Solving the food crisis: the causes and the solutions

Farmers in the Global South could not compete with grain sold at prices below the cost of production and were driven out of business. The rural poor were then available to work for starvation wages on plantations growing low-profit agricultural exports including bananas, cotton, tobacco, coffee, sugar, and beef, or high-end, non-traditional export crops, like snow-peas and flowers. As SAPs destroyed the supports for national food production, southern countries lost the ability to feed themselves.

The spread of Free Trade Agreements (FTAs) and the rise of the World Trade Organization (WTO) ended any aspirations to food security the Global South might have had.

The WTO was formed in 1995 for the global enforcement of market-led economic development. The WTO’s Agreement on Agriculture (AoA) restricts government power to establish agricultural policies. The WTO’s “disciplines” (areas of enforceable deregulation) include domestic supports, export subsidies, market access, tariffs, and quotas - all the mechanisms needed by nations to regulate their farming sector and ensure a stable food supply.

The WTO has a number of obscure rules kept in colored “boxes” that allow the US and EU to exempt their subsidies from WTO disciplines. This double standard privileges northern grain, seed and chemical companies seeking to dominate southern markets.

Under the banner of “comparative advantage,” many poor countries that had previously been self-sufficient in food were turned into net food importers - as 70 per cent of developing countries now are. Forty years ago the Global South as a whole produced annual trade surpluses in food of $7 billion. Today the southern food deficit has swelled to $11 billion per year.

These processes put poor countries in a very vulnerable position for the time when biofuels and other factors brought about a massive price swing for agricultural commodities on the international market.

The renewable fuel targets of the US Energy Acts of 2005 and 2007 mandated the consumption of 4 billion, 7.5 billion, and then 36 billion gallons a year of agrofuels. This obligatory market - sweetened with tariffs and subsidies that prop up half of ethanol’s wholesale market price - has led to a worldwide “agrofuels boom”.

Between 2001 and 2007, the amount of corn used in US ethanol distilleries exploded from 18 million tons to 81 million tons. In 2007, the jump in ethanol production more than doubled the average annual growth in demand for the world’s grains that took place between 1990 and 2005. At this rate, half of the US corn harvest will be diverted to ethanol production by the end of 2008.

As more corn is planted, it displaces wheat and soybeans, increasing their market prices. Since US corn accounts for some 40 per cent of global production, US agrofuel expansion impacts global markets for all food grains, and exacerbates food-price inflation worldwide.

The agrofuels boom collapses the food system with the energy economy. Ever since the Green Revolution, cheap oil has driven a fuel-intensive industrial food system. Rising petroleum costs makes industrial farming more expensive and raises the cost of transporting food the 1,200-2,000 miles it frequently travels through the global food system. At the time of writing, the price of oil is a record US$129 a barrel. Freight costs are up 80 per cent since 2006 and fertiliser prices spiked at 150 per cent. Now, thanks to agrofuels, food not only depends on oil, it competes with fuel.

Just how big agrofuels’ direct effect is on food prices depends on who is talking. President Bush says it’s responsible for about 15 per cent of the rise in costs. The US Department of Agriculture claims 20 per cent. The World Bank asserts that the 60 per cent rise in corn prices from 2005-07, “is largely because of the US ethanol program, combined with market forces.” What is clear is that both direct and indirect effects of agrofuels on the food system are global, profound, and highly destructive.

Our world leaders have been quick to offer a spate of solutions: A “New Deal” from the World Bank, another “Green Revolution” from the Bill and Melinda Gates and Rockefeller Foundations, and $970 million in emergency food aid from the US. Billions more will be spent, and it’s a lucrative business. As the crisis has unfolded, seed, chemical and grain companies are basking in the glow of the agrofuels boom and posting profits 60-80 per cent higher than last year.