The world food crisis and the capitalist market (place)
By Alex Lantier April 2008
POSTER's NOTE: Read the article below, you'll see that you need to start a garden, buy seeds, stock up on food, medicine and other essentials while you still can. This dangerous epoch coming is the real deal. This is no Y2K that doesn't happen. We are just seeing the start of the worst depression that has ever hit the modern world and things are going to go south fast. The main reason is that the gov needs to create MEGA INFLATION of prices to shoot their own debt back into lower digits. So Bread today that is 4$ is 50$ tomorrow. Get a grain grinder, mill NOW. Stock up on HORSE FEED! Wheatberries. Rice. Millet. It is finel to send e-mails and read up on gardening books but if you aren't taking real steps right now to til the soil, grow food, your loved ones will not be ready for the famine and inflation that is coming & you will be roadkill! There will be no one that comes to your rescue. This is going to make Hurricane Katrina look like a school picnic.
As the June 3-5 Conference on World Food Security of the United Nations’Food and Agriculture Organization (FAO) began in Rome, FAO Director Jacques Diouf said of the explosion of food prices: “It is touching every country in the world. We have not only seen riots and people dying, but also a government toppled [in Haiti], and we know that many countries...could tilt to one way or the other depending on the discontent or satisfaction of their population.”
With these words, Diouf expressed the growing concern of governments and ruling elites internationally over the potentially revolutionary implications of the upward spiral of prices for basic food staples, which has already sparked a social and economic crisis of global dimensions. In recent months, strikes and demonstrations against rising food prices have occurred in many parts of the world. These initial struggles have exposed the
contradiction between the elementary demand of the world’s masses for affordable food and the workings of the capitalist market.
Diouf called for donations of US$30 billion to be invested in world agriculture. Even were this sum to be allocated, it would not begin to address the sources of the current crisis, which lie in economic and political processes of privatization and price speculation that have unfolded over the past three decades and are bound up with the globalization of capitalist agriculture.
With consumers increasingly unable to pay world market prices for food,
national governments are compelled to intervene to
avert famine and revolt. These interventions, while offering at best
partial resolutions to local problems, only increase difficulties
elsewhere. Exporting states are limiting their external sales in an attempt
to shield their own populations from the worst of the
price rises, while extorting higher prices from importing nations by
The most devastating price increases are those for the basic food grains.
These are relatively non-perishable and therefore
widely traded, and make up a third or more of daily caloric intake,
especially in poorer countries. They are also used
extensively in other parts of the food chain—e.g., for livestock feed and
sweeteners—thus affecting prices for meat, eggs, dairy
products and various processed foods.
Wheat prices in the US—the largest exporter and one of the few not imposing
export restrictions—remain at historically high
levels after an extraordinary spike in February. On April 28, Newsweek
wrote of the commonly used hard red spring wheat
variety: “For 50 years it traded at around $2 or $3 a bushel on the
Minneapolis futures exchange, which specializes in hard red
spring wheat. In September, the price was $7. In February, that price
peaked for a day at $24, as the market panicked over
low supply. ‘It wasn’t clear whether there would be enough to finish out
the year,’ says Bill Lapp, an agricultural economist in
Omaha. The current price is down again, but only to $11.24.”
Other major exporters are also charging record prices or have ceased
exports altogether. Prices at the main European wheat
export port of Rouen, near Paris, were EUROS 280 per ton in April, up from
EUROS100 in 2006. Russia has imposed a 40
percent export tax on wheat, and a large December 2007 Russia wheat sale to
Egypt fetched a price of roughly US$11.80 per
bushel. Argentina and Kazakhstan have both banned wheat exports. Kazakhstan
cited the “need to assure the country’s food
security, and not permit negative consequences for the domestic market, in
conditions of a significant rise in prices on the world
grain market and a shortage of food grain in the world.”
The world rice market has been even further destabilized. In part, this is
because it is relatively small—only 7 percent of the
global 2006-2007 crop of 420 megatons (Mt) was traded internationally,
versus 19 percent of the 592-Mt 2006-2007 crop of
wheat—and therefore more vulnerable to supply shocks.
Also, far more of the world’s main rice exporters (Thailand, Vietnam,
India, Pakistan, the US, China and Egypt) are poorer
countries, where the state fixes low domestic prices for the crop. These
countries have imposed export restrictions as well, as
rising world prices give rice processors an incentive to export large
quantities of rice to higher-priced international markets.
India, Vietnam, China and Egypt all announced rice export bans or
restrictions in April. Forbes magazine quoted Vietnamese
Industry Minister Nguyen Thanh Bien as saying the measure would “reduce the
quantity but increase the value and export
revenues, while ensuring food security and serving the state’s interest.”
