By Glenn Ashton · 3 Dec 2008
Last year in the run up to the global economic meltdown, all commodities became fair game for the financial casinos of Wall Street, London, Tokyo and points between. The prices of food sky-rocketed around the world, driven by several triggers but primarily by the ability to trade futures, speculative financial instruments linked to international food commodities in the same way as resources like iron, coal, oil and gold are speculated upon as a hedge against market uncertainties.
This speculation was a principal force in driving food prices to unprecedented levels. Consumers around the world were shocked by precipitous cost increases. The hardest hit segment are the poor who spend substantial proportions of their income on food.
In light of this, it is remarkable how the prices of grain commodity crops have fallen recently. Maize has fallen 36% between June and October of this year. Rice has dropped by 41% between April and October and wheat has plunged a whopping 46% since March, as quoted by the International Monetary Fund. But these reductions in food prices have not trickled down. Why?
Much of the impetus behind the increase in food prices has come from an increasingly globalised food supply. Until a few decades ago food supply was managed as a part of the strategic role of the state, mainly through institutions such as grain marketing boards.
This important role has increasingly fallen under the control of transnational grain traders like Cargill, Archer Daniel Midland and Bunce. These corporations have, as their primary consideration, their capital profit and return to investors. Food security and consumer costs do not form part of their business plan. Neither do such niceties as the national or international strategic values of food. Cargill was recently nominated as one of the 10 worst corporations for 2008 for, amongst other reasons, putting profits ahead of people and food security.
Couple this concentration of control of food commodities to the distorting impacts of agricultural subsidies in developed nations and policies pursuing food based 'biofuels' and we have a perfect storm.
These market realities make it critical that smaller nations, such as South Africa, re-examine their priorities regarding the relationship of food security to the maintenance of peaceful and orderly national development. Southern nations should, as far as is practical, decouple themselves from the vagaries of the market, through providing strategic national support mechanisms for agricultural production that aim to maximise national food sovereignty. Agriculture and food production should become issues of national strategic importance.
Prioritising food security has been actively undermined by structural adjustment programmes forced upon developing nations by institutions such as the World Bank and International Monetary Fund. These first world agents have forced indebted nations to move away from agricultural projects that concentrate on food security to those that maximise tangible gross domestic product (GDP) financial flows.
Instead of rural farmers being able to feed themselves and local communities, small nations have been forced to pursue farm consolidation and industrial food production methods. This has forced subsistence farmers into the invidious position of being unable to compete against globally distorted market prices, increasing social dislocation and negatively affecting food security amongst the most vulnerable sectors of society.
So how can smaller nations manage to shift away from this economic press ganging?
The first thing is a profound need to hang tough, in concert with their natural allies within the global south, in resisting corporate-driven G8 and OECD agendas. The recent establishment of groups like the G21 and the coalescence of the Brazil, India, China axis, has created a powerful counterweight to the G8 and enabled the developing world to flex its collective muscle. The continued rejection of the Doha Round of the WTO, mainly on agricultural policy issues, has revealed a chink in the armour of the dominant global players. But this is not enough; besides dealing with bi- and multilateral agreements, there needs to be a clear focus on what needs to be done at national and local levels to ensure food security.
Developing nations must develop and promote policies that seek to maximise agricultural potential and output. Food security and sovereignty must be prioritised. The International Food Policy Research Institute recently wrote that despite pledges by African nations to increase spending on agriculture to ten percent of GDP by 2008, only seven nations had achieved these levels to date. Although spend on agriculture has increased, it must be accelerated, not only because Africa derives an estimated 30-40 percent of GDP from agriculture but more importantly because food security and self sufficiency must become a priority.
It is also important as to how this money is spent. For instance, the food security NGO Grain found in a recent study of the government funded 'Massive Food Production Project' in the Eastern Cape province, that the public private partnership between Monsanto and other genetically modified seed corporations and the government had not only failed in its aims, but had directly affected locally developed non-proprietary seed supplies, undermining local food security.
On the other hand several other studies have shown how, through sharing local techniques of improved agro-ecological farming practices, that yields can be sharply improved. Projects in Malawi, Kenya, Madagascar have seen yields improve by up to 250%, while increasing farm diversity and providing a more balanced diet.
In South Africa, there has been a notable lack of state run extension packages to assist new and emerging farmers. Extension services have tended toward privatisation through the influence of corporate seed companies, promoting industrial agricultural models. This has had an unhealthy influence on national agricultural policy and must be rectified.
South Africa is almost alone in Africa in its lack of local food markets. Centralised markets in Cape Town, Johannesburg and Durban cater almost exclusively for industrial agricultural producers.
The state should urgently facilitate the implementation of a network of local marketplaces where not only can produce be sold, but perhaps more importantly, information, seed and knowledge can be shared between smaller and emerging farmers. These markets can feed into regional markets, in turn, supplying the existing centralised market system, creating a practical three tier system.
Throughout Africa markets are the lifeblood of rural and peri-urban communities. If this shortcoming is not addressed in South Africa, the huge potential to enhance food security by bringing new and emerging farmers into the fold is almost bound to fail.
This takes us back to the starting point. Through corporate-controlled food markets, no benefits have devolved to consumers, even as commodity prices have fallen. The primary reason for this is the commercial reality of investor driven middlemen. These include millers, distributors, retailers and resellers. These entities create inflationary pressure as they are forced to provide ever-increasing levels of profit for shareholders. A strong argument can be made that the shortcomings of the neo-liberal capitalist system are primary drivers of food inflation – if not most aspects of inflation.
Farmers are usually forced to rely on middlemen to purchase and market their produce. They become trapped in a situation where they have to accept what they are offered. Caught between increasing input costs and diminished payment margins, they are sandwiched between barren ground and cloudless skies. The dairy industry in South Africa is a prime example.
Where infrastructure and investors are lacking, the adoption of co-operative farming and marketing practices has often been successful. The re-establishment of marketing boards for commodities, coupled to state support of local markets, can assist market stability for both farmers and consumers. It also seems sensible to implement institutional protection for local farming against international market distortions such as subsidies and state support within wealthy nations and blocs.
The global financial crisis holds yet another hidden risk. The tightening of global credit, high energy prices and the food price increase has had a serious impact on the balance of payments of poorer nations. Food shortages have already caused food riots and other social disruption around the world. Again, the only realistic solution is to concentrate whatever capital and infrastructural resources are available into supporting local agricultural production. It is not only farmers that are squashed between barren ground and cloudless skies but the general public too.
The double whammy of the spike in global food prices and the financial crisis must focus our minds on the urgent need to concentrate far greater resources toward local, national and regional food security.
That this has not yet occurred is concerning. Food shortages are the perfect trigger for social instability. Even if food commodity prices continue to decline, developing nations especially need to concentrate on developing food security as a matter of the highest priority, for reasons of national and international security.
Food and shelter are basic human needs. A fair return, for the producers, on the production of food is a basic requirement for continued food security.
The absorption of food into a world wide trading system developed for non-perishable commodities such as iron an steel does not make sense. Food should be traded as locally as is possible. I am in total agreement with Glenn. Local surpluses could then go on to regional markets and regional surpluses could go onto national markets.