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 Editorials | Issues | January 2008 
Chew on This: Food Issues are a Growing Concern
 Tom Ford - Winnipeg Free Press
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 |  | A coming global food catastrophe will be one of the most crippling the world has ever seen. It's going to hit this year hard.
- Donald Coxe |  | | | |
Food has long been a siren, tempting and enticing us. Now, it's going to cost us more money.
Food's social aspects are well-known: Too many of us eat too much of the wrong foods - and exercise too little. The result is obesity. At the same time, starvation is stalking thousands of Africans.
Food's economic side also pushed to the fore last year: Commodity prices in price-setting markets are rampaging higher. Surveys indicate prices of Illinois corn and soybeans are up 40 per cent and 75 per cent respectively from a year ago. Kansas wheat is up 70 per cent or more.
The Economist magazine's food price index in December was at its highest since it began in 1845, having risen a third in 2007.
An extreme example of crazy prices: A Toronto restaurant, located in the historic Harbour Commissioners building, this week proudly advertised a 12-ounce Japanese Kobe strip loin for $265.
Donald Coxe, a leading investment strategist with the BMO Financial Group, told Toronto's Empire Club that a coming global food catastrophe will be one of the most crippling the world has ever seen. "It's going to hit this year hard," he added.
Canadian consumers are just beginning to feel the impact of higher prices. About one in four persons interviewed in December in a Canadian Press Harris/Decima poll said they felt prices have increased a lot.
That figure may well have been higher except that the stronger loonie and some vigorous competition among grocery chains have, so far, helped shield Canadian consumers from a major inflation of food prices.
What's causing the upheaval in grain markets? It's not scarcity, the usual culprit. The International Grains Council, a London-based trade body, says 2007's total cereals crop will be 1.66 billion tonnes, the largest on record and 89 million tonnes more than the previous year's harvest, another banner crop.
Two factors are mainly responsible for the soaring prices: George W. Bush's grain policies (isn't it amazing that Bush gets blamed for almost everything), and the fact that many persons in India and China, despite the idea that they were dedicated vegetarians, have taken a fancy to meat now that they have more money.
Bush's government is spending huge amounts subsidizing the growing of crops that can be used to make ethanol fuels that are supposed to moderate the production of climate change gases. As a result, farmers moved into corn and soybeans and away from wheat - thus boosting the price of all these crops.
I've said this is Bush's policy. But he had help from a powerful group of western senators. Under America's constitution, each state gets two senators, regardless of the size of its population. Senators from the upper western states, who represent more cows than people, regularly get together and help formulate America's agriculture policy. Administrations usually bow to their wishes because they want their support on other key programs.
The American Senate in December approved a $286-billion farm bill that subsidizes producers of crops such as corn, cotton, soybeans and wheat. You'd think that with prices rising, America could cut back on subsidies. No way.
Fed-up with America's outrageous subsidies, Canada and Brazil in December complained to the World Trade Organization (WTO) that America is exceeding permitted levels of trade-distorting handouts to producers. This is a gutsy move for Ottawa, which tends to go cap-in-hand to Washington on major trade matters.
"There's an important point to be made," says François Jubinville, spokesman for Trade Minister David Emerson. "Canadian farmers have had to compete against American farmers that were heavily subsidized, which created unfair market conditions."
The impact of American subsidies has been felt particularly in poorer countries. When I was in Mexico last year I saw empty fields that had once been used to grow corn. Mexico's cuisine is based on corn, but, as a Mexican told me, "We can't compete with subsidized American corn in our own country."
The WTO has set up a panel which is expected to issue its first of what could be many rulings in 2008.
Mexico's farmers are not the only ones harmed by the turmoil in commodity markets. David Rolfe, president of Manitoba-based Keystone Agriculture Producers, fired off a letter to the Winnipeg Free Press a few weeks ago saying farmers are not benefiting from higher prices on futures markets.
For one thing, the cost of a farmer's inputs have also gone up (the cost/price squeeze) and farmers only get a fraction of a future market's price (the age-old Canadian issue of price spreads).
The farmers' problem is that they are at the intersection of the two most powerful world issues - the environment including climate change (which dictates what they can grow and what they get paid for it) and $100 a barrel oil (which severely impacts their bottom line by increasing the cost of fuel and fertilizer).
The intersection doesn't appear to have a stop sign. That means there's little chance of knowing where our farmers will end up.
Tom Ford is managing editor of The Issues Network. |
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