These bans leave Thailand as the largest exporter by far.
Thai 100 percent B-grade white rice, the industry benchmark, passed
US$1,000 per ton on April 24, up from US$383 per ton
Thai exporters could further raise prices if Iran and Indonesia,
traditional rice importers that have until now waited for prices to
fall, begin purchasing rice. They told the International Herald Tribune,
“If Iran buys rose from Thailand, Thai 100 percent
B-grade white rice would hit $1,300 a ton.” These price increases have
particularly hurt poorer countries in sub-Saharan
Africa, the Middle East and the Americas, which represent about half of
world import demand.
Corn prices have also exploded. Prices in the US—which has about 40 percent
of world production of roughly 700 Mt, and
60 percent of the world export market—jumped to US$6.61 per bushel on May
6, on supply fears due to rainy weather during
the corn-planting season and rapid demand growth from ethanol biofuel
plants. This is up from US$1.90 per bushel in 2005.
China, another major producer and traditional exporter, faces high demand
for animal feed as well as from ethanol and corn
syrup plants. It may end up importing some corn by the end of the year.
In a recent analysis of rising food prices, Joachim von Braun of the
International Food Policy Research Institute (IFPRI),
calculated average prices for grains since 2000, weighted by volume
exported from different exporting ports. He found that the
price of most grains remained roughly constant between January 2000 and
January 2004, but in the ensuing period until January
2008, increased from roughly US$150 to US$400 per ton (for rice), US$120 to
US$410 per ton (wheat), and US$100 to
US$200 per ton (corn).
He noted: “In 2007, the international food price index rose by nearly 40
percent, compared with 9 percent the year before, and
in the first three months of 2008 prices increased further, by about 50
Political developments indicate the bitter struggle for advantage occurring
between different national bourgeoisies, under
conditions where the global economy has been destabilized by rising oil
prices and financial turmoil in the wake of the US
On May 8, the Financial Times reported that China, Saudi Arabia and Libya
were in talks with agricultural countries in Africa,
South America and eastern Europe to buy tracts of agricultural land on
which they could grow food to guarantee their “food
On May 2, Thai Prime Minister Samak Sundaravej proposed that Thailand,
Vietnam, Burma, Laos and Cambodia form a rice
cartel, along the lines of the oil cartel OPEC, to charge higher prices for
rice on world markets. Thai government spokesman
Vichienchot Sukchokrat explained, “Though we are the food center of the
world, we have little influence on the price. With the
oil price rising so much, we import expensive oil but sell rice very
cheaply, and that’s unfair to us and hurts our trade balance.”
However, international criticism ultimately forced the Thai government to
abandon the idea, despite support from the Laotian
Smuggling and hoarding are surging in producing countries, as owners of
grain try to export it to take advantage of higher prices
on international markets. Forbes published a May 1 piece entitled “A Black
Market Grows in Rice,” describing smuggling’s
lucrative investment potential.
It advised: “The biggest opportunities may be in China, the world’s largest
rice producer, where grain prices are among the
lowest in the world.... Reports of rice smuggling have surfaced this week
in areas all along China’s sprawling borders, from
Yunnan province next to Vietnam, to northwest Xinjiang, which borders the
central Asian states of Kazakhstan and
Kyrgyzstan, all the way to Guangdong, a prosperous southern Chinese
province that sources 60 percent of its rice from
elsewhere in the country.”
Though not yet consciously unified, the response of the international
working class has shown the world scale and objectively
integral character of its struggles and demands. Strikes and protests have
spanned the globe.
South Korean media reported a rare street protest in North Korea in March
2008 against a 60 percent reduction in
state-distributed rations and the execution of three North Koreans who
illegally crossed the border into China to search for
food. In China, there have been reports of strikes against factory owners
increasing food prices at company stores. Food
inflation in the country has reached 21 percent so far in 2008, according
to China’s National Bureau of Statistics. Rice prices
are reported to be fairly stable due to state subsidies, but prices for
pork, cooking oil and vegetables rose 55, 34 and 30
percent, respectively, in 2007.
May Day saw large-scale anti-inflation demonstrations by workers across
Southeast Asia. Thousands marched on the
Malacanang presidential palace in Manila in the Philippines, the world’s
largest rice importer, where rice prices have doubled in
recent months. Fifteen thousand workers marched in Jakarta, Indonesia, amid
sharp increases in rice, oil and soy products. In
Thailand, 2,000 workers demonstrated outside government buildings in
Bangkok, with posters declaring: “Expensive rice
prices, cheap labor wages—How can laborers live?”
