Tag Archives: FAO

how the markets make famine

The Food Crisis Strikes Again

Esther Vivas

The threat of a new food crisis is already a reality. The price of food began to rise to record levels again, according to the FAO Food Price Index of February, 2011, which does a monthly analysis of global prices of a basic food basket made up of grains, seed oils, dairy products, meat and sugar. The Index came to a new historic maximum, the highest since the FAO began to study food prices in 1990. In the past months, prices have leveled off but analysts predict more hikes in the coming months.

This increase in the cost of food, especially basic grains, has serious consequences for southern countries with low incomes and dependency on food imports, and for the millions of families in these countries that devote between 50 and 60 percent of their income to food—a figure that rises to 80 percent in the poorest countries. In these countries, the rise in the price of food products makes them inaccessible.

We are approaching a billion people—one out of every six on the planet—that today do not have access to adequate food. World Bank president, Robert Zoellick, affirmed that the current food crisis has increased the number of persons who suffer chronic hunger by 44 million. In 2009, this number was surpassed, reaching 1.023 billion people undernourished on the planet, a figure that went down slightly in 2010, but without returning to the levels before the food and economic crisis of 2008 and 2009.

The present crisis takes place in the context of an abundance of food. Food production has multiplied over the three decades since the sixties, while the world population has merely doubled since then. There’s plenty of food. Contrary to what international institutions like the FAO, World Bank and World Trade Organization say, it’s not a problem of production, but rather a problem of access to food. These organizations urge an increase in production through a new Green Revolution, which would only make the food, social and ecological crises worse.

Popular Rebellions

The popular rebellions in northern Africa and the Middle East had among the many catalysts the rise in food prices. In December of 2010, in Tunis, the poorest of the population occupied the frontline of the conflict, demanding, among other things, access to food.

In January of 2011, youth demonstrated in Algeria blocking highways, burning stores and attacking police stations to protest for the rise of prices in basic foods. Similar cases were seen in Jordan, Sudan and Yemen. Egypt is the largest importer of wheat in the world, and depends on food imports.

Evidently other factors came into play in the uprisings: high unemployment, lack of democratic freedoms, corruption, lack of housing and basic services, etc. In any case, the rise in food prices was one of the initial catalysts.

A Central Cause

What are the causes of the new spike in the cost of our meals? Although international institutions and experts have pointed to several elements such as meteorological phenomena that affect harvests in produce countries, the increase in the demand in emerging countries, financial speculation, the growing production of agrofuels, among others—various indices point to speculation with raw food materials as one of the main reasons for food price increases.

In 2007-2008 the world experienced a profound food crisis. Basic foods prices such as wheat, soy and rice rose by 130%, 87% and 74% respectively. Then, as now, several causes converged, but the most important were production of agrofuels and the growing speculative investment in the food futures markets. But this increase in the price of food leveled off in 2009, in part probably due to the economic crisis and a reduction in financial speculation.

By mid 2010, with international financial markets calmed down and huge sums of public money injected into the private banks, food speculating struck again and the price of foods began to rise. To “save the banks”, after the financial crisis of 2008-2009, it is estimated that the governments of rich countries gave a total of $20 trillion dollars to stabilize the banking system and lower interest rates.

With the influx of money, speculators saw incentives to acquire new loans and buy merchandise that predictably would rise rapidly in value. The same banks, high-risk funds, etc. that caused the subprime mortgage crisis are currently responsible for speculation in raw materials and the rise in the price of food, taking advantage of unregulated global commodity markets.

The food crisis is intimately linked to the economic crisis and the logic of a system that promotes, for example, plans to bail out Greece and Ireland while sacrificing their sovereignty to international institutions, just as it sacrifices food sovereignty of the peoples to the interests of the market.

A Grower’s Guarantee or a Speculator’s Bonanza?

There has always been some speculation in the price of foods and this is the logic behind futures markets. In their current form, futures markets date back to the mid-1900s when they began in the United States. These are legal standardized agreements to buy and sell physical merchandise in a previously established time period in the future and have been a mechanism to guarantee a minimum price to the producer faced with the oscillations of the market.

It works like this: Farmers sell their production to traders before harvest to protect themselves from uncertainties in the weather, for example, and to guarantee a future price. The trader also benefits. When the harvest is bad, the farmer still gets a good income and when the harvest is optimal, the trader benefits even more.

This same mechanism is used by speculators to make money off the deregulation of the raw materials markets that was spurred in the mid-nineties in the United States and Great Britain by banks, free-market politicians and high-risk funds in the context of the process of deregulation of the world economy. The contracts to buy and sell food became “derivatives” that could be traded independently of the real agricultural transactions. A new business was born—food speculation.

