The world is suddenly aware that food prices are climbing, consumers are feeling it and the number of people who cannot afford to adequately feed themselves and their families is becoming a major concern once again. Why this sudden awareness, where is it going to lead, and what do we need to do to address the core problem?
Agriculture is arguably our most important activity. Try not eating and then see if your friendly GP can provide a pill to fix the problem. Agriculture though is more than the way we produce food, it also produces fibres, fuels and medicines - particularly throughout the developing world.
A broad definition of production from land resources includes grazing industries, forestry and what used to be part of agriculture but are now more recreational pursuits, for example, horses (I am writing this while in Inner Mongolia where this dependence still exists).
All these sectors are competing for common resources. If you then follow through the products of agriculture, their processing, the service industries that support them and final consumption the collective value of these activities would come close to half the economy in developed countries and more in others.
Unfortunately national statistics and often treasurers seek to play down the role of agriculture and claim it is almost a trivial part of the economy and one they don’t have to pay much attention to. They typically get a shock when droughts and, or rising food prices suddenly seem to be affecting more than that supposed trivial sector.
The shocks of rising food prices are only understandable when you appreciate that agriculture and its products are integrated throughout society; it is the core activity. As the costs of critical inputs like fuel rise, exacerbated by climate change, they affect all parts of the chain.
Typically though, of the price rise experienced by end consumers, only a small fraction gets back to farmers. Unfortunately we have been hearing cries about reducing farmer incomes to solve this problem (supermarkets often want to blame farmers) when any analysis shows they are merely responding to their increased costs and, or adverse seasonal conditions and they rarely pocket the main part of price increases.
Some still want agriculture to be a peasant activity. It becomes somewhat odd when consumers complain about rising prices in restaurants and blame farmers, when all those involved in the food chain are increasing their prices, including the restaurateur.
Many input costs for agriculture are on the rise. Australian agriculture requires phosphate, but cheap sources are declining. Fertilisers require energy to produce. With rising energy costs these inputs will only continue to become more expensive. The same applies to chemicals used for pest and disease control.
Water is becoming a scarce resource: better pricing of the cost of water will lead to more rational and efficient use, but also to cost increases.
On more marginal land cost increases can result in the cessation of food production unless farmers can achieve a price increase to cover these costs. This is particularly so when combined with more variable climates, thus reducing the amount of food for markets
Current media attention is being directed to the agricultural products being diverted into biofuels. In China, the USA and some other countries this has had an effect on the price of food for other uses. Most food crops, though, are not being used for biofuels. The Chinese have taken steps to stop the diversion of maize, wheat and other cereals into biofuel, requiring the use of sorghum and other plant species that are more used for animal feed - the effect could then be more on prices for animal than plant products.
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