Rising food costs impact Canadian Foodgrains Bank
Agency asks for help
Rising food prices have dramatically increased the costs of our programming. In Bangladesh, in the four months between the first delivery of food and the second, the cost of rice doubled.
These rising prices put unbearable pressure on people trying to cope with disaster. They also are having an impact on the millions of people living with chronic poverty who often spend 50–80 percent of their income on food. Our resources are being stretched to the limit in Myanmar. With our current resources, we can only provide a portion of what was requested.
We are asking for your help in responding to the global food crisis and to emergencies like these cyclones and droughts.—Heather Plett
What’s pushing food prices up?
The warning flags have been up for the past two years. Over the past decade almost every year the amount of cereals consumed globally has exceeded the amount produced by farmers. Not by much – just enough to gradually reduce global food stocks from about five months in 1998 to less than two months of consumption in 2006. Then, in the last two years, several relatively sudden changes or shocks have occurred that have caused food prices to increase abruptly.
1. Rising consumption of meat and dairy products
Over the past fifty years, the methods of producing meat and dairy products have changed dramatically. In order to take advantage of the economies of scale, farmers have specialized in producing particular farm products. Before the 1960s, farmers who raised beef cattle raised their own feed – either grass or, for the winter, some grain and silage. The same was true for poultry and pigs. As part of the specialization, the diets of these animals were switched to products that could be produced by other specialized farmers or by-products of other products. Today, most poultry, pigs, and cattle are fed grain, grain by-products, or oilseed by-products. Unless it’s grass-fed, beef takes eight kg of grain to produce one kilo – pork takes about four kilograms of grain per kilo, poultry about two kilograms of grain.
North Americans eat on average about 100 kg of meat each year – a number that has risen slowly over the past 50 years. At the same time, the average Chinese was eating only six kg of meat per year in 1965, but this rose to 20 kg per year by 1985. Today they eat on average 50 kg per year and this continues to rise. India shows a similar pattern of rising meat and dairy consumption. Much of this meat is coming from the same kind of specialized meat farms as we have in North America. Thus, the consumption of grain as feed has been rising rapidly.
2. Crop failures in major exporting countries
The past few years have also seen some unusually large declines in crop production in major exporting countries. Australia has had several years of drought which have all but removed them from the world export markets. Poor weather in the U.S. and Canada in recent years have also had an effect. It is difficult to say for sure that these declines are linked to climate change but this is a real possibility.
At the same time, many countries in Africa have seen their own crop production slashed by droughts and floods which do seem to be more clearly linked to climate change. They have also seen very low levels of investment in agriculture during the past 20 years.
3. Use of cereals and oilseeds to make biofuels
Much has already been written about the rapid and massive diversion of corn into ethanol and edible oils into biodiesel. Up to 40 percent of the huge U.S. corn crop now goes to make ethanol and the U.S. was the largest exporter of corn in the world. In Europe, the goal of replacing 10 percent of diesel with biodiesels by 2010 will require far more edible oil than Europe can produce. Already large amounts of palm oil and Canadian canola are being imported to make biodiesel.
The impact of biofuels on food prices is complex. If corn and edible oils become too expensive the production of biofuels will slow down. If the price of oil continues to rise, biofuel production may rise even faster.
4. Increased speculation by financial markets
Finally, the recent rapid changes in cereal and oilseed prices have drawn the attention of the financial markets which are particularly interested in anything whose price is changing rapidly. This price “volatility” offers a chance to make huge short-term profits. With the collapse of the sub-prime mortgage market in the U.S. and the knock-on effects on stocks, food commodities have attracted great interest by speculators.
In developing countries as well, speculation has begun to play a role with traders hoarding stocks in hopes of making money as the prices continue to increase.