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How to counter global food scarcity
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December 20, 2007

Wheat prices have climbed to record highs around the world, as stocks have ebbed to their lowest levels in a quarter century. The result is that global food security is in jeopardy.

The situation is unlikely to improve in the near- to medium-term, as the crop outlook is far from satisfactory in most of the major wheat-exporting countries. Matters have got even worse because some of the other cereals, notably maize, are being diverted to bio-fuel production as a response to spiralling crude oil prices.

The worst-affected, predictably, are the low-income, food-deficit countries, mostly in sub-Saharan Africa, who face an unaffordable 25 per cent rise in their food bill in just one year. India cannot remain unscathed; there has already been controversy over expensive wheat imports, and the government has been forced to jack up wheat procurement prices quite sharply in order to feed the public distribution system, thereby increasing the food subsidy bill.

On top of that, the lack of winter rains has affected wheat sowing in unirrigated areas; even in irrigated tracts, farmers have not expanded the acreage under wheat despite the record Rs 250 per quintal hike in procurement prices.

Sharp price swings are not uncommon in agricultural markets but high prices rarely last beyond a season or two. The situation is different this time, for the uptrend in wheat prices began in early 2006, and has not only endured but tended to accentuate, leading to some of the biggest price leaps in recent weeks.

Indeed, the price surge has not remained confined to cereals, it has got extended to milk and meat and has coincided with soaring freight rates. Climate change-induced factors like droughts and floods are largely responsible for this state of affairs, though there are other reasons as well.

The upheaval in wheat prices, for instance, has been caused largely by a two-year drought in Australia, dry weather in Ukraine and unfavourable growing conditions in Russia, besides untimely rains in the US. Most of these are wheat-exporting countries.

Consequently, world cereal stocks are projected by the UN's the Food and Agriculture Organisation to drop this year by 17 million tonnes to 142 million tonnes, the lowest level in 25 years. So are, of course, the stocks of other cereals traded in the global food bazaar. It is no wonder then that FAO has warned of a fall in the per capita consumption of cereals, especially in the least developed countries, where the bulk of the world's 852 million hungry people lives.

While India continues to import wheat at today's record prices -- in the process fanning the global price rise -- it has no escape from taking measures to boost domestic output, which in the case of wheat has been either stagnant or growing slowly in recent years.

One inevitability will be even more attractive prices for farmers. Food price inflation is going to be the inevitable result, and/or a sharp spurt in the food subsidy bill. It is not going to be a free lunch for anyone.

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