Entries tagged with “food prices”.


The Guardian recently ran a piece titled “Food scarcity: the timebomb setting nation against nation.” It was retweeted a lot across my social network, enough that I feel the need to respond to it.  So, here it goes.  The article is yet another example of the remarkably durable narrative of production crisis that dominates discussions of food security today.  The article operates from the assumption that we are running out of food, and then selectively interprets quotes from Lester Brown and Oxfam to support this attention-grabbing story.   The problem here is that Brown/Oxfam make much more nuanced claims than suggested by the headline, which perpetuates the neo-Malthusian agenda of scarcity that dominates modern food security.  In short, I find the very title and tone of the article to be terribly irresponsible – in attempting to bring attention to the very serious issue of global hunger, this article sets back intelligent conversation about the causes of the problem, and therefore its solutions.

It takes little but careful reading to see that the Guardian piece doesn’t actually have the evidence to say that food scarcity is a geopolitical timebomb.  Brown never says we have an absolute scarcity of food in the world, just increased levels of pressure on the food system.  The issue of increased pressure is not, as the article suggests, about production, per se: it is about a complex global political economy that intersects in complicated ways with the remnants of colonialism, failed development, and environmental change in particular ways in specific places.  Sure, US grain production is down 15%…but that isn’t a big deal against the GLOBAL 40% rate of waste in the food system.  We can cover the current US shortfall (indeed, more or less any conceivable global shortfall) with ease just by cleaning up some low-hanging fruit in the global supply chain, such as improving the transportation networks from farm to market in the Global South.

The only actual argument for scarcity in the article is buried down the page, in Evan Fraser’s claim:

“For six of the last 11 years the world has consumed more food than it has grown. We do not have any buffer and are running down reserves. Our stocks are very low and if we have a dry winter and a poor rice harvest we could see a major food crisis across the board.”

It seems to me that Fraser is misreading his evidence. It is possible that the world has consumed more food than has been available on agricultural markets…but this is NOT THE SAME THING as the amount of food grown.  In each of the last 11 years, humanity grew much more food than it consumed. It’s just that each year we then wasted about 40% of that production as it either rotted on the way to market (a common problem in the Global South) or we threw it away uneaten (a problem in the wealthy countries).

So if there is no global food production crisis, why are we seeing land grabbing that will set “nation against nation”?  After all, if there is plenty of agricultural production globally, land-grabbing for food supplies is nonsensical behavior. Prices are where they are because the global food system has significant problems that could be addressed relatively easily and at relatively low cost (when compared to the challenge of completely reengineering an agricultural ecosystem). Anyone analyzing things in a serious way should see this, and recognize that food prices are a bubble that could be popped by a serious infrastructural development push.  And, as it happens, they have.  If you read the article carefully, you realize that there is no evidence in this article that land grabs are for food as much as they are for biofuels. Oxfam’s report is more to the point – the planting of biofuels has to be taken seriously, as that does take arable land out of local production, which can stress local food systems.  But if anyone thought there was a serious global food shortage, they would not buy arable land for biofuels – they would buy it for food itself, as after a certain point food prices become inelastic. The very fact the land grabs are heavily for biofuels tells us all we need to know about the idea of a global food shortage.

Rising food prices in today’s world just signal a stress point on today’s (astonishingly inefficient) food system. Leveraged correctly, these pressures could bring about dramatic changes in global food markets, as saving even half of the food that rots on the way to market in the Global South would more than offset all but the most extreme local food deficits.  This is an opportunity to make changes in the food system that are immediate and relatively cost-efficient.  For all of the noble intents here, ginning up cries of false scarcity in the name of focusing attention on global hunger drags the policy conversation away from real, achievable solutions.

Friend/colleague/journalist Keith Kloor has a very interesting piece about the problematic character of some research that recently purported to cast doubt on the health safety of GMOs.  The piece is an excellent effort to push back against crap science and crap evidence in the GMO debate, and stands as an interesting example of a general need to critically evaluate “scientific” claims about any number of issues from the harmful character of vaccines to those would deny anthropogenic climate change.  However, the piece, in making a strenuous argument for evidence, overreaches in its conclusions and too-quickly dismisses the ecological issues associated with GMOs – exactly the opposite outcome Keith was seeking.

