than a financial crisis: widespread famine. While Le Maire’s measures would help combat such a problem, he will have difficulty getting ministers to agree to allow their borders to be controlled by an external entity.
It is important to keep in mind that, while higher food prices (NYSE:RJA) are an inconvenience or even a strain on citizens of well-developed countries like the U.S., they can lead to millions of starvation deaths in the third world. And hunger isn’t the only danger threatening peoples’ welfare in case of food shortages. Last time food prices surged, from 2007 to 2009, more than 60 related riots occurred around the world, and those surges were to prices below what we are now facing.
Corn futures have advanced 82% in the last 12 months, a global benchmark, while rice gained 39% and sugar jumped 65%, with worldwide shortages in all three, and shortages in soybeans, wheat, coffee, and cocoa to come. Australia (NYSE:EWA) and Canada (NYSE:EWC) witnessed droughts and floods that ruined crops last year, and now European farmers are facing the driest growing season in over three decades.
India does not count itself among the 19 members of the G-20, and is unlikely to adhere to any agreement that limits their control over their exports. In 2008, India (NYSE:IFN) was one of the nations banning rice exports when prices of the staple reached an all-time high in many parts of the world. As a country that already faces much economic hardship, with a very large number of people living in poverty, India has been very careful to ensure that their domestic requirements are met. Egypt also decreased exports, Vietnam barred speculators from its markets, and China (NYSE:FXI) imposed steep taxes on exports. Part of Le Maire’s proposal to G-20 leaders would limit their ability to curb imports through such methods, which for many more independently sustainable countries means putting the good of the many above the good of the few.
The institution of new measures to stave off a food crisis are not just important in combating a temporary problem. According to the UN, by 2050 the world population will have climbed to 9.2 billion, up from an estimated 6.9 billion world population in 2010. That means food output will have to increase by 70% by 2050, and that the institution of Le Maire’s measures could be vital in making sure that global food output continues to grow with the population. Growth in agricultural output has already slowed, from 2.6% growth per year in the previous decade, to 1.7% a year through 2020. If we were to maintain that 1.7% growth per year through 2050, growth in food output would fall nearly 4% short of population growth.