An emergency meeting of heads of government convened by the Food and Agriculture Organisation (FAO) in Rome to address the specter of rising food prices and food riots has lost its reason. Which is why many countries, including India, did not even bother to attend at the heads of government level. Global food prices have been coming down of late and there have been no significant food riots anywhere in the recent past. The FAO has itself said that wheat prices, for example, have fallen by 50% since their peak in February. So, there really is no crisis to address. Large producer countries like India have helped the cause through bumper harvests. India isn?t in the import market after a period of two years, which has helped keep the price of wheat in the global market at manageable levels. Markets have achieved by themselves what panicky governments could not even begin to discuss. Higher prices of agricultural goods, including food crops, give farmers the incentive