In general, I agree with Keith that the screaming about the health impacts of GMOs has greatly outstripped the evidence, but I take issue with the idea that GMOs have been largely proven safe all around.  There remain significant questions about ecological impacts that have not attracted a solid scientific consensus (i.e the impact/cost/tradeoffs of gene flow between GMOs and the surrounding ecology, pest resistance, etc. –.  The evidence base in this area is pretty small, and ecological systems are very diverse and complex, so the levels of uncertainty here are fairly epic (Pamela Ronald, whose article Keith references approvingly, even notes that the ecological impacts of GMOs are still an open issue).  Honestly, Keith is too dismissive of this challenge:

Some of these folks are worried about new genes being introduced into plant and animal species. But humans have been selectively breeding plants and animals pretty much since we moved out of caves, manipulating their genes all the while. The process was just slower before biotechnology came along.

Modern genetic engineering does not have all that much to do with selective breeding.  We are doing things in GMOs that could not occur in nature, which is rather different then applying what amounts to a modified evolutionary force (human selection of seeds to plant the next season or animals to breed) in the selection of traits within certain crops.

Another big concern that has been widely reported is the “rapid growth of tenacious super weeds” that now defy Monsanto’s trademark Roundup herbicide. That has led farmers to spray their fields with an increasing amount of the chemical weed-killer. Additionally, some research suggests that other pests are evolving a resistance to GMO crops. But these problems are not unique to genetic engineering. The history of agriculture is one of a never-ending battle between humans and pests.

Again, this is a bit off to one side.  Yes, agriculture has always been about the radical simplification and management of ecosystems in a complex world, and therefore is indeed an endless battle for control between farmer and surrounding ecology.  What this elides, though, is the fact that some of these GMOs have made things harder for us in the long run.  It is hard to sell this as a good, or even neutral, outcome.

I raise this issue because of its implications for conversations about food security. People (some, but not all) working in food security tend to be a bit dismissive of the ecological concerns surrounding GMOs, loosely equating them with the human consumption concerns that have largely been disproven at this point.  The response to insistent questioning about ecological impacts is the argument that, on balance, GMOs have done more good than harm and/or that GMOs are necessary for global food security going forward.  The “more harm than good” argument seems to me based on evidence that is hardly complete, and often references a glowing, startlingly unproblematic vision of the Green Revolution.  The “we need GMOs” is a crisis narrative of food production that drives current and future claims about their value.  At the moment, much of the food security world is arguing that there is a dire food production crisis either coming or just arrived (embodied in the 2008 and 2011 food price spikes), and therefore we cannot wait for the burden of proof surrounding any issue associated with GMOs – we must act now!  This crisis narrative effectively reduces anyone who raises objections to an all-out push for more production to some sort of monster who would rather let innocents starve than engage with the messiness of the real world. Basically, precaution is conflated with timidity, making those who show concern over the ecological impacts of GMOs into the food security equivalents of Neville Chamberlain.

This would perhaps be true…if, in fact there were a global production crisis and we needed GMOs to feed everyone. This is a much harder thing to sell, however, when one realizes that the world produces roughly twice as much food as needed to feed everyone adequately each year.  There isn’t a global production crisis (though there are local production crises that arise from complex causes and need to be addressed in locally-specific ways). I’ve said it before, and I will say it again: globally, there is plenty of food. Now, and likely for quite some time. Period.

In the twitter conversations that emerged around Keith’s article, Robert Wilson, a mathematical ecologist, argued for “an adjusted precautionary principle where we consider the risks of inaction, as well as action.”  This strikes me as both reasonable and necessary when discussing food security policy and programs these days.  If we did this, though, I think we would find that the risks of inaction are, in fact, substantially smaller than the risks of action – this is not to say there are necessarily huge risks to action, just that when you are producing twice the calories needed already, the risk from doing nothing is, at least in the short term, pretty small.  There is time to test more crops, more widely, under more conditions, before we arrive at any production crunch.  There is no need to rush.

In short, we need to be sure that our efforts to push back against crap science (which is really what Keith was doing in his article) don’t overreach and inadvertently empower narratives and arguments that are not supported by the evidence – exactly the opposite outcome Keith sought.