In the Americas, women in Lima banged pots outside of Peru’s Congress on
May Day to demand more government subsidies
for eating halls for the poor. On March 13, protestors banged pots outside
the Central Reserve Bank of El Salvador to protest
rising prices, amid reports that a basic basket of food items now costs
$160, versus $128 in 2004. The country’s minimum
wage is $162.
Already in February 2007, Mexico City saw a 75,000-strong “tortilla
protest” over the price of corn tortillas.
On April 12, the Haitian government fell after 10 days of massive protests
against a 40 percent rise in food prices and the
doubling of the cost of imported rice. These protests turned into violent
confrontations with police forces and UN
“peacekeepers” occupying the country, with at least five people killed and
several UN troops injured.
In the Middle East, rising food prices have brought a number of
long-simmering social and political conflicts into the open. Riots
shook southern Yemen in early April, with the government deploying tanks
against protestors demanding jobs and pay raises in
al-Dalea. Wheat prices in the country had doubled over the last year, and
rice and vegetable oil had increased by 20 percent.
Foreign workers in the oil and construction sectors of Saudi Arabia and the
UAE launched unprecedented strikes in March
2008 for higher wages, amid rising rent and food costs. More than 600 such
workers were arrested and deported from the
UAE in early April.
The outbreak of fighting between sectarian factions in Lebanon in early May
followed closely on the heels of a general strike
called by trade unions over price inflation of food and other goods.
In Egypt, a major wheat importer, a textile workers’ strike over food
prices at Mahalla al-Kobra on April 6 turned into a
confrontation with police, who forced workers to return to work. Police
also arrested activists who had called for a general
strike in Cairo, but according to international media, most schools and
universities in Cairo were deserted. Workers
complained of long lines to obtain state-subsidized bread, under conditions
where non-subsidized bread often costs 10 to 12
times as much. Other staples such as rice and cooking oil were reported to
have doubled in price.
In South Asia, a general strike against rising food prices hit the Indian
metropolis of Calcutta on April 21. On April 12, 10,000
textile workers rioted against high food prices in Fatullah, near Dhaka in
Bangladesh, a major rice importer. In Afghanistan,
workers blocked the main Jalalabad-Kabul road to demand lower food prices
on April 22.
In Europe, rising prices for staples such as pasta, bread and dairy products have fueled strikes this year, including in the Scandinavian healthcare sector and the French retail industry. A May 1 rally in the Russian city of Chelyabinsk attracted 14,000 workers, who chanted, “Salaries must rise higher than prices.”
In sub-Saharan Africa, protests have hit Mozambique, Senegal and the Ivory Coast in recent months. Trade unions in South Africa and Nigeria struck in May against higher food and electricity prices. The most widely publicized protests this year were February’s demonstrations in Cameroon and Burkina Faso, which left 40 wounded and five dead after confrontations with state security forces.
The central problem underlying the current food crisis is not a physical lack of food, but rather its unaffordability for masses of people due to rapidly increasing prices. Among the immediate factors driving the rapid worsening of the food crisis, a major role is played by the explosion of speculative investment in basic commodities such as oil and grain, itself bound up with the difficulties facing US and world financial markets and the decline in the US dollar. Rampant speculation by hedge funds and other big market players has increased costs, encouraging private firms to further bid up prices in a competitive drive to amass as much profit as possible.
Official statistics disprove the assertion that there is not enough food for everyone. According to 2008 US Department of Agriculture figures, the average per capita consumption is 2,618 calories per day in developing countries and 3,348 in developed countries, compared with a recommended minimum of 2,100 calories. However, profound disparities in access to this food, stemming from poverty and social inequality, condemn many millions to hunger.
Time magazine quoted United Nations World Food Program official Josette Sheeran as saying, “We are seeing food on the shelves but people being unable to afford it.”
Commodity speculation - World market prices for agricultural commodities have surged precisely as big investors have pulled out of traditional investment and credit markets, largely as a result of the bursting of the US housing and credit bubbles in 2007. Speculative capital has gone in search of other profitable investments.
A major avenue for such speculative capital is commodity futures. This essentially involves financial bets that prices of basic goods such as oil, grains and metals will continue to rise. Since these futures are used as benchmarks for actual trading in the physical commodities, their heady rise has helped sharply pull up market prices for the commodities themselves.
Recent congressional testimony by a US hedge fund manager, Michael Masters, sheds an interesting light on commodity futures speculation. He told Congress:
“In the early part of this decade, some institutional investors who suffered as a result of the severe equity bear market of 2000-2002 began to look to the commodity futures market as a potential new ‘asset class’ suitable for institutional investment. While the commodities markets have always had some speculators, never before had major investment institutions seriously considered the commodities futures markets as viable for larger-scale investment programs. Commodities looked attractive because they have historically been ‘uncorrelated,’ meaning they trade inversely to fixed income and equity portfolios [i.e., they do not necessarily fall, and instead tend to rise, when the bond or stock markets decline].”
