Crude oil prices hit $120 a barrel this month, translating into gas
pump prices above $4 a gallon in parts of the United States. As a
result, the rallying cry of energy self-sufficiency is gaining
strength, reinforcing the U.S. policy of promoting renewable fuels,
particularly corn-based ethanol, to reduce dependence on imported oil.
But a different rallying cry—food self-sufficiency—is becoming
louder in many developing countries where rice, wheat and other staples
are in such short supply that food riots have erupted. China, India,
Argentina and several other countries have raised export restrictions
on key crops to ensure food supplies for their consumers. That move has
further increased world prices.
It is important to remember two key lessons from similar chaos in
world food markets in 1973-74. First, attempts to gain domestic price
stability create global price instability. And second, once policies
are established to protect food markets, they are not easily
dismantled. It took two decades for rice trade to expand in Asia, and
even then, it remained limited.
The United States must take a lead in confronting the world food
crisis. But to do so will require a genuine commitment to improving the
well-being of people around the world—and recognizing that energy
self-sufficiency at home can mean widespread starvation abroad.
In its starkest form, the global food crisis is about rising
agricultural commodity prices that place hundreds of millions of poor
people at greater risk of malnutrition. Most of the 800 million people
globally who survive on a dollar a day or less live in rural areas and
work on farms.
The two- to fourfold jump in prices during the past 18 months for
internationally traded commodities, such as rice, wheat, corn, soy and
vegetable oils, has resulted in fewer and smaller meals for the poor.
The rise in the number of malnourished people globally is only
beginning to be tallied.
High food prices have been associated with high petroleum prices.
The cost of crop production is up, the value of the dollar is down, and
biofuels are an attractive alternative to fossil fuels for
transportation. Diverting one-fifth of the U.S. corn crop to
corn-ethanol production and setting a renewable fuels mandate of 20
percent of U.S. motor fuel consumption by 2022— a fourfold increase in
15 years—has driven up prices for corn and substitute crops, especially
soybeans.
Demand for corn, soy and other livestock feeds already had been
rising due to increased meat consumption by China and other emerging
economies. Add some major weather, pest and disease shocks, and the
market for staple agricultural commodities tightened dramatically in
2006 and 2007.
Moreover, a surge in speculative activity has exacerbated market volatility.
How should the three presidential candidates, in particular, address this crisis?
For starters, the United States should retreat from its heavy
promotion of corn-based ethanol and allow the markets to settle.
Although the 2008 U.S. Farm Bill, passed by the House and Senate last
week, includes a reduction in the ethanol blending credit from 51 cents
to 45 cents per gallon, the subsidy remains high and is offset by other
biofuels production incentives.
President Bush plans to veto the bill, but both the House and the
Senate passed it with more than the two-thirds majority needed to
overturn a veto. The presidential candidates, Sens. John McCain, Barack
Obama and Hillary Rodham Clinton, were all absent for the vote.
The bill increases the Food Stamp Program by $10 billion to help
poor Americans buy food at higher prices, but there are no measures
that will assure developing countries and international markets that
global food supplies will be adequate and that prices will come down.
Congress needs to endorse the World Food Program's new strategy of
providing food aid in the form of cash instead of surplus grain
shipments, a strategy that would allow food-deficit countries to
purchase their calories regionally and thereby promote agriculture
closer to home.
It also would be wise for the U.S. Agency for International
Development to expand, not abolish, investments in agricultural
research for low-income countries.
The world can produce plenty of crops at reasonable prices for food
and feed, if appropriate agricultural investments are made. But it
cannot produce enough crops for food, feed and fuel at prices
affordable to half of the world's population.