Christopher BurnsMonday, October 29, 2007
THE enduring resourcefulness of corn has finally managed to stretch the price of a pound of rice way beyond its swelling capacity, but enough to also cause collateral damage to the ego of "gungo peas", as it jostles for position among fewer grains of the good ole Uncle Ben's.
While, on the other side of the plate, the relationship between corn and wheat has gone so sour that cornmeal dumpling is no longer amused, because its main companion, flour, has been biting the dust on account of the "Bully Rhygin" behaviour of the price of corn, as it takes pride of place in the biofuel industry. For now, rice and flour are hollering for some of the subsidies corn has been receiving, and chickens are no longer merry, because the corn hawks are too near.
Excursus aside, from the statuesque colonial structures of Mexico City to the unforgettable corners of Rome, where the Trevi Fountain occupies pride of place in the square with the same name, consumers are paying, and bracing for, higher prices for corn, corn-based products, rice, wheat, flour-based products - such as bread, buns and biscuits - poultry products, pork and its derivatives, and a host of other basic food items.
There is a combination of factors driving world commodity prices. Chief among these factors are soaring oil prices, higher freight rates, stronger maize price because of the demand for ethanol and decrease in acreages planted due to climatic and other environmental changes in places like Australia. Like other commodities such as wheat, the rice fields of Asia are in danger from extreme weather.
In Indonesia, for example, production may fall short of demand because of El Nino weather conditions which hurt rice crops. Price increases are also influenced by population growth, historically low levels of stocks, high demands and a progressively weak US dollar to which several world currencies are pegged. However, apart from global demand and environmental maladies, higher input costs for labour and fertiliser have been fuelling the latest price increases.
Unfortunately, there is no end in sight for a levelling off of corn prices. There were about 110 ethanol refineries in operation in the United States at the end of 2006 with another 73 under construction. With generous government subsidies and a commitment to produce 35 billion gallons of ethanol by 2017, the enormous volume of corn required to produce this "clean" fuel will continue to send shock waves throughout the global food system. Sadly, at the epicentre of these upward price movements are billions of the world's poorest people.
The heightening demand for corn is decreasing the supply of other grains, including soybeans, because farmers are shifting fields to make room for corn. And, as economists will tell you, rising rice prices is an automatic result of rising wheat prices. When wheat prices rise and people shift to close substitutes like rice, they also go up. Economist at the Food and Agriculture Organisation (FAO), Adam Prakash, is forecasting substantial increases in the cost of imported food for least developed countries of upwards of 90 per cent above what they were in 2000.
In Mexico, for instance, President Felipe Calderon has had to ditch his free trade principles by forcing producers to sign agreements that fix the prices for corn products. His actions were precipitated by skyrocketing prices for corn on the world market that have been pushing up the price of the "humble tortilla", a main stay of the Mexican diet. This is no simple matter in Mexico, where 50 per cent of the country's 107 million people live on $4 a day, or less, and many of them survive on tortillas and beans.
The FAO is reporting that cereal import bills for the world's poorest countries are expected to increase by some 14 per cent above the 2006 level. As the FAO report states, "The total import bill of the Low-income Food-Deficit Countries (LIFDCs) is forecast to reach an all-time high of US$28 billion in 2007/08 and developing countries are likely to spend $52 billion on cereal imports. Wheat prices in the United States, for instance, increased from $4 per bushel in July 2006 to close to $6.5 per bushel in May 2007, translating to an increase of 63 per cent.
It's hard to think of a food that matters more - to more people - than rice. A pound of rice can easily feed more persons than a pound of yam can. Although it is grown in more than 100 countries, roughly 90 per cent of all the rice in the world is consumed in Asia where about three billion people depend on rice to survive.
According to the FAO, global rice consumption is estimated to reach 418 million metric tonnes in 2007, up from 414 million tons in 2006, while global rice production is expected to reach 415 million tonnes, down from 418 million produced in 2006. Global rice trade is expected to reach 29.8 million tonnes, up from 28.3 million tonnes in 2006. Strong economic growth in China has caused demand to rise more rapidly than supply, because growth in per capita income is increasing the consumption of rice.
Only recently, Agriculture Minister Dr Christopher Tufton gave the clearest indications of imminent price increases for most basic food items and pointed to the inevitability of growing backyard gardens to lessen financial burdens that are bound to come. I rather like the suggestion of self-reliance, but wonder about the ability of our people to just shift cultural gears overnight, when no such shift was envisioned.
In Jamaica's case, the passage of Hurricane Dean and the recent bout of heavy rains have exacerbated an already bad situation because domestic crops such as yams, bananas and sweet potato have been destroyed. And, as if acts of nature aren't challenging enough, the steady depreciation of the Jamaican dollar is not helping and is causing serious financial problems, especially for the most vulnerable. It will be interesting to see how government deals with these issues, although they are primarily driven by external geopolitical and economic happenings.
Julia's Comments:
As the prices of staples like rice and flour increase, everyone is feeling a pinch on their pockets. While some food vendors are able to absorb the increase in prices of these staples for the time being, in the long run, they may find that the burden is too heavy for them, and may have to resort to raising the price of the food they sell. Meanwhile, other food vendors have already started increasing the price of their food, or making use of alternative, lower quality brands. In a report on The Straits Times, it was also mentioned that prices of food in school canteens have been raised, if the food portions are not reduced. This has resulted in students packing food to school to save money, or to ensure that they do not have to study on an (almost) empty stomach. The hike in prices of commodities has indeed proved to be detrimental to both food vendors and consumers. Yet, it is hard to find an immediate solution for this acute problem, and consumers have no choice but to make do with the higher prices of commodities for now.
Posted by Julia
posted by - @ 10:01 PM
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