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« Fighting food scarcity and environmental degradation
in times of economic crisis »
By Franz Fischler,
former European Commissioner for Agriculture
Last week on the Momagri website we published an official summary of the speech by the winner of the 2009 Nobel Prize for Economics, Paul Krugman, on the occasion of the forum on the future of Agriculture which took place in Brussels on March 181.
Another talk is also worthy of mention, part which is quoted below: the opening speech made by the former European Commissioner for Agriculture, Franz Fischler,2 who paints a realistic picture of the global agricultural situation and the state of international governance in this area. Drawing together the three crises facing the world today – financial, food and environmental – he shows that they all mean the same thing: the end of the illusion of self-regulating markets. "The market has lost its magic", he says, "and deregulation is having the opposite effect of that which was expected"; in his opinion this observation in itself is sufficient cause for returning to much-needed regulatory policies, in particular on agricultural markets which, more than any others, need to be overseen due to their vital, strategic dimension.
Momagri Editorial Board
“We face three global crises. They concern the environment, finance and food. The sharpest of them is the current financial collapse, the worst since the Great Depression. The most frightening is the looming food crisis with world hunger approaching one billion people this year. The most alarming is climate change because of its different and greater scale of risk. They are interconnected. For instance, without a greater and more stable food economy, one cannot expect to meet the Kyoto goals against climate change. Without success at the Copenhagen Conference later this year food production itself would suffer in turn from declining yields. Without trust in the financial framework, there is no way to meet the food and environmental challenges.
As Bill Clinton said at the last World Economic Forum in Davos, the world’s problem is that it is « unequal, unstable and unsustainable ». This requires corrective action. My comments will be on the financial crisis, food security and environment preservation, and conclude advocating new, global responsibilities.
Let me now move to the food crisis. Farm land is under stress. For the World Earth Institute the main reasons why world food supply is tightening are population growth and accelerated urbanization3 , changes in life-stiles, falling water tables and diversion of irrigated water towards the cities. All this leads to losses in soil availability, quality and use for food.
The food crunch may have eased from one year ago. Wheat, corn and rice prices have tumbled 40% to 60% from all-time highs. In the EU, average producer prices increased by 2.7% in 2008, while agricultural input prices shot up by 11.6% (+60.6% for fertilizers and soil improvers). Make no mistake: the food crisis will come back with a vengeance. In 2008, the world’s food import bill has surged above one trillion US dollars, 23% more than in 2007, and 64% more than in 2006. Developing countries have actually spent in 2008 about one third of the world’s food import bill, or 35% more than in 2007. The 2008 World Food Report of FAO warned against a “false sense of security” as it expected the current combination of low food prices, high input costs, tightening export finance and conditions for bank letters of credit, that farmers cut their plantings, that there will be a price surge in the 2009-2010 harvesting season, “unleashing even more severe food crises than those experienced recently”. There is good potential new land for cultivation, notably in Latin America, Africa and east Europe. But, new land is insufficient, and either inappropriate because of poor or polluted soils, or difficult to use for food production (due to doubtful property rights and/or poor finance and/or due to government mismanagement, or difficult to feed the market because of lack of transportation infrastructure.)4Moreover, cultivated land is diminishing fast, not just because of expanding deserts, but also because much of it being lost to urbanization. It has been calculated that the addition of some 70 million people every year claims nearly 3 million hectares for housing, roads, highways and parking lots.
To meet world demand the necessary production growth will to a large extent have to be met by a rise in the productivity of the land already being farmed today. However, this will be difficult to accomplish as global agricultural productivity growth has been in decline since the Green Revolution of the 1960s and 1970s. Global crop yield increases have plummeted from 4% per annum in the sixties to eighties to 2% in the 1990s and barely 1% in 2000 to 2030 forecasts, despite substantial expected yield increases in India the USA, Russia and the Ukraine by then.
