World Car Food Day?

Kenneth Richter

16 October 2012

Today is World Food Day and ministers are meeting in Rome to discuss what can be done about rapidly rising food prices worldwide.  Droughts this summer in the US and Eastern Europe have sparked sharp peaks in global food prices, rising by 10% in July compared to a year earlier. Staple commodities hit record highs in August and September. Maize and wheat were up 25%, and soybean oil rose 17%. But these deadly fluctuations cannot be blamed on bad weather alone.

Policy choices have created the conditions for a perfect storm of increasing demand in tight and more volatile food markets. Financial speculation on crops, diversion of food into biofuels and rising demand for animal feed for meat, mean that higher and increasingly unstable food prices are fast becoming the norm.

When global prices rise suddenly more people go hungry. An estimated 44 million people were pushed into poverty when this last happened in 2010. Women and children were hit hardest. Sudden price spikes in 2008 sparked riots in dozens of countries - a scenario which the United Nations warns could be repeated if staple foods, such as maize and wheat, jump again.

As agriculture ministers meet to discuss the next food crisis, the EU is about to take some momentous decisions that could avert or exacerbate future crises.

Firstly, the European Commission is proposing to make amendments to biofuel policy. Demand for biofuels has been found to be a key factor in rising and more volatile food prices.  This has been recognised by key international institutions such as the World Bank, WTO, OECD and FAO which have called for an end to agrofuel subsidies and mandates for this reason.

Research shows most biofuels actually accelerate rather than lessen climate change. Yet almost half of all maize grown in the US, and 60% of Europe's rapeseed is now being burned in cars. Biofuels create competition for crops between the world's hungry and its relatively affluent motorists. It's clear that drivers are winning.

Unfortunately the latest indications point to an extensive watering down of the new EU biofuel proposal due to industry pressure. It is now likely to have only a limited impact on the current demand for food crops for biofuel production.

Secondly, EU ministers and the European Parliament are about to vote on proposals that could rein in excessive food speculation. Speculation - when financial bodies reap huge profits from betting on food values - drives up prices and volatility, and must be curbed. The revision of a financial regulation, the EU Markets in Financial Instruments Directive, provides a unique opportunity to end this deadly trade. But the text is currently too weak and full of loopholes.

Unless these failings in the regulation are fixed, and limits placed on the share of the food commodity markets an investor can hold, harmful speculation will continue. Thanks to public pressure a number of banks, such as Deutsche Bank and Raiffeisen, have voluntarily withdrawn from food speculation. Now politicians must follow suit.

And lastly, agriculture ministers and the European Parliament are about to agree on a reform of Europe's Common Agricultural Policy. We currently import massive amounts of soy and maize from the Americas to feed European factory farms. We need to reduce this demand by cutting industrial meat production and feeding farm animals grass and local crops, such as beans and peas.

Farmers need to be supported to grow protein plants and rotate their crops as part of a move to a greener model of agriculture. This should be complemented with initiatives to encourage people to eat less meat and dairy. Doing so will cut Europe's dependence on imported grain commodities, and lessen the pressure exerted on tight food markets.

Repeated food crises are no coincidence. But solutions are within reach, and now is the time for our governments to grasp the opportunity. Three clear steps would help prevent future food crises and save millions from poverty and hunger.