Masters continued: “Mainline financial industry consultants, who advised large institutions on portfolio allocations, suggested for the first time that investors could ‘buy and hold’ commodities futures, just like investors previously had done with stocks and bonds.”
A commodity futures contract is an agreement between a buyer and seller to trade a given quantity of the commodity at a specified future time and place. The only negotiated element of the contract is the price at delivery, which varies over time on the market. First developed during the nineteenth century on Chicago grain exchanges, commodity futures were initially designed to allow farmers or other producers to lock in costs, avoiding financial losses from sudden swings in prices for key goods.
There is a long history of futures speculation. An investor correctly guessing that corn prices will rise can enter into a futures contract as a buyer, then pocket the difference between the price agreed on at the earlier date and the higher value of corn on the delivery date. Similarly, an investor believing that corn prices will fall can enter into a futures contract as a seller. This is called selling “short.”
To prevent mass speculation in futures from driving prices, the US Commodity Futures Trading Commission (CFTC) places limits on the amount of futures contracts an individual speculator can hold. However, according to 2007 congressional testimony by CFTC Director of Market Oversight Don Heitman, the CFTC has been making an exception to these regulations for Wall Street banks since at least the early 1990s. Now, hedge funds, pension funds or other major investors simply enter into swap agreements with these Wall Street banks to evade CFTC restrictions.
This speculation has taken on grotesque forms. According to the Chicago Board of Trade, less than 10 percent of their grain futures contracts are held by parties actually intending to trade grain. Big investors routinely seek to profit simply from buying futures contracts and, shortly before the due date of the contracts, exchanging or “rolling” them for futures contracts expiring later. This type of speculation is built on the premise that prices will rise, and gives big investors a powerful financial interest in higher commodity prices.
Funds worth tens or hundreds of billions of dollars each have been generating returns of more than 30 percent, as big investors control and profit from owning claims to ever-larger portions of the world’s food supply. The value of the two largest commodity indexes—the Standard & Poor’s/Goldman Sachs Commodity Index and the Dow Jones-American International Group Index—went from about $20 billion in 2002 to $110 billion in 2006, then to $170 billion in 2007 and $240 billion in March 2008.
As investment in commodity futures took off, the rise in food prices over the years 2000-2006 accelerated sharply. The International Food Policy Research Institute, a Washington, D.C., think tank, writes: “In 2007, the international food price index rose by nearly 40 percent, compared with 9 percent in 2006, and in the first three months of 2008 prices increased further, by about 50 percent.”
Bloomberg News wrote on April 28: “Commodity index funds control a record 4.51 billion bushels of corn, wheat and soybeans through Chicago Board of Trade futures.... Investments in grain and livestock futures have more than doubled to about $65 billion from $25 billion in November, according to consultant AgResource Co. in Chicago. The buying of crop futures alone is about half the combined value of the corn, soybeans and wheat grown in the US, the world’s largest exporter of all three commodities. The US Department of Agriculture valued the 2007 harvest at a record $92.5 billion.”
According to a June 6 report in the New York Times, wealthy investors are pouring billions of dollars into the acquisition of physical property—farmland, fertilizer, grain elevators and shipping equipment. Brad Cole, president of Cole Partners Asset Management, told the Times: “There is considerable interest in what we call ‘owning structure’—like United States farmland, Argentine farmland, English farmland—wherever the profit picture is improving.”
The Times matter-of-factly explained the investors’ strategy of deliberately holding back grain from the market in order to reap higher profits from shortage and famine: “When crop prices are climbing, holding inventory for future sale can yield higher profits than selling to meet current demand, for example. Or if prices diverge in different parts of the world, inventory can be shipped to the more profitable market.”
The Times also quoted a commodities broker, Jeffrey Hainline, who pointed out the dangers of a catastrophic price collapse if speculative investors ultimately decide to pull out their money and sell off the assets they have acquired. Hainline said: “Farmland can be a bubble just like Florida real estate. The cycle of getting in and out would be very volatile and disruptive.” This type of outcome threatens not only farmland, but also the agricultural goods being acquired or traded on the futures markets.
Energy prices and biofuels - Rising energy prices, caused to a significant extent by futures speculation, are massively boosting costs for basic farm inputs. The International Food Policy Research Institute (IFPRI) notes: “Energy prices always affected agricultural prices through inputs, i.e., price of fertilizer, pesticides, irrigation and transport. Now, energy prices also affect agricultural output prices strongly via biofuel-land competition.”
