Sun, Jun 15, 2008 - Page 9 News List

The end of the era of plenty is the start of food jitters worldwide

Beware ... it isn’t only poor countries that will be adversely affected by the growing problem of food supply shortages. Wealthier countries cannot avoid the issue

By Hardin Tibbs And Kate Bailey  /  THE GUARDIAN , LONDON

The rising global population means not just more mouths to feed, but more sophisticated tastes to satisfy as developing countries grow wealthier. And as demand for food increases around the world, supply capacity is struggling to keep up with these changing requirements — with potentially dire consequences for every nation.

At the three-day summit hosted earlier this month by the UN’s Food and Agriculture Organization (FAO) in Rome, world leaders discussed rising food prices. Without direct and effective action, the poor of the world face great suffering. In the last 12 months alone, according to the FAO, 100 million have joined the world’s hungry and 22 countries remain particularly vulnerable to chronic hunger.

But in developed countries, too, the availability and cost of food will begin to carry a political, economic and social significance not seen for generations.

To help understand the implications of change for the EU and the UK, Chatham House — home of the Royal Institute of International Affairs, an independent international affairs think tank — has developed four scenarios that explain possible future pictures of global food supply. These have been used to help representatives of the UK’s wheat and dairy supply networks to focus on the challenges they face and the choices they may have to make:

‘JUST A BLIP’

Higher prices trigger a major investment in production capacity. In broadly the same timescale of two to three years, good weather allows global yields to recover. Food input costs decline as geopolitical conditions improve and the oil price drops, undercutting biofuel production. Food prices drop back, though they remain volatile because of continuing speculative investment.

This scenario demonstrates the extent to which all the main price-determining factors would have to play out favorably if food prices are to fall back to more familiar levels. As a possibility, it is considered by many in the UK food supply industry to be too complacent. There is a widely held view that even if some easing back in commodity prices is seen, something more akin to structural change is occurring in global food production and supply.

FOOD INFLATION

Global demand for food continues to grow and persistently outpaces production growth, albeit by a narrow margin. Investments in production technology ensure that global food production capacity is not overwhelmed, but the proportion of personal income spent on food ends its long-run downward trend.

The economic logic of this scenario is currently a topic of debate among investors. The world economy appears to be heading for a recession, and under these conditions commodity prices would normally fall in expectation of reduced economic activity. Yet they remain high. Sustained food inflation will create a number of challenges on the domestic front and all sectors will find it difficult to access the capital investment necessary to meet raised productivity targets.

INTO A NEW ERA

Climate change worsens and global oil-supply contracts keep food supply input costs high. Per capita production falls steadily. A dramatic shift in food production and manufacturing in general becomes unavoidable; the new emphasis is on “regenerative,” rather than “extractive,” practices.

This scenario will require the development of new supply concepts, policies and structures, with the drive for technological innovation and the need for significant levels of agricultural investment seen as converging concerns. Whether sufficiently high yields can be achieved through an alternative production paradigm is certainly controversial, particularly as the whole concept entails change to existing models of food production and delivery. But many observers maintain that numerous pockets of innovation are already pushing in this direction.

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