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Why your grocery bill is about to hurt

Wheat, corn, beef: prices are soaring. Is the global food supply in danger?

CHARLIE GILLIS | February 27, 2008 |

After five years watching the cycles of feast and famine in West Africa, Margie Morard had some clearly formed ideas about what drives food prices in her part of the world. War, floods, droughts — these are the things that used to determine the cost of bread in Freetown or Timbuktu, says the representative for British Oxfam, who monitors food security in 10 countries lying southwest of the Sahara Desert. That and myopia. In sub-Saharan Africa, boom harvests tend to result in cash-hungry farmers flooding street markets with cheap corn and rice, while lean years see brokers ruthlessly hoard grain in anticipation of a big payday. The extremes can produce heartbreaking scenes of deprivation, says Morard; widespread begging, gaunt children with distended stomachs, families on the move in search of food. But at least they tend to be predictable.

Then, last summer, a dynamic took hold that neither fickle weather nor the greed of cynical middlemen could adequately explain. In the dust-blown streets of Mauritania, the cost of a bag of wheat flour doubled within a few short weeks. In Niger, a country already riven by poverty and rebellion, the price of staples like corn and soya sailed into the stratosphere, as they did in neighbouring Mali and Burkina Faso. Odd, because it hadn't been a particularly poor harvest year. And hunger quickly fermented into anger. By November, food riots were breaking out in Nouakchott, the Mauritanian capital, as residents found themselves priced out of basic supplies. "This is putting people in a very tight bind," said Morard from her office in Dakar, another city that saw street protests, also over food, in November. "It's affecting all of West Africa."

Continued Below

West Africa, it turns out, and the rest of the world. With the global supply of cereal grains falling to 40-year lows, and with consumption trending ever upward, the earth's supply of food is suddenly under pressures unknown in half a century. Two weeks ago, wheat prices hit an all-time high of US$18.53 a bushel, while corn, driven in part by demand from the biofuel industry, climbed to $5.34 a bushel, more than double the average price before 2007. The political repercussions have been swift, and in some cases violent. In Mexico, about 70,000 people hit the streets to protest the doubling and tripling price of tortillas. Chinese officials are warning that rising rice and corn prices could lead to civil unrest in rural areas. Even the food-rich West is starting to feel the pinch. In September, rising pasta prices, a direct function of the soaring value of wheat, sent Italians flooding city squares in Rome, Milan and Palermo to demonstrate. In the United States, the skyrocketing cost of chicken and cattle feed is hitting the pocketbooks of consumers at all points of the economic spectrum. Milk, eggs and filet mignon are all going up. So is Kraft Dinner.

This escalation has been sudden enough to start a heated debate about exactly how much cause there is to panic. Is the recent price bump due, as some argue, to passing or localized phenomena, like Australian droughts or the biofuel fad? Or is it rooted in longer-term forces that augur sustained and potentially distastrous shortages? After all, many of the conditions necessary to make the food armageddonists' predictions come true are now upon us. Water is scarce, fossil fuels are prohibitively expensive, fish stocks are near collapse and the world adds 80 million people every year. To that, you can now add global warming, which agronomists say is drying up vulnerable countries where farmlands depend on rain.

And then there's China. With ever greater purchasing power, Asian consumers are moving toward the higher-protein, better-tasting, meat-laden diet westerners have enjoyed for decades. Producing all that beef, pork and eggs requires vast quantities of grain that might otherwise be used to feed people. "On the amount of grain fed each year to cattle in the United States, you could feed 850 million people as vegetarians," says David Pimentel, a Cornell University agricultural scientist who studies the global food economy. "That's not a value judgment. It's a fact."

The result has been a lesson in the interconnectedness of the modern food economy. In Canada, where the soaring loonie has cushioned the effect of climbing costs, the price of bread is still up nearly 10 per cent over last year, while flour has doubled in value since last summer. In Britain, grocery prices are up 6.6 per cent over 2007, and Europe has seen similiar inflation — pasta prices have climbed 20 per cent and more expensive grain is making it difficult for dairy farmers to make ends meet. Even those entrusted to keep an eye on food supplies appear to have been caught off guard. Just 18 months ago, the Food and Agriculture Organization of the United Nations (FAO) was dismissing concerns about the world's grain reserves plunging to near-historic lows, telling Canada's National Farmer's Union "the global supply and demand balance is not in danger." By Jan. 11, the agency had performed the PR equivalent of a flat-wing spin, declaiming an "unforeseen and unexpected" decline in supply that created a "very serious risk that fewer people will be able to get food."


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