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Price Volatility, Food Crisis and the Way Forward

In the midst of the chaos being witnessed across the Arab world, what is being ignored is the role food inflation has played in triggering these protests.
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In the midst of the chaos being witnessed across the Arab world -- Tunisia, Algeria and now Egypt -- what is being ignored is the role food inflation has played in triggering these protests. It is the collapse of growth economics -- reflected in the way food prices are manipulated through speculation -- that is building anger across the developing world.

Whether the world will witness a repeat of the 2008 food crisis -- when 37 countries faced food riots -- is yet to be seen. But what is clear is that the international community hasn't drawn any lessons. Business leaders from 17 private companies announced at the World Economic Forum in Davos the launch of a global initiative -- New Vision for Agriculture -- that sets ambitious targets for increasing food production by 20 percent, decreasing greenhouse gas emissions per ton by 20 percent, and reducing rural poverty by 20 percent every decade.

The 17 agribusiness giants include Archer Daniels Midland, BASF, Bunge Limited, Cargill, Coca-Cola, DuPont, General Mills, Kraft Foods, Metro AG, Monsanto Company, Nestlé, PepsiCo, SABMiller, Syngenta, Unilever, Wal-Mart, and Yara International.

Well, this shouldn't come as a surprise. Every global crisis provides an opportunity for business. Multinational giants are quick to grab it. In the days to come, I am sure political leadership across the world will welcome the initiative not realizing that it is the industrial farming model that has created the global food crisis in first instance -- soil health devastated, excessive mining of groundwater has dried aquifers and chemical pesticides have contaminated the food chain. Green Revolution has already run out of steam, leaving behind a trail of misery and terrible human suffering.

Over the years, an unjust world trade has pushed farmers out of agriculture. In the past 30 years or so, including the years of World Trade Organization, 105 of the 149 third world countries have already become completely dependent on food imports. With food prices conveniently manipulated through commodity trading and the entire food chain gradually slipping into the hands of a handful of agribusiness giants, the North will soon emerge as the world's bread basket. The South is being reduced to a begging bowl.

Rich countries have already moved in to grab fertile land in the developing world. I call them 'food pirates'. Foreign direct investment is moving swiftly where land is available, investing in crops that can be shipped back home. And where there are restrictions on the purchase of farm land, like in India, investment banks and companies are getting into contract farming -- producing food for export. More of the same therefore will only acerbate the global crisis. And this time I am sure it will be beyond redemption levels. I don't know why the political leadership fails to see through the destructive pathway.

But let us first find out whether there is food shortage. The UN tells us that the global population is around 6.7 billion and we produce food for 11.5 billion. In simple words, the world produces food for almost double the population. In terms of calories, while a person requires an average of 2,600 calories per day (you can even take the upper figure of 3,000 cal/day), 4,600 calories are available per person.

Why should the world be faced with recurring food crisis when there is abundance of food? It is only because of our failure to manage food supplies in a just and equitable manner. The crisis therefore is not of production but of access and distribution. I only hope that the G-20 for once gets down to food management ensuring that the available supplies are equitably distributed. It has to be known that even in 2008, there was no shortage of food to create a crisis of unprecedented magnitude. It is well known how investment companies and agribusiness giants made a killing on the stock market while millions went to bed hungry. Why can't the G-20 take responsibility to put an end to arguably the most pressing problem confronting the planet.

We have seen the collapse of Soviet Union -- which was triggered by a deep rooted food crisis. More recently, the world has managed to tide over the 2008 food crisis, but once again food inflation is showing its ugly head. According to FAO, the 2011 food index has already surpassed the peak achieved in 2008.

Behind the chaos lies the volatility in prices. And it is here that the business leaders remain quiet. Take for instance the steady rise in oil prices. In 2008 it had almost touched $140 a barrel and we were told that it was because of rising demand from the emerging economies. The Indian Prime Minister Manmohan Singh had at one time remarked that he wasn't sure whether the oil price rise was because of rise in demand or because of a shortfall in production. Both his assumptions were incorrect. It was simply because of speculation. By the end of 2008, the prices had begun to drop. Ultimately oil prices came down to almost $35 a barrel. Did the global demand drop drastically at that time? The answer is no. So, why the volatility in oil prices?

Oil prices are again on the rise, crossing $90 a barrel.

I am also baffled at the frenzy being witnessed in gold prices. On a TV show in India the other day my views were sought on commodity trading. This was a one hour programme on future markets. I told the studio audience (which was comprised of commodity traders) that you guys are primarily responsible for gold prices hitting the roof. There is no dramatic shortfall in production or a rise in the demand for gold. Just because a few of you are making money by speculating on prices, people are being made to pay through their nose.

With food being branded as a commodity, the futures market is busy exploiting the gullible masses. While people are feeling the heat and pain, the mainline media has very cleverly ignored the fundamental reasons behind the global food crisis. At the global level, neither the G-20 leaders nor the World Economic Forum has had the courage to accept where the fault lies. In fact, both the political as well as the business leadership is looking at the business opportunities that the crisis offers.

But there is hope. As we enter 2011, the script for a futuristic agriculture, which brings back the smile on the face of farmers, without leaving any scar on the environment, is being rewritten. I am drawing the attention of political as well as the business leadership to a sustainable pathway that does not need the involvement of giant multinationals. Community movement taking control of their destiny and showing a viable path that sustains livelihoods and protects the environment.

What began as a small initiative some six years back in a non-descript village in Khamam district in the southern State of Andhra Pradesh in India, has now spread to over 2.8 million acres. I remember when I first talked about the miracle brought about in village Pannukula in Andhra Pradesh, many thought I was simply trying to romanticize agriculture. How farming can be done without the use of chemical pesticides, and that too without any drop in yield, I was repeatedly asked. But in the past six years, farmers' enthusiasm for a farming system that does not use pesticide and fertiliser has steadily grown.

Ten years from now, in 2020, when we try to look back, Indian agriculture and for that matter global agriculture can be transformed into a healthy and vibrant system where farmer suicides have been relegated to history, where distress and despondency has been replaced by the lost pride in farming, where agriculture becomes sustainable in the long run, and does not add on to global warming. Such a system can never lead to food riots.

"We need a revolution," UN Secretary General Ban Ki-moon had told a panel at the World Economic Forum "on how best to make the global economy sustainable." The present economic model surely is an 'environmental suicide'. It is time to reverse the clock, and Andhra Pradesh provides a ray of hope.

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