Europe’s role as provider of food to the world is diminishing. The net crop-trade position of the EU-27 can be expected to deteriorate. Between 2003/05 and 2013/15 European Union demand for grains and oil seeds can be expected to increase more than its supplies for both grains and oil seeds. As we approach 2015, average net imports of corn are diminishing; net imports of oilseeds are expected to go up by 70%; and for wheat the EU will move from a net exporter to a net importer position. Part of the explanation lies in a shift towards bio-fuel production. The EU capacity to help fight world starvation will be reduced at a time in which food production will decline predominantly in those countries which already record increasing food import needs. Nevertheless Europe will become a more secure production location in comparison to other world regions, while higher food prices will boost deforestation there. “Consequently, Europe has to take responsibility to significantly contribute to world food security and also to combat global warming by utilizing its production potential.” 5
Europe is of course only one player, however big. All countries will have to improve their food security policies. In many of them, in particular in Africa, one cannot expect to boost agricultural production without land reform and courageous food price policies favouring the farmer and costly to the urbanite. Consumption patterns will also have to change, notably reducing beef intake. There is already a fight for food in many countries. Moreover, there are signs of an international scramble for food, and beyond it a scramble for land to produce it. According to FAO the race by some countries to secure farmland overseas risks creating a “neo-colonial system”. For instance, Daewoo Logistics of South Korea, the fourth largest maize importing country, is seeking to lease vast areas of productive agricultural land in Madagascar and elsewhere in order to satisfy domestic demand for maize and palm oil in Korea. There are precedents starting with Japan, who bought land in the American West to produce beef for Japanese consumers. A poor country such as Ethiopia, infamous for more than one food crisis, has just openly offered Middle Eastern countries to lease hundreds of thousands of hectares of its farmland in order to help them ensure food security in the Middle East. These plans show how important food security has already become. One can well imagine what sort of political problems may eventually arise if a country hosting foreign investment in faming faced a serious food crisis at a time in which rich foreigners exported all the food produced there for the exclusive benefit of their richer and better fed people abroad.
Clearly, banking crises have a substantial impact on food demand and supply, notably on planting, investments and trade. Last year, production costs have grown far more than corresponding farm income. The world’s poorest developing countries lack the necessary credit lines to buy food; the great food exporters suffer from a lack of export finance. Trade financing costs tend to overtake trade margins. Food commodity markets are meanwhile so volatile and unpredictable, that barter trade has become too tempting to resist, despite its costs in shrinking markets. So has commodity speculation. The first of today’s panels will deal with that.
In his conclusion, Franz Fischler calls for a new era of "responsibility", in particular with respect to the organisation of trade on international agricultural markets. Emphasising that agriculture is not the same as other sectors due to its strategic importance, the former European Commissioner for Agriculture recommends implementing a global regulatory framework which takes into account the stage of development of each country and guarantees their food security.
It remains to be seen how this can be implemented. Although Franz Fischler does not go into detail on how to proceed, he insists on the necessity of including agriculture in the current reform of the financial system. The future will be one of scarcity, thus "the status quo is not an option:" it is time to rethink the economic, financial, agricultural and environmental governance of our planet.
Momagri Editorial Board
|1 Cf. momagri, " Paul Krugman: the world is wrong to neglect the food crisis," April 20, 2009|
3 An estimated 40,000 ha of land are needed for basic living space for every 1 million people added.
4 For instance, an increase in Brazil’s grain land and the creation of new rural settlements there would have negative consequences for the environment: domestic-soil sustainability, rainfall recycling, biodiversity and climate effects worldwide. In some countries, particularly in Africa, little can be achieved without agrarian reform and/or unpalatable pricing policies. “Africa’s soils are the poorest in the world, and poor soils produce poor crops” (Kofi Annan). They are thin, laden with iron and often lacking nitrogen, potassium and zinc. They cannot hold much artificial or natural fertilizer, because their nutrient retention is very poor and most of it will be washed away. Africa loses about 8m tones of soil nutrients a year. Much of the land is degraded to the point that 95m hectares have seen productivity reduced.
5 Humboldt Universität zu Berlin, Working Paper no. 84/2008