The lethal business of hunger

Banyat Thongdeenok, a 54-year old rice farmer in Chiang Rai in northern Thailand, is an angry man. Last year he received 10,000 baht for one tonne of unhusked rice, whilst this year the rice mills are paying him only 9600 baht (USD 296). «Farming costs have risen. How can it be that our crop is worth less this year», he demands to know. He finds this all the more incomprehensible seeing that the consumer price of rice has tripled on Thai markets in the space of a year. He joined a thousand other farmers on 12 May in blocking country roads to protest against the low purchase prices.

Farmers in many countries are experiencing the same thing as Banyat Thongdeenok. At the Civil Society Forum on the food crisis held in parallel to the FAO Summit in Rome, several farmer organisations from developing countries reported that they were unable to benefit from the rising world food prices. Instead, whilst the cost of fertilisers and seeds were exploding and many farmers in the South could no longer afford them, the purchase prices being paid to farmers remained the same or were even falling.

World market prices are rising. The price of wheat has risen 130 per cent over the past year, and the price of rice has doubled during the first three months of this year alone. And this despite a record 2.3 billion-tonne cereal output in 2007, or 4 per cent more than the previous year. Since 1961, world cereal production has tripled whilst the population has «only» doubled. What is absurd is that although more cereal per capita is being produced, some one billion people can no longer afford it. At the same time, roughly 50 per cent of world cereal production is being used as animal feed and an increasing amount is also going into biofuels production.

Background to the crisis

Today's food crisis can be attributed to two principal long-term factors, namely the green revolution agricultural model, and the policies of the World Bank, International Monetary Fund (IMF) and World Trade Organisation (WTO):

• In recent decades, many countries have had to abandon their autonomous national agricultural research and food policies. Since the 1970s, the IMF and World Bank have imposed radical liberalisation and structural adjustment reforms on them, and these have been further buttressed by the WTO as well as through bilateral free trade and investment agreements.

• The resulting agricultural and economic policy has neglected farmers in many developing countries. Most countries have had to give up important agricultural and price stabilisation instruments. They were forced to open up their markets, give foreign investors access to land, and to dispose of strategic food reserves. This opened the floodgates to global agricultural industry and speculation. Local markets are now being flooded with subsidised agricultural products from industrialised countries. Instead of producing food for local markets, farm products and commodities are being produced for industrialised countries. The result is that some 70 per cent of all developing countries are now net food importers and find themselves entirely at the mercy of world market prices.

• Industrialised countries have trimmed their agricultural budgets for research, development and advice, and credit possibilities for farmers as well as contributions to international organisations have been curtailed. Private firms have taken over what used to be government functions. They are forging ahead with transforming peasant farming into an industrial, energy-intensive agricultural model. In the hands of large corporations, seeds are being engineered to be chemical-dependent and to require regular watering, and are being protected by patents. The new seeds are not suited either to poor soils or to smallholdings.

• Cereal has now become an object of speculation by large firms and investment funds on deregulated markets. The share of speculative investments in commodity futures trading – in other words in markets were investors do not physically buy or sell products but make bids only on future price movements (as is precisely the case for wheat or rice) – has risen dramatically from USD 5 billion in 2000 to USD 175 billion in 2007. This means that today as much as one-half of the wheat being traded on the Chicago grain exchange is already controlled by investment funds. On Thailand's commodity futures exchange for example, the number of futures transactions in rice has tripled in one year. Half of these transactions are conducted by hedge funds and other speculative investors.

The winners

Alongside investment funds, other players in the agricultural production and distribution chain have also profited from the crisis. Cereal traders have done particularly well. Hence, Cargill, the world's largest cereal trading firm has seen its profits rise 86 per cent for the first three months of 2008. Already in 2007 when the crisis began, grain dealers were able to increase their profits massively. Cargill was up by 36 per cent to $2.34 billion, ADM by 67 per cent to $2.2 billion, Conagra by 30 per cent to $764 million, Bunge by 49% and Singapore's Noble Group by 92 per cent.

Fertiliser manufacturers too are announcing soaring profits. The Mosaic Corporation, owned by Cargill and controlling a substantial share of world potash and phosphate reserves, saw its profits more than double over the past year. The world's biggest potash producer, Canada's Potash Corp, made a profit of over USD1 billion in 2007, a 70 per cent increase on the previous year.

Lethal cocktail

The deeper roots of the food crisis lie in the lethal cocktail consisting of years of pressure to liberalise and growing control by corporations, to which must be added the expectation of quick profits, and worsening climatic conditions.

That explosive mix has led to soaring prices and hence astronomical profits. At the same time, it spells hunger and destitution for millions of human beings. The 850 million people suffering from hunger have been joined by at least another 100 million «new poor» who can no longer afford the expensive food items.

Demonstrations and riots against high food prices in almost 40 countries have startled many governments. Somewhat unsure themselves, they gathered in June at the FAO World Summit in Rome. They all agreed that something needed to be done and fast; yet there was the greatest disunity as to how to go about it.

What should be done?

The crisis is profiting both the agro-industry and cereal traders, and both are keen to continue and step up the same policy as hitherto – more hybrid and genetically modified seeds, more money for fertilisers and more market. Many governments are yielding to them, as they know nothing other than the call for market opening and new technologies.

On the other side are farmers' organisations, non-governmental organisations and agricultural experts. For them – given the failures of the industrial agrarian system – the only way forward is a new beginning, starting at the level of the peasant base. Small farmers still produce the bulk of all food and possess well-tried and sustainable production models. Farmers' organisations and their allies have clear ideas and are calling for a radical turnaround in global agricultural policy:

• The human right to food should be upgraded to the status of binding international law that allows individual countries, in the pursuit of food sovereignty, to protect their food security and self-reliance with appropriate measures, to remove the control over seeds and genetic resources secured by patents, and to promote multifunctional agriculture.

• Agricultural policies should be geared to the needs of small farmers, they should promote the biodiversity and sustainable production methods and strive towards independence from petrol-based and environmentally damaging auxiliary materials.

• Governments should use land reforms to guarantee reliable access to land and other resources and put an end to the policy of selling off national resources and land.

• Government-backed agricultural research, counselling and credits should be strengthened by means of new investments and a stronger orientation toward sustainability, as was recently recommended by the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD).

• Commodity futures trading as well as speculative investments in foodstuffs and agricultural produce must be regulated and taxed.

• The international community should decide to place a moratorium on agrofuels made from foodstuffs instead of subsidising them with tax advantages and customs tariff waivers.

• The international agricultural organisations (FAO, IFAD, WFP, CGIAR) should be restored to United Nations supervision and to the democratic principle of «One nation – one vote», and should work better together.

Miges Baumann, Bread for all

Miges Baumann is responsible for Development Policy at Bread for All, an Alliance Sud member organisation.