Fertilizer prices have exploded, because the production of nitrogen fertilizers requires large amounts of natural gas, the price of which has been carried upward along with oil prices. According to a University of Illinois study, from 2000 to 2008, Illinois farmers’ fertilizer costs roughly doubled—from approximately $55 to $115 per acre of corn. Rising grain prices also result in rising costs for seed, which has roughly doubled from 2000 to 2008. Together, the two account for approximately two thirds of farmers’ input costs.
Transport cost increases, driven by soaring fuel prices, have particularly affected grains, which make up a large portion of world solid bulk shipping. According to the London-based International Grains Council, average shipping prices for a ton of heavy grains sent from the US Gulf Coast to Europe have gone from $44 to $83 over the last year; for the Gulf Coast to Japan, the jump was $65 to $165.
US support for the development of biofuels, largely driven by agribusiness interests, is further dragging food prices upwards. In a measure ostensibly aimed at reducing US energy imports, the Bush administration has mandated the use of corn-based ethanol as a fuel substitute, subsidizing it at the rate of $0.51/gallon. In 2007, ethanol production consumed 20 percent of the US corn crop—roughly 53 megatons (Mt) of corn, enough to feed 150 million people on a US-style, corn-intensive diet.
Projects to triple US corn-based ethanol production to 35 billion gallons by 2017 would further eat into world food supplies. These projects are going forward despite corn-based ethanol’s at best negligible energy and ecological benefits.
As corn fetches higher prices thanks to ethanol subsidies, and the US corn-growing region expands northward due to global warming, corn is increasingly replacing wheat in US farm planting. According to the Washington Post, US farmers are expected to plant 64 million acres of wheat this year, down from 88 million acres in 1981.
Speaking of the February 2008 wheat price spike, David Brown, chairman of the American Bakers Association’s commodity task force, told the Post: “With low stocks and a weak dollar, things fly off the shelf faster than they used to. There’s just not enough acreage coming back into production to replenish [US] stocks.”
The profit system destabilizes the food supply chain- Amid rapidly increasing inflation, the struggle for profit is disorganizing the entire supply chain, stretching from farm inputs to food sold in grocery stores, as major corporations vie for the lion’s share of the new revenues arising from price inflation.
Fishermen and dairy farmers throughout Europe are currently mounting strikes and protests as rising fuel and input costs lead to massive losses, while the prices paid to them by major food traders stagnate.
Especially for small farmers, the gap between rising seed and fertilizer prices and the market prices for their goods spells financial ruin. In the antiseptic terminology of bourgeois social science, the IFPRI notes that this “hinders production response” to higher prices and increased demand for food. In India, the peasantry has become massively indebted to agribusinesses, and tens of thousands of farmers have committed suicide over the last decade.
With little financial incentive to farm basic grains, farm producers worldwide are collectively planting too little of their harvests. Grain traders must therefore dip into reserve stocks to meet demand.
According to April 2008 figures from the US Department of Agriculture (USDA), from 2004 to 2008, world wheat stocks fell from 151 Mt to 110 Mt; world stocks of coarse grains (corn, oats, rye, barley) fell from 179 Mt to 129 Mt. Rice stocks increased from 74.4 Mt in 2004 to 76.5 Mt in 2005, but since have declined to 75.2 Mt.
The UN Food and Agricultural Organization (FAO) writes: “The ratio of world cereal ending stocks in 2007/08 to the trend of world cereal utilization in the following season is forecast to fall to 18.8 percent, the lowest in 3 decades. In spite of the increase in world cereal production in 2007, supplies are not sufficient to meet demand without a sharp drawdown of stocks.... The ratio for wheat is forecast to fall to 22.9 percent, well under the 34 percent level observed during the first half of the decade. The ratio for coarse grains is put at only 14.5 percent.... The stock-to-use ratio for rice is put at 23.4 percent, also a very low level.”
Large companies controlling key inputs or markets and having wide knowledge of trading conditions are profiting immensely, however.
Key among such companies are big retailers. In a February 2008 conference call with investors, Wal-Mart Chief Financial Officer Tom Schoewe said that Wal-Mart’s record quarterly sales and $4.1 billion profit were partially due to rises in grocery prices, and particularly dairy prices. Schoewe “declined to quantify the impact” of rising food prices, according to Bloomberg News.
France’s Carrefour, the world’s second-largest retailer, announced record first-quarter profits of €1.87 billion. Its CEO, José Luis Durán, told analysts that slumping consumer confidence was starting to hurt non-food sales, but this drop was largely offset by a rise in food sales figures.