 

Over at the Guardian, Damian Carrington has a blog post arguing that “Food is the ultimate security need.”  He bases this argument on a map produced by risk analysts Maplecroft, which sounds quite rigorous:

The Maplecroft index [represented on the map], reviewed last year by the World Food Programme, uses 12 types of data to derive a measure of food risk that is based on the UN FAO’s concept. That covers the availability, access and stability of food supplies, as well as the nutritional and health status of populations.

I’m going to leave aside the question of whether we can or should be linking food security to conflict – Marc Bellemare is covering this issue in his research and has a nice short post up that you should be reading.  He also has a link to a longer technical paper where he interrogates this relationship…I am still wading through it, as it involves a somewhat frightening amount of math, but if you are statistically inclined, check it out.

Instead, I would like to quickly raise some questions about this index and the map that results. First, the construction of the index itself is opaque (I assume because it is seen as a proprietary product), so I have no idea what is actually in there.  Given the character of the map, though, it looks like it was constructed from national-level data.  If it was, it is not particularly useful – food insecurity is not only about the amount of food, but access to that food and entitlement to get access to the food, and these are things that tend to be determined locally.  You cannot aggregate entitlement at the national level and get a meaningful understanding of food insecurity – and certainly not actionable information.

Further, you can’t aggregate food markets or prices at the national level and get anything meaningful with regard to food security – let’s compare Maplecroft’s map with FEWS-NETs maps for the immediate future (August-September 2011):

First Maplecroft:

Now FEWS-NET:

While FEWS-NET does not have global coverage, compare their maps to those of Maplecroft and you see two things: One, FEWS is clearly working at a much finer geographic scale, because they have on-the-ground information about actual markets and access, as well as a deep understanding of climate and livelihoods through which to contextualize their grounded data.  This is what it takes to represent variable vulnerability within a country.  The variability you see on their map illustrates my point about the problems of national-level statistics – clearly food insecurity is a regional-to-local problem in every country, even Somalia.  Two, FEWS is not projecting major risk in the same places as Maplecroft, whose map has painted most of equatorial and dryland Africa as problematic at best.  Now, FEWS-NET’s medium-term projections (October-December 2011):

Again, no real resemblance to the Maplecroft map.

Now, you can argue that the Maplecroft map is aimed at a different goal than the FEWS-NET maps, as Maplecroft is trying to create a risk-assessment picture of food security in the region.  However, Maplecroft’s timescale is unclear (does it cover the next 6 months? 1 year? 5 years?), and its data is so over-aggregated as to be non-actionable.  You can’t build policy or programs from this, and I would argue that you can’t really assess the risk of food insecurity from the map or the underlying index either.  FEWS-NET’s maps are what actionable information looks like . . .

I appreciate the point Carrington is trying to make on his blog – food security is a really important issue.  But if we are to address the challenges of hunger and conflict, we need to build our understanding of the connection between them from meaningful data . . . and probably work from the outstanding material already available via FEWS-NET and others.



Pat Michaels has a rather astonishing blog called Climate of Fear at Forbes.com.  Too bad for Forbes – they are providing a platform for a serious climate crank who I think is far too well-educated and smart to misunderstand the things he misrepresents in his public statements and writing.  His recent post on climate change and food security is a classic of the genre – and fits very well into the strategies that Naomi Oreskes and Erik Conway so brilliantly lay out in Merchants of Doubt (which, if you want to understand the professional climate change denial camp, you absolutely must read).  It requires debunking.  Hell, the man’s blog requires debunking, post by post.

So, what does Michaels have to say about climate change and food security?  Well, in a nutshell he doesn’t see how climate change is a problem for agriculture – indeed, he seems to suggest that climate change will do good things for agriculture.  However, a careful read of the article for what it does and does not actually say, and what evidence it draws on (mostly tangential), demonstrates that this is a piece of misdirection that, in my opinion, is criminal: insofar as it causes anyone to doubt the severity of the challenge in front of us, it will cost lives.  Lots of lives.

