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'Major new pressure on food prices when the world picks up' |
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February 2010 |
Jannie de Villiers, executive director of SA's National Chamber of Milling, believes that the current world recession is resulting in grain prices being in a lull, but if growth returns major pressure on food prices throughout the world is again expected.
He said in an address to the International Grains Symposium, held
recently in Pretoria by Cereal Science and Technology-SA and the
International Assoc for Cereal Science and Technology, that the energy
crisis in the world had triggered the development of the biofuel
industry, which had linked crude oil and grain prices permanently.
"Crude oil prices are mainly driven by world economic growth and the
impact of this development internationally was thoroughly experienced
in the food price spikes seen in 2007/2008.
"The current world recession suppressed the demand for oil and other
commodities which, in turn, lowered the demand for grains;
simultaneously there was an increase in world production. This range of
events has caused a calmness between two storms."
The FAO Food Price Index was a clear indication of this calmness between two storms, he said.
"The major concern now is that despite this current calm period, cereal
production in the world has recorded new record highs. This means that,
should the demand for food and processed food products pick up together
with world economic growth, we expect major pressure on food prices
throughout the world again. This elevates the issue of food security as
a very important cornerstone for taking the world forward."
De Villiers said: "Very careful consideration should be given to using
foodstuffs for biofuel purposes in the developing world ... while we
are not food-secured; it is difficult to imagine using food to
manufacture fuel for the ever-thirsty developed world."
Food security, he said, is defined by the availability of food - the
responsibility of the free market. This entails ensuring enough, safe
food to be physically accessible to all.
The second leg of food security is affordability - the responsibility
of government, which must provide a policy environment whereby
competition will drive down prices, and economic growth and job
creation to provide the means to buy the food and a social safety
network to assist those in distress. Lastly, affordability also
necessitates infrastructure provision by government to ensure a proper
support system for the market.
Food self-sufficiency, however, has to do with surplus production, no
imports, and exports of surplus food. In SA the self-sufficiency index
(production as percentage of consumption) for white maize over the past
10 years has been 131%. For yellow maize the self-sufficiency index for
the same period was 116% but, for wheat the self-sufficiency index is
only 77%.
De Villiers said the free market system has encouraged the world to
react to high food prices by increasing production to new records.
"It is proposed to allow the market forces to react this way in order
to ensure sufficient quantity of food to the world," he said.
But free trade and minimum government intervention were currently under
huge pressure following the failure to make available sufficient food
during the 2007/2008 price crisis.
"The leaders of the G8 have acknowledged their failure in investing in
agriculture to ensure food security to the world. The share of official
development assistance to agriculture has dropped significantly falling
from a peak of 17% in 1979 - the high of the Green Revolution - to a
low of 3.5% in 2004.
"The leaders of the G8 industrial countries have now promised to
rectify this situation within a short period of time. Only time tell
will whether or not they have lived up to these promises!"
Infrastructure related to transportation in SA had deteriorated
substantially. In the 1980s, 85% of all grains were transported by rail
(which is 20-30% less expensive than road transportation) and the
processing sector had been developed for rail intake. The current
percentage transported by rail is about 30%.
"These inefficiencies in our rail system are adding substantial cost to the price of basic food products," he said.
Elsewhere in the developing world, there was also "a desperate need to
improve infrastructure to ensure food security". For instance, recently
it was reported that large parts of Kenya ran out of maize following a
failure in their rail system.
He said trade and tariff policy in SA also affects food security
dramatically - "the substantial increase in non-tariff barriers is not
conducive to food security when nations promulgate quantitative
restrictions in an effort to feed themselves".
National Chamber of Milling: Tel 012-663-1660;
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