Agribusiness firm Monsanto, which provides genetically modified seeds to farmers in the US and internationally, has also sent seen its net profits increase from $255 million to $993 million from 2005 to 2007. Among seed-producing agribusiness firms, Monsanto is often singled out for its acquisition of Delta and Pine Land Company, which created “Terminator seeds” that grow into plants with sterile grains. This could force farmers to rely exclusively on agribusiness companies for seed supplies. Monsanto claims it will not commercialize the product.
Agribusiness giant Archer Daniels Midland (ADM) reported a 42 percent rise in quarterly profits, to $517 million, for the first quarter of 2008. ADM CEO Patricia Woertz commented: “Volatility in commodity markets presented unprecedented opportunities. Once again, our team leveraged our financial flexibility and global asset base to capture those opportunities to deliver shareholder value”—that is to say, to reap massive profits.
The current food crisis reflects not only financial events of recent years, but longer-term policies of world imperialism. Instead of allowing for a planned improvement of infrastructure and farming techniques, globalization on a capitalist basis has resulted in a restriction in many parts of the world of farm production. This has been carried out in order to lessen competition and prevent market gluts from harming the profit interests of the major powers.
One major aspect of imperialist policy was to limit farm production in the so-called “First World” to prevent sudden falls in world prices. In the US, this policy took the form of the federal government’s Conservation Reserve Program, first passed as part of the 1985 Food Security Act.
The program allows farmers to apply for payments of $50 per acre of land on which they do not plant crops. A nationwide limit of 180,000 square kilometers (about 10 percent of US arable land) was imposed on the program, later decreased to 130,000 square kilometers in 2007.
Though the bill was presented as a means of limiting soil erosion due to overplanting of ecologically vulnerable land, much of the fallow land registered under the project was not, in fact, vulnerable to erosion, but rather chosen by farmers on the basis of the price of the crops that could be grown on it. This was in line with the law’s stated objectives, which were “acreage reduction” and the maintenance of “target prices and price-support loans.”
Similar payments to farmers for farmland kept out of cultivation were adopted on a country-by-country basis, after the 1992 reform of Europe’s Common Agricultural Policy.
Production collapsed in the former Soviet bloc after the 1991 dissolution of the USSR, as planned Soviet industries were shut down and sold off by the Stalinist rulers and their Western economic advisers. According to UN Food and Agriculture Organization (FAO) statistics, agricultural production in the former USSR fell 38 percent in the first four years after its dissolution and per capita food production fell 40 percent. Today, even after a partial economic recovery starting around 2000, largely fueled by oil and gas sales, total planted area in the former USSR is 12 percent less than in Soviet times.
The collapse of the Soviet agricultural machinery industry and the disappearance of Soviet subsidies tore into the farm sectors of Soviet-aligned states. According to US Department of Agriculture (USDA) figures, Cuban agricultural production fell 54 percent and food consumption fell 36 percent from 1989 to 1994, and North Korean grain production fell 40 percent from 1990 to 1999.
In developing countries, agriculture and infrastructure were devastated by export surges from wealthy countries and the programs of the International Monetary Fund (IMF), which largely dictated state policy in exchange for loans to help with the states’ debt. As agriculture was converted away from regulated subsistence farming and toward free-market cash crops produced for export, developing countries were opened up as export destinations and had more export revenue siphoned off to service debts to “First World” banks.
Liberalization of “Third World” markets and their opening to imperialist power exports devastated local farmers, whose products were forced to compete with highly subsidized exports. The US spends approximately $20 billion and the EU €45 billion per year on export subsidies to keep their farm prices low in foreign markets. In Haiti, liberalization of agricultural markets from 1985 to 1999 resulted in a 40 percent fall in domestic rice production, from 163 kilotons to 100 kilotons, while US imports grew from 4 percent to 63 percent of the Haitian rice market.
IMF programs eliminated state regulation of the food supply and provision of subsidies for fertilizer, irrigation and vaccines, which the IMF declared an unacceptable drain on state funds. World production of cash crops such as coffee, tobacco and cocoa soared, but entire populations became more vulnerable to famine. In the 1980s, Africa’s per capita grain production fell from 150 to 125 kilograms, while its grain imports went from 3.72 megatons (Mt) in 1974 to 8.47 Mt in 1993.
In Somalia, the IMF-mandated 1981 devaluation of the Somali shilling led to massive price hikes for imported fertilizer and livestock vaccines, and the government progressively slashed subsidies for farmers and nomadic herders. A 1991 collapse in livestock herds due to disease and a resulting fall in farm production were important factors leading to the 1992 famine, which was then used to justify a US invasion of the country.