Michaels begins with a classic of the denial genre – he goes after a New York Times article not on its merits (indeed, he never addresses any of the article’s content), but by lumping it in with every previous warning of what he calls “environmental apocalypse.”  Except, of course, that the only call he actually cites is the now legendary “global cooling” fear of the 1970s – a fringe belief that was never embraced by the majority of scientists (no matter how hard the denial crowd wants you to believe it). That concern was based on patterns of natural cycles of heating and cooling that some felt were timed to push us back toward another ice age, but it was not the consensus view of scientists at the time.  Michaels knows this.  Either that, or he was a very, very bad graduate student, as he claims to have recieved his doctorate on the wings of “global cooling.”

Then Michaels moves to a false correlation (or non-correlation) – temperatures rose by .75 degrees C over the 20th Century (about 1.35 degrees Farenheit), but Michaels argues that since “U.S. corn yields quintupled.  Life expectancy doubled.  People got fat” clearly there is nothing to worry about.  Except, of course, that temperature/CO2 has relatively little to do with these results – biotech and improved farming techniques were much, much more important – and one could argue that these techniques and biotech have persevered in the face of conditions that might have, in many parts of the world, led to declining yields.  Hell, it is well known that the increases in per-capita food availability worldwide are not evenly distributed – According to the Food and Agriculture Organization of the United Nations (FAO), in sub-Saharan Africa there is less food per person than there was thirty years ago.  Either Michaels has a distressingly flawed understanding of correlation and no real understanding of agricultural development over the past 100 years, or he is willfully misdirecting the reader.  Either case should disqualify him from writing this article.

Besides, temperature is only one concern (it is possible that some parts of the globe will warm several degrees Celsius, pushing some current staple crops out of the temperature bands in which they can germinate) – Michaels makes no mention of precipitation, except to basically trot out the old “CO2 is plant food” argument by saying “greenhouse warming takes place more in the winter, which lengthens growing seasons. With adequate water, plants then fix and yield more carbohydrate.”  This is almost hilarious, as one of the biggest problems we face is finding adequate water. Rising atmospheric temperatures have driven changes in wind patterns and atmospheric moisture content which, in turn, have shifted rainfall patterns over the past century or more.  Today CO2 is not able to serve as plant food in many parts of the world that most need it because the very injection of more CO2 into the atmosphere is creating declines in the rain needed to make that CO2 useful to plants.  Unless Michaels is willing to argue that rainfall patterns have not shifted, and therefore is willing to ignore rain gauge data from around the world, he has just offered the reader another misleading argument.

To address these empirically-documented challenges, farmers have adopted new crops, some biotech and improved irrigation tech has helped (though in parts of sub-Saharan Africa, a region in which most agriculture is rain-fed, farmers are getting hammered by precipitation change) , but we are moving into an era where the vast bulk of work on GMOs is “defensive” – that is, trying to hold the line on yields as environmental conditions deteriorate.  This is not a recipe for continued rising yields in the future – which makes a few of his later claims really, really embarrassing – if he had shame, that is.  His claim that the continued increase in per capita grain production is going up means that climate change has had no effect is a logical fallacy – he is not factoring in how much production we have lost because of climate effects (and we are losing production – Southern Africa is one example).  His claims about rising wheat production in the future, even in a world free of wheat rust, presume either current environmental conditions will hold or that there will be significant technological advances that boost yields – but these are assumptions, not facts that can be stated with certainty.

In short, Michael’s alignment of temperature change and improving human conditions are basically unrelated . . . unless one wants to (rightly) note that many of the things that allowed us to live longer and get fatter required manufacturing processes and transport mechanisms that burned fossil fuels, thus warming the atmosphere – in other words, causality runs the other way.  We live longer and better, which is in part causing the warming of the atmosphere.  But Michaels can’t even consider that direction of causality . . .

I do agree with Michaels that using food crops for ethanol is and was stupid.  Of course, I was saying this (along with a lot of other colleagues) at author meetings of UNEP’s Fourth Global Environment Outlook in 2005.  The decision to push biofuels was political, not scientific.  Welcome to the party, Pat – we’ve already been here for a while, but there might still be some beer in the keg . . .