Speculators today have more weight in the futures markets, even though these transactions have nothing to do with real supply and demand. Mike Masters, manager of Masters Capital Management, points out that in 1998 speculative financial investment in the agricultural sectors was around 25% and today it is close to 75%. These transactions are carried out in the markets, the most important of which on the world level is the commodities market in Chicago, while in Europe food and raw materials are traded in the futures markets of London, Paris, Amsterdam and Frankfurt.

A “100% Natural Deposit”

In 2006/2007, following the fall in the high-risk mortgage loan market in the United States, institutional investors like banks, insurance companies and investment funds sought safer and higher yield places to invest their money. Food and raw materials became a popular alternative. As the price of food soared, investments in the food futures markets rose, pushing the price of grains up and worsening inflation in food prices.

In Germany, the Deutsche Bank announced easy earnings if invested in rising agricultural products. And similar business deals were promoted by the major European bank BNP Paribas. Catalunya Caixa urged its clients in January 2011 to invest in raw materials under the slogan a “100% natural deposit”.

What did they offer? A guarantee of 100% of capital with the possibility of obtaining profits of up to 7% annually. How? According to the ads, based on “the evolution of yields in three food products: sugar, coffee and corn”. To assure such high yields, the ads pointed out that prices of these three products had increased at 61%, 34% and 38% respectively over the past months due to “growing demand that is increasing above the rate of production”, because of the increase in world population, and agrofuels production.

Catalunya Caixa left out important information, however: food speculation that provided such handsome profits increases the price of food, makes it inaccessible to large parts of the population in the global South and condemns thousands of people to hunger, poverty and death in these countries.

Oil Dependency

Another element that exacerbated the food crisis is the heavy dependency on oil of the current model of food production and distribution. The rise in the price of oil had a direct impact on the similar rise in the cost of basic foods. In 2007 and 2008 the price of oil and the price of foods reached record levels. Between July of 2007 and June of 2008, crude oil went from 75 dollars a barrel to 140 dollars, while the price of basic foods went from 160 dollars to 225, according to the FAO Food Index.

Food and agriculture have become heavily dependent on oil. Following the Second World War and with the Green Revolution in the sixties and seventies, and with the supposed increase in production, an intensive and industrial model of agriculture was adopted. In the current system, our food travels thousands of kilometers before it arrives on our tables; production requires the intensive use of farm machinery, chemicals pesticides, herbicides and fertilizers. This model could not exist without oil.

The rise in the price of oil and the strategy of governments to combat climate change has led to a growing investment in the production of alternative fuels, agrofuels, such as biodiesel and bioethanol, made from sugar, corn and other crops. But this production has entered into direct competition with food production for consumption and is now another cause of the rise in food prices.

The World Bank recognizes that when the price of oil goes over fifty dollars a barrel, a 1% increase causes a 0.9% increase in the price of corn, since “for every dollar that the price of oil rises the profitability of ethanol rises and consequently the demand for corn grows.”

Since 2004, two-thirds of the rise in world production of corn was destined to satisfy the North American demand for agrofuels. In 2010, 35% of the corn harvest in the United States, which is 14% of world production, was used to produce ethanol. And the tendency is on the rise.

But beyond the causes such as food speculation and the rise in oil prices that has an impact on the growing investment in agrofuels, leading to competition among grain production for consumption and for transportation, the food and agriculture system is profoundly vulnerable and in the hands of the market. The growing liberalization of the sector in the last decades, the privatization of natural resources (water, land, seed), the imposition of a international model of trade at the service of private interests, etc., has led to the current crisis.

As long as agriculture and food continue to be considered merchandise in the hands of the highest bidder, and business interests prevail over food needs and the limits of the planet, our food security and the welfare of the earth are far from assured.

*Esther Vivas is a member of the Center for the Study of Social movements (Centro de Estudios sobre Movimientos Sociales) in the Universidad Pompeu Fabra (Barcelona). She is the author of “En pie contra la deuda externa” (El Viejo Topo, 2008) among other publictions, and a contributor to the CIP Americas Program www.cipamericas.org.

I would like to thank Esther Vivas for allowing me to reproduce this article.

+info: http://esthervivas.wordpress.com/english


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the whys of hunger

The whys of hunger

Esther Vivas | El País

We live in a world of plenty. Today food is produced for 12 billion people, according to the Organization of the United Nations Food and Agriculture (FAO), when the planet is inhabited by 7 billion people. There is food. So why is one of every seven people in the world going hungry?