In Kenya, long a major African food exporter, the IMF-mandated 1996 reform of the National Cereals and Produce Board (NCPB) devastated the economy and transformed Kenya into a net importer of food. Under pressure to function as a commercial, for-profit enterprise, the NCPB charged more for farm inputs and allowed middlemen to take over much of the storage and distribution of the harvest to cut distribution costs. By 2001, farmers were receiving 400 shillings from private traders for a 90-kg bag of rice costing 719 shillings to produce.
In Malawi, IMF-mandated deregulation of the state grain market led to an explosion in the number of private traders. When flooding hit the country’s maize crop in 2001, the state, under pressure to raise funds as international donors such as the US and UK refused to give aid, sold off its strategic grain reserve to traders at one third of the world market price. Prices rose through the end of 2001 as traders hoarded the grain, and the country experienced a major famine in 2002.
The poor state of much of “Third World” agricultural infrastructure after decades of such treatment is common knowledge, though rarely discussed in the mass media. In a March 2004 address, FAO Director-General Jacques Diouf noted: “Africa is the only region in the world in which average per-capita food production has been constantly falling for the past 40 years.... There are many causes for this. There is, for example, the insignificant use of modern inputs, with only 22 kg of fertilizer applied to each hectare of arable land, compared to 144 kg in Asia. The level is even lower in sub-Saharan Africa, which uses 10 kg per hectare.
“The selected seeds that spurred the success of the Green Revolution [the increase in crop productivity during the 1960s and 1970s] in Asia and in Latin America are barely used in Africa. There is also a profound shortage of rural roads and storage and processing facilities.
“Another factor strongly influencing [Africa’s] poor agricultural performance is water. It only uses 1.6 percent of its available water reserves for irrigation, as compared to 14 percent in Asia. Only 7 percent of Africa’s cropland is irrigated against 40 percent in Asia, and if we exclude the five most developed countries in this regard—Morocco, Egypt, Sudan, Madagascar and South Africa—the proportion for the remaining 48 countries drops to 3 percent. Yields from irrigated crops are three times higher than yields from rain-fed crops, but agricultural activity on 93 percent of Africa’s arable land is dependent on extremely erratic rainfall, and therefore seriously exposed to the risk of drought. Eighty percent of food emergencies are linked to water, especially water stress.”
Nor are infrastructure difficulties limited to Africa. In Asia, the International Rice Research Institute (IRRI) noted reduced research investment, the lack of new irrigation projects, and “inadequate maintenance” of existing irrigation infrastructure as major problems. It added that an “unexploited yield gap of 1-2 tons per hectare currently exists in most farmers’ fields in rice-growing areas of Asia,” citing lack of proper irrigation and fertilizer, pest and disease control, post-harvest storage and transport facilities.
According to the India Times, spring harvest yields for rice are 3.12 tons per hectare (t/ha) in India, as opposed to 4.17 t/ha on average in Asia and 6.26 t/ha in China. In wheat, India produces 2.6 t/ha, below China’s 4.1 t/ha and Europe’s 5.0 t/ha. The Times noted that rural development expenditure averaged 14.5 percent in 1986-1990, but after the 1991 liberalization and opening to international capital, this fell to 6 percent. Agricultural productivity growth fell from 2.62 percent to 0.5 percent.
While agriculture in China is more productive than in India, it faces its own challenges. Uncoordinated industrialization has decreased land available for farming from 127.6 to 121.7 million hectares, according to figures from the Ministry of Land and Resources. This is despite the passage of repeated measures by the central government to limit land sales by farmers to local officials aiming to set up factories or businesses on prime farmland. Land near factories, many of which are operated with little regard for environmental standards, is often severely polluted.
As the crisis of world agriculture pushes supply downward, population growth and rising demand for more complex foods in industrializing countries are pushing demand upward. This dichotomy between powerful objective developments in world capitalism gives the crisis a particularly intractable and explosive character.
The increased food demand caused by population growth does not in general pose a major problem. Population growth in this decade (roughly 1.2 percent per year) has been less than growth in the 1960s, which averaged 2 percent per year—a time when, thanks to crop productivity and infrastructure improvements, world grain production per capita rose from 275 to 300 kg.
As a result of lower agricultural and research investment, however, crop yield growth has fallen precipitously and is now barely keeping up with population growth. The Washington, D.C.-based International Food Policy Research Institute (IFPRI) comments: “The neglect of agriculture in public investment, research, and service policies over the past decades has undermined its key role for economic growth. As a result, agricultural productivity growth has declined and is too low to meet the present challenges.” From 1980 to 2004, it fell from a high of 4.5 percent to 2.0 percent for wheat, 3.3 percent to 1.0 percent for maize, and 3.2 percent to 1.5 percent for rice, according to UN figures.