So, to summarize – Michaels has created a post that relies on false correlation, logical fallacy and misdirection to create the idea that climate change might not be a problem for agriculture, and that it might even be good for global production.  But he does not cite the vast bulk of the science out there – and ignores the empirical literature (not theory, not conjecture – measured changes) to create a very deceptive picture that minimizes the slowly intensifying challenges facing people living in many parts of the Global South.  I invite Dr. Michaels to look at the FEWS-NET data – not just contemporary, but historical – on the East African/Horn of Africa climate.  Empirical observation (again, measured, verified observations, not projections) tells us it is drying out* . . . and has been, for some time, massively compromising both crops and livestock, the backbone of livelihoods in Southern Ethiopia, Somalia and Northeastern Kenya.  As all hell breaks loose in that region, and the US Government considers using the term famine for the first time in a decade to describe the situation on the ground, it seems to me that Michaels’ efforts at misdirection rise beyond nuisance to a real question of ethics that Forbes would do well to consider before publishing such mendacious material again.

 

*very important note: FEWS-NET is agnostic as to the causes of the drying out – at this time, they do not care what causes it, they need to document it to better organize US Government and multilateral food aid delivery.  They would have jobs even if climate change did not exist, as the weather does vary from year to year no matter what, and therefore food insecurity would vary year by year.

The AP is running a story on food prices – and it is heavily focused on the problem of commodities speculation.  Actually, it is heavily focused on French President Nicholas Sarkozy’s comments on the causes of the food price increases.  While Sarkozy acknowledged the importance of issues like climate change, he quickly moved past these causes:

Sarkozy said the difficulties go far beyond the whims of nature. He said financial market specialists — instead of agricultural trading houses — had taken over the global farm market and called for change.

“Take the Chicago market,” said Sarkozy, listing how the derivatives exchange totals 46 times the annual U.S. wheat production and 24 times that of corn. He said 85 percent of the contracts on commodities futures markets are held by purely financial players “with no link to the commodity itself.”

“The example shows to what extent our world has lost a sense of value, a sense of reality, a sense of capitalism to serve the development and happiness of people,” Sarkozy said.

It is worth noting that Sarkozy is no leftist . . . though he will likely be painted as one for that last sentence.  Then again, anyone who notes that markets might have negative as well as positive effects will be painted as  anti-capitalist/naive/out-of-place ideologue (see the comments on Dot Earth’s mention of my concerns over climate change communication).

Let me note that Sarkozy is not demonizing all speculation – nor do I.  As I discussed in an earlier post, speculation plays an important economic role that can distribute the stresses that lead to future price spikes over time, thus ameliorating future crisis.  However, this is not to say that speculation should just run unregulated – basic regulation that keeps speculation within productive parameters would likely enhance its value in the food security arena.  (See this IFPRI forum for more on the role of speculation in world food markets)

However, more information for these markets would probably help as well.  While the USDA and other organizations offer estimates of global and sometimes national-level agricultural production, it would be good to have concrete, sub-national datasets on ag production updated in real time – this would remove some of the uncertainty in commodities markets that can then be leveraged into arbitragable price instability . . . and that alone might start to clean out the more problematic players in agricultural commodities markets.

The other day, I posted about the convergence between my own qualitative findings on the food security outcomes of food price instability and those of Marc Bellemare, Chris Barrett and David Just: that, at least in various parts of Africa, such instability was most likely to impact the middle and upper income cohorts more than the lower income cohorts of a given population.  However, I jumped too quickly in assuming that their dataset included rural and urban households – as Marc pointed out on his blog, they used a panel of rural household surveys.  So my initial argument about convergence does not hold up, as they did not consider the urban context in their work.

This is not to say that I am backing away from my assessment of the vulnerabilities of urban populations to this sort of challenge – I stand by it, having seen it, if only anecdotally, in towns and cities in Ghana over the past 13 years.  Urban populations are generally much more dependent on markets for their food supply than those living in rural areas (though this is not always true), and therefore price instability does create significant livelihoods uncertainty that is very difficult to manage, especially for the urban poor.  I therefore stand by my argument that we need to be keeping a close eye on the relative impact of price volatility on urban and rural populations, as the impacts of such volatility is likely to have very different impacts on these groups.