The food emergency that affects over 10 million people in the Horn of Africa brings to light a disaster that has nothing natural about it. Droughts, floods, wars … serve to exacerbate a situation of extreme food vulnerability, but they are not the only factors that explain it.

The famine in the Horn of Africa is not new. Somalia has been experiencing a situation of food insecurity for 20 years. And, periodically, the media moves us from our comfortable sofas and reminds us of the dramatic impact of world hunger. In 1984, nearly one million people died in Ethiopia; in 1992, 300,000 Somalis died of hunger; in 2005, almost five million people were on the brink of death in Malawi, just to name a few examples.

Hunger is not inevitable, nor is it inevitable that it affects certain countries. The causes of hunger are political. Who controls the natural resources (land, water, seeds) that enable the production of food? Who benefits from agricultural and food policies? Today, food has become a commodity and its main function, to feed people has started to take second place.

One  can point to the drought, with consequent loss of crops and livestock as a major trigger of famine in the Horn of Africa, but how is it that countries like the U.S. and Australia, which periodically suffered severe droughts, are not suffering from extreme hunger? Obviously, the weather can exacerbate food problems, but not enough to explain the causes of hunger. In regard to food production, control of natural resources is key to understanding why and for whom things are produced.

In many countries of the Horn of Africa, access to land is a scarce commodity. The purchase of large amounts of fertile land by foreign investors (agro-industry, governments, hedge funds…) has led to the expulsion of thousands of peasants from their lands, decreasing the ability of these countries to feed themselves. Thus, while the World Food Programme tries to feed millions of refugees in Sudan it is a paradox that foreign governments (Kuwait, UAE, Korea…) are buying land to produce and export food for their own populations.

We should also remember that Somalia, despite recurrent drought, was a self-sufficient in food production until the late seventies. Its food sovereignty was undermined in later decades. Since the eighties, the policies imposed by the IMF and World Bank, so that the country will pay its debt to the Paris Club, have forced the implementation of a set of structural adjustment measures. With regard to agriculture, this implied a policy of trade liberalization and opening up of markets, allowing the massive influx of subsidised products like rice and wheat from North American and European multinational agribusinesses, who began to sell their products below their cost price — creating unfair competition for local producers. Periodic devaluations of the Somali currency also generated rising input prices and encouraging the production of monoculture for export, steadily forcing peasants to abandon the land. There are similar tales not only in Africa, but also in Latin America and Asia.

The rising price of staple cereals is one of the elements identified as a trigger for famine in the Horn of Africa. In Somalia, the price of corn and red sorghum increased by 106% and 180% respectively in just one year. In Ethiopia, the cost of wheat rose by 85% over the previous year. In Kenya, maize reached a value 55% higher than 2010. These increases have made these basic staples inaccessible. But what are the reasons for the escalation of prices? Several signs point to financial speculation over food commodities as a major cause.

The price of food is determined by the stock exchanges, the most important of which, worldwide, is Chicago, while in Europe the food is sold in the futures exchanges in London, Paris, Amsterdam and Frankfurt.

But today, most of the purchase and sale of these goods does not correspond to actual trade flows. In the words of Mike Masters, head of hedge funds at Masters Capital Management, 75%  of financial investment in the agricultural sector is speculative. We buy and sell commodities in order to speculate with them and make profit which is eventually reflected in higher prices for the consumer. The same banks, hedge funds, insurance companies, which caused the subprime mortgage crisis, are those who speculate with food today, taking advantage of a deep global market which is deregulated and highly profitable.

The global food crisis, and famine in the Horn of Africa in particular, are the result of food globalization in the service of private interests. The chain of  production, distribution and consumption of food is in the hands of a few multinationals who put their individual interests before collective needs and over recent decades have eroded, with the support of international financial institutions, the ability the countries of the Global South to determine their agricultural and food policies.

Returning to the beginning, why is there hunger in a world of abundance? Food production has tripled since the sixties, while the global population has only doubled since then. We are facing not a problem of food production, but above all a problem of access to food. The UN reporter for the right to food, Olivier de Schutter, told El Pais: “Hunger is a political problem. It is a matter of social justice and redistribution policies.”

If we want to end hunger in the world it is urgent to implement different policies for food and for agriculture which put at their centre the need of people, those who work the land and the ecosystem. This is to achieve what the international movement Via Campesina calls “food sovereignty” and regain the ability to decide what we eat. Borrowing one of the most popular slogans of the Movement 15-M, what is necessary is a “real democracy, and” in agriculture and nutrition.

*Article published in the Spanish newspaper El País, 30.07.2011.