To the social and industrial problems underlying slow growth of the food supply, one must add rising demand tied to substantial shifts in the global economy—notably the increase in oil revenues in oil-producing countries and industrialization in a number of developing countries, especially in Asia.
Available data does not suggest that major oil producers that are traditional importers of grain (e.g., Saudi Arabia, Nigeria) have contributed to price rises by importing more grain. The tonnage of their rice and wheat imports have, in fact, shrunk in the last few years, according to USDA figures—in part because grain importers refused to buy from high-priced world grain markets as the state fixed low bread prices.
However, these countries’ surging oil revenues—oil prices in US dollars have gone up by a factor of more than 6 from 2002 to 2008—have greatly increased market expectations that grain importers will be able to afford to pay large sums for rice, wheat and other foods.
Rising living standards and more meat- and dairy-intensive diets in certain developing countries have increased demand for grain—not only for food, but particularly for feed. According to the International Feed Industry Federation, world use of grain in compound animal feeds passed from 290 Mt in 1975 to 537 Mt in 1994 and 626 Mt in 2005. The FAO forecasts a 60 percent growth in grain use for feed from 1996 to 2030, compared to 45 percent growth in grain use for food.
Compared to 1990 per capita levels, China in 2005 consumed 2.4 times as much meat, 3.0 times as much milk and 2.3 times as much fish. India consumed 1.2 times as much per capita in all categories in 2005 as in 1990. Brazil consumed 1.7 times more meat, 1.2 times as much milk, and 0.9 times as much fish per capita in 2005 as in 1990.
These increases are important in absolute as well as comparative terms. For instance, meat consumption in China in 2007 was 50 kg per person, versus 20 kg in 1980. By comparison, US per capita consumption in 2004 was 98 kg.
The increasingly unstable balance of production and consumption is further threatened by global warming. In a February 2007 article, the Toronto-based Globe and Mail described a Consultative Group on International Agricultural Research (CGIAR) report painting a dire picture of its effect on grain yields.
It wrote: “A rough rule of thumb developed by crop scientists is that, for every 1-degree Celsius increase in temperatures above the mid-30s during key stages in the growing season, such as pollination, yields fall about 10 per cent.” It added that, “Average global temperatures will likely rise between 1.1 and 6.4 degrees over the next century, according to the authoritative Intergovernmental Panel on Climate Change, suggesting that, over most of the range of future temperatures, crops will suffer problematic declines.”
The CGIAR report described computer models analyzing crop yields in regions—the northern half of the Indian subcontinent, Southeast Asia, and the Sahel (the part of Africa just south of the Sahara desert)—where temperatures often reach 35 degrees Celsius or higher during crop-growing seasons.
The Globe and Mail concluded, “Cereals and corn production in Africa are at risk, as is the rice crop in much of India and Southeast Asia.... The best wheat-growing land in the wide arc of fertile farmland stretching from Pakistan through Northern India and Nepal to Bangladesh would be decimated. Much of the area would become too hot and dry for the crop, placing the food supply of 200 million people at risk.”
An advance look at global warming’s possible effects is provided in Australia by two straight years of droughts, which the Australian press has widely noted are exacerbated by global warming. Wheat yields have fallen from a normal level of 25 Mt to 10.6 Mt in 2007 and an anticipated yield of 13 Mt in 2008.
The scale of the challenges posed to world agriculture, and the dimensions of the inflationary crisis that has already been unleashed on the world’s population despite the plentiful supply of food, underscore the irrationality of world capitalism.
Divided as they are between the competing profit interests of different corporations and states, capitalist policymakers are unable to rationally and coherently plan world economy and agriculture to face these challenges. Instead, they have overseen the destruction or degradation of immense productive resources.
These basic contradictions are now exacerbated and brought to a crisis point by the bursting of the US credit bubble and the rise in oil prices. Despite humanity’s elementary need for affordable food, the response of the world bourgeoisie has been to use the price crisis as a source of profits through speculation, smuggling or organizing nationally based price cartels.
The wave of strikes and demonstrations with which the international working class has responded to the explosion of food prices testifies to its objective unity, in opposition to the forces of the world market.
To the perplexity and token measures of capitalist governments and imperialist-dominated agencies such as the UN, the working class must counterpose the revolutionary perspective of international socialism. The social force that is uniquely capable of resolving the crisis on a humane and progressive basis is the international working class, uniting behind it the peasantry and all other oppressed social layers.
The historic task posed to the working class is the reorganization of world economy on an international basis, overcoming the conflict between globalized production and the nation state system, and the replacement of the profit principle by scientifically planned production for the social good, on the basis of public ownership of the means of production under the democratic control of the working population.
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