But recognizing that Bellemare et al’s work only addresses rural outcomes is not a problem for my argument about what I am loosely calling temporary deglobalization as a strategy for managing price instability (and price increases) – indeed, I think it strengthens the argument because it means that their dataset is now commensurate with mine, which was also rural.  As I argued in an extended comment on Marc’s blog:

The rural farmers most hit by price instability are those most integrated with global markets – the ones least able to deglobalize, as it were, when things get uncertain . . . Meanwhile, the bottom 60% is not as engaged with markets in which price volatility matters, and therefore can back away from them in terms of how they use their crops. In my work in Ghana, I found very few true cash crops (in the area I was working). Instead, some crops were treated like “cash crops” in years where price conditions and farm outputs of staple crops were favorable, and as staple crops when either prices were not favorable (including periods of volatility) or outputs of other staples used for subsistence were not adequate to meet household food needs. (Note: in many cases, the treatment of a crop as “cash” or “staple/subsistence” was highly gendered as well). The real difference between the rich and poor (relative terms in the Ghana sample) is the overall livelihoods strategy – one strategy (seen among the wealthier) is much, much more engaged in production for local markets, while the other (seen among the poorer) hedged market production with significant subsistence production (again, highly gendered). In years of volatility (or really in the face of most shocks), the market-oriented livelihoods were simply less resilient than the more diversified livelihoods strategies of the poorer households.

Or, as Marc himself noted in his response to my post on his blog:

[The wealthier] households tend to be hurt by price volatility because they are producers and therefore net sellers of most of (if not all) the seven commodities retained for analysis (i.e., coffee, maize, beans, wheat, teff, barley, sorghum).

So this means that the “temporary deglobalization” argument is not merely a rural-versus-urban argument, but one that can separate households in the same rural community.  This, I think, strengthens one of the arguments I was making in my original post:

  • Demanding that rural producers orient themselves toward greater and greater integration with global markets in the absence of robust fallback measures (such as established, transparent microinsurance and microsavings initiatives) will likely extend the impact of future price instability further into the poorest populations.

UPDATE: Marc Bellemare pointed out some issues with this post, which I have addressed here.  These issues, though, strengthen the argument about strategic deglobalization . . .

§§§§§§

There have been an interesting series of blog posts going around about the issue of price speculation in food markets, and the impact of that speculation on food security and people’s welfare.  Going back through some of these exchanges, it seems to me that a number of folks are arguing past one another.

The most recent discussion was spurred by a post on the Guardian’s Global Development blog by John Vidal that took on the issue of speculation in food markets.  In the post, Vidal argues that food speculation is a key driver of price instability on global food markets, which results in serious impacts for the poorest people in the world – a sort of famine profiteering, as it were.

The weakness of this post, as I see it, are twofold.  First, it doesn’t take the issue of price arbitrage seriously – that is, how speculation is supposed to function.  Aid Thoughts, via one of the comments on Vidal’s post, takes Vidal to task for this.  As Aid Thoughts/the commenter point out, the idea behind speculation is to pull future price impacts of shortage into the present, stimulating responses to future shortages before they occur.  Thus, a blanket condemnation of speculation makes very little sense from the perspective of one who wants to see food security enhanced around the world – without speculation, there will be no market signal for future shortage, creating a world that addresses shortages in a reactive instead of proactive manner. This is a completely fair critique of Vidal, I think.

However, neither Vidal nor those responding to him actually address the evidence for significant market manipulation, and the intentional generation of instability for the purposes of profiteering.  This evidence first emerged in a somewhat anecdotal manner in Fredrick Kaufman’s “The Food Bubble: How Wall Street starved millions and got away with it.”  In this article, Kaufman uses a fairly limited number of informants to lay out a case for the intentional manipulation of wheat markets in 2008.  It is an interesting read, though I argued in an earlier post that it suffers from trying to be a parable for the pervasive presence of complex investment vehicles in the modern world.  And in the end, its findings can hardly be called robust.