To read the original article go  to http://esthervivas.wordpress.com/english/the-whys-of-hunger/


Famine: Less land, more hunger

Esther Vivas

The tragedy of hunger again becomes current news from the food emergency in the Horn of Africa, but famines are a silent daily reality. Worldwide, more than a billion people, according to the United Nations Food and Agriculture Organisation (FAO), have difficulties accessing food. A famine with political causes and responsibility.

Africa is a ravaged land. Its natural resources have been plundered from its communities over centuries of domination and colonization. Although it is not only the plundering of gold, oil, coltan, rubber, diamonds and so on, but also, water, land, seeds that provide food to its inhabitants. If 80% of the population in the Horn of Africa, as indicated by the FAO, depends on agriculture as their main source of food and income, what they do when there is no land to cultivate?

In recent years, the growing wave of privatization of land in Africa (purchase by food multinationals, foreign governments or investment funds) has made its precarious agricultural and food system even more vulnerable. With peasants and farmers expelled from their lands, where can they grow food to eat? Many countries, as a result, have seen their already limited capacity for self-provision drastically reduced, after decades of trade liberalization policies which have reduced their productive capacity.

The food and financial crisis that erupted in 2008 gave rise, as has been well documented by the international organization GRAIN, to a new cycle of appropriation of land on a global scale. Governments of countries dependent on food imports, in order to ensure the production of food for their people beyond their borders, and agro-industry and investors, eager for new and profitable investment, have subsequently been acquiring fertile lands in the South. A dynamic that threatens peasant agriculture and food security in these countries.

It is estimated that since 2008, they have acquired in this way around 56 million hectares of land on a global scale, according to data from the World Bank, the major part of this, more than 30 million hectares, in Africa, where land is cheap and communal ownership makes it more vulnerable. Other sources, such as the Global Land Project, speak of from 51 to 63 million hectares in Africa, an area similar in size to France. This covers leases, concessions or purchases of land. The forms of transaction can be multiple and often opaque, a dynamic that some authors have described as a “new colonialism” or “agricultural colonialism”, through an indirect recolonization of African resources.

The World Bank has been one of the main proponents in developing, together with other international institutions such as the FAO, UN Conference on Trade and Development (UNCTAD) and the International Fund for Agricultural development (IFAD), what have come to be known as the “Principles for Responsible Agricultural Investment”, which legitimize the appropriation of land by foreign investors. Through the International Finance Corporation (IFC), the institution affiliated with the World Bank dealing with the private sector, programmes have been promoted to eliminate administrative barriers, change laws and tax systems in the countries of the South and encourage investment.

Ethiopia, one of the countries affected by the current famine, has offered three million hectares of arable land to foreign investors in India, China, Pakistan, and Saudi Arabia, among others. Business could not be better: 2,500 km2 of virgin productive land at 700 Euros per month, with a contract for fifty years. This is, for example, the agreement reached between the Ethiopian government and the Indian company Karuturi Global, one of the 25 largest global agribusiness which uses these lands for the cultivation of oil palm, rice, sugar cane, corn and cotton for export. The consequences: thousands of peasants and indigenous people expelled from their lands, precisely those who suffer most from hunger and lack of food, as well as vast tracts of forests cut down and burned.

Other African countries such as Mozambique, Ghana, Sudan, Mali, Tanzania, and Kenya have leased out millions of hectares of their territory. In Tanzania, the government of Saudi Arabia has acquired 500,000 hectares of land to produce rice and wheat for export. In Congo, 48 per cent of agricultural land is in the hands of foreign investors. In Mozambique, more than ten million areas of land have been leased.

The academic conference “Global Land Grabbing”, which took place in Britain in April 2011, noted the negative impact of these acquisitions. Over 100 documented case studies show how these investments had no positive impact on local communities, on the contrary generating displacement and increased poverty.

For years, the international movement Vía Campesina has denounced the dramatic impact of this massive wave of land grabbing on the peoples of the populations of the countries of the South. If we want to put an end to hunger in the world it is essential to ensure universal access to land, as well as water and seeds, and prohibit speculation and business deals concerning that which feeds us and provides us with food.

*Esther Vivas is a member of the Centre for Studies on Social Movements (CEMS) at Universitat Pompeu Fabra. She is author of the book in Spanish “Stand Up against external debt” and co-coordinator of the books also in Spanish “Supermarkets, No Thanks” and “Where is Fair Trade headed?”. She is also a member of the editorial board of Viento Sur.

I would like to thank Esther Vivas for allowing me to reproduce these articles.

+info: http://esthervivas.wordpress.com/english

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