An article published in The Economist on Dec. 6 titled “The end of cheap food” argues that the global food market is gradually entering an era of high prices. The article also analyzes how rising food prices influence living standards in countries at different stages of economic development.
As food consumption makes up a relatively high portion of expenditures in developing countries with average or low incomes, they are the most vulnerable to the possible impact of rising food prices. As could be expected, food shortages in Haiti have recently led to violent food riots.
With many big rice-producing countries restricting rice exports, the Council of Agriculture recently declared that Taiwan’s grain self-sufficiency rate had reached 90 percent and that it had a 90-day stock of domestic grain. Agriculture, however, is an industry where the climate plays a significant factor. As the harvest season only begins in June, worries about food shortages remain.
Therefore, a deliberate look at relevant issues is necessary.
A number of reasons explain soaring international food prices: First, overall raw material supplies have decreased.
The rising price of oil has created substantial demand for alternative energy sources. The US, for example, produced 85 million tonnes of bioethanol last year, compared with 15 million tonnes in 2000.
With the total output of corn remaining stable, corn fodder supplies decreased, leading to a hike in the price of corn. Many farmers then shifted their soybean plantings to corn, which resulted in a rise in the price of soybeans.
The wheat price hike was mainly the result of the sharp decline in grain yield caused by a drought in Australia. So long as transportation continues to vie with humans and animals for limited crop supplies, supplies will remain under constant pressure.
Second, demand has increased mainly because of rapid economic growth in China and India, where the rising national income has led to increased demand for meat. It is estimated that the production of 1kg of pork requires 3kg of grain feed, while the production of 1kg of beef requires 8kg of grain. If every Chinese increases pork consumption by 1kg, grain production would have to increase by 3.9 million tonnes.
At present, meat consumption per capita per year is 50kg in China and 79kg in Taiwan. It is easy to see that global food markets could be in for a strong increase in demand for food products.
As far as food policy is concerned, some academics advocate relying on international trade for the provision of sufficient necessary foods at the lowest prices and with the smallest production fluctuations. In other words, a high degree of self-sufficiency is not necessarily the policy goal.
In order to join the WTO, Taiwan deregulated rice imports in 2002 and prior to that it made a vigorous push for rice field conversion and fallow policies in preparation for the impact of market deregulation. These policies were all predicated on continued sufficient food supplies.
However, significant changes in global demand and supply meant that aside from continuing to maintain a high degree of rice self-sufficiency, there was also the question of whether Taiwan should use fallow land to produce highly demanded crops such as wheat, corn and soybeans to increase self-sufficiency.
The nation’s scattered and narrow fields as well as its climate are unfavorable to growing soybeans and wheat. More pragmatic food policies should focus on the development of alternative foods. For instance, Japan has long promoted sweet potato production as a food reserve in wartime. Other than that, the government should develop alternatives for crop feeds, such as exploring the use of agricultural waste as feed.
Of course, given the cross-strait market premise, one feasible strategy would be to focus on crop improvement and take advantage of China’s vast agricultural land to increase production to raise self-sufficiency while cutting demand on foreign products and meeting domestic demand. Food supply is vital for living standards and social and political stability, and we cannot rely entirely on imports. However, how to stabilize society and offer reasonable prices is certain to become an important part of government policy.
Lei Li-fen is a professor in the Department of Agricultural Economics at National Taiwan University.
Translated by Ted Yang
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