Though Kaufman’s argument might, by itself, be less than robust, it received a serious empirical boost from the International Food Policy Research Institute (IFPRI) in the fall of 2010.  In a discussion paper that remains underreported and under-considered in food security circles (trust me, it is difficult to get anyone to even talk about speculation in program settings), Bryce Cooke and Miguel Robles demonstrate quantitatively that the dramatic price rises for food in 2008 is best explained by various proxies for speculation and activity on futures markets.  Now, we can argue about how large an impact that activity had on actual prices, but it seems to me that Cooke and Robles, when taken in concert with the Kaufman piece, have demonstrated that the speculation we see in the markets right now is not merely a normal market response to potential future shortage – indeed, the Food and Agricultural Organization (FAO) of the United Nations has been arguing for months that there are no likely supply issues that should be triggering the price increases we see.  In other words, while it is foolish to simply blame price arbitrage for food insecurity, it is equally blind to assume that all of those practicing such arbitrage are doing so in the manner prescribed in the textbooks.  Someone will always try to game the system, and in tightly connected markets, a few efforts to game a market can have radiating impacts that draw in honest arbitrage efforts.  There is need for regulatory oversight.  But regulation will not solve all our food problems.

But this all leaves one last question unanswered: what is the impact of price instability, whether caused by actual likely future shortages or by efforts to game markets for short-term profits, on the welfare of the poor?  Vidal, Kaufman and many others assume that the impacts are severe.  Well, maybe.  You see, where matters (again – yep, I’m a geographer).  In a very interesting paper, Marc Bellemare (along with Chris Barrett and David Just) demonstrates that, at least in Ethiopia:

contrary to conventional wisdom, the welfare gains from eliminating price volatility would be concentrated in the upper 40 percent of the income distribution, making food price stabilization a distributionally regressive policy in this context.

This finding may be a shock to those working in aid at first glance, but this finding is actually intuitive.  In fact, in my book (out tomorrow!) I lay out a qualitative picture of livelihoods in rural Ghana that aligns perfectly with this finding.  In Bellemare et al, I would bet my house that the upper 40% of the population is that segment of the population living in urban areas and/or wealthy enough to be purchasing large amounts of processed food.  Why does this matter?  This is the segment of the population that typically has the most limited options when food prices begin to get unstable.  On the other hand, the bottom 60% of the population, especially those in this cohort living in rural areas (it is unclear from the study how much of an overlap between poor and rural there is in the sample, but I am betting it is pretty high), has a much more limited engagement with global food markets.  As a result, when food prices begin to spike, they have the ability to effect a temporary partial, or even complete, disengagement from the global market.  In other words, much as I saw in Ghana, this study seems to suggest that temporary deglobalization is a coping strategy that at least some people in Ethiopia use to guard against the vagaries of markets.  Ironically, those best positioned to effect such a strategy are the poorest, and therefore they are better able to manage the impact of price instability on food markets.

In short, I would argue that Marc’s (and his co-authors’) work is a quantitative empirical demonstration of one of my core arguments in Delivering Development:

2. At globalization’s shoreline the experience of “development” is often negative. The integration of local economies, politics, and society into global networks is not the unmitigated boon to human well- being presented by many authors. Those living along the shores of globalization deal with significant challenges in their lives, such as degrading environments, social inequality that limits opportunity for significant portions of society, and inadequate medical care. The integration of these places into a global economy does not necessarily solve these problems. In the best cases such integration provides new sources of income that might be used to address some of these challenges. In nearly all cases, however, such integration also brings new challenges and uncertainties that come at a cost to people’s incomes and well- being. (pp.14-15)

I’m not suggesting Marc endorses this claim – hell, for all I know he’ll start throwing things when he sees it.  But there is an interesting convergence happening here.  I’m glad I met Marc at a tweet-up in DC a few weeks ago.  We’re going to have to talk some more . . . I see the beginning of a beautiful friendship.

In summary, while efforts to game global food markets do exist, and have very serious impacts on at least some people, they do not crush everyone in the Global South.  Instead, this instability will be most felt by those in urban areas – in the form of a disaffected middle and upper class, and a large cohort of the urban poor who, lacking alternative food sources, might be pushed over the brink by price increases.  The policy implications are clear:

  • We need to be watching the impact of price increases on urban food insecurity more than rural insecurity
  • Demanding that rural producers orient themselves toward greater and greater integration with global markets in the absence of robust fallback measures (such as established, transparent microinsurance and microsavings initiatives) will likely extend the impact of future price instability further into the poorest populations.
  • We need to better understand the scope of artificially-generated instability and uncertainty in global food markets, and establish means of identifying and regulating this activity without closing price arbitrage down entirely.

Ah, The Leaks that Shall Not Be Named (if you work for the US Government, at least) seem to have some amusing data on one of our banks here in the US.  This is not new news – Assange mentioned this last month.  But I like this piece on DealBook on who really is freaked out by this . . . turns out it is the government, again.  I agree completely with the author – pretty much nothing that is dumped would surprise me or much of the public anymore.  We know we got screwed . . . well, at least some of us have figured this out.  The rest of the population seems to be preoccupied by . . . well, honestly I have no idea what the hell people are looking at anymore.  Where is the collective rage?  Why hasn’t Congress rammed serious regulation of the financial industry through in fear of a pitchfork-wielding constituency?  Oh, right, Simon Johnson covered that . . .

All that aside, as the piece in DealBook points out this new dump of documents might shed some light on just how close the relationship between the financial industry and the government really is.  If, as Johnson claims, the financial industry has more or less captured the government in a sort of quiet coup, there may well be evidence of this – such as clear instances of regulators ignoring evidence of illegal acts, or warning institutions to change their behaviors before the regulators were forced to act.

Who knows what is in the documents . . . but given the remarkable Officer Barbrady impression pulled by the SEC in the “flash crash” case, I have a feeling something ugly is in there.  I just don’t believe the regulators are that blind, or that stupid . . .

But here’s what I am wondering – and I’ve not seen it raised yet: what if these documents contain evidence of the conscious manipulation of wheat pricing that triggered the 2008 global food price spike, and appears to be behind at least some of the current food price increases we are seeing.  It is one thing to screw around with financial instruments until you collapse the economy . . . but it is entirely another to quite literally starve people to death for profit.  It would be interesting to see if such behavior qualified as a crime against humanity.  It damn well should.

This strikes me as especially pertinent because the document dump, by placing the documents in the public realm, makes them usable by various governments (including our own) in prosecutions of criminal acts.  While the documents were illegally obtained, they were not obtained at the behest of the government (I think we can all agree that Assange and the US Government are not colluding on much of anything these days) and therefore may not be “fruit of the poisoned tree.”  Would regulators/the Justice Department dare ignore evidence there for all to see?  Would the ICC get involved?  And how ugly would this get, if indeed there was evidence of collusion between the regulators and the financial institutions?  Are the regulators liable for actions in commodities markets if they allowed manipulation to take place?

but I told you so.  Remember this post?  Well, the New York Times has finally caught up to the story, and its not good news. The UN is finally starting to make official their concerns for global food prices.  Now, you can argue that it is in the UN’s interest to raise this issue and make it a big deal, as the organization’s funding relies on donor countries who often are reticent to contribute except in times of crisis.  However, the main person downplaying this potential crisis in the NYT story is Food and Agriculture Organization of the UN (FAO) economist Abdolreza Abbassian:

“If you look at the numbers globally, the Americans, the Europeans and the Australians can make up the supply,” Mr. Abbassian said of the wheat harvest, playing down the chances of repeating the 2008 crisis. “There is no reason for this hype, but once the psychological thing sets in it is hard to change that perception, especially if Russia keeps sending bad news.”

There are a few important things to note here.  First, while Abbassian downplays the idea of real shortages driving market prices, he is acknowledging that the uncertainty in the market is likely to drive price instability – the end result being unpredictable, and likely rising, food prices.  Second, Abbassian must not be looking at the data that is trickling in from around the world.  For example, I have firsthand information from Southern Malawi about the failure of the maize crop there – not as bad as a few years ago, but bad enough that it might compromise Malawi’s status as a maize exporter.  Without wheat, people will start to press other grains, which are now themselves starting to get tight.

This is problematic globally, but I am very, very concerned for the situation in Southern Africa.  Mozambique is already starting to see significant civil unrest related, at least in part, to rising food prices.  Basically, this seems to have been the match that finally set off significant civil discontent with a problematic government.  The last time Mozambique fell apart, refugees flooded places like southern Malawi, stressing land availability and people’s livelihoods – sort of exporting the problems to surrounding countries.  The convergence of climatic variability and a highly interlinked global food market could be setting this region up for a really serious disaster in the immediate future . . . and we will feel the disaster here at the supermarket.  Not good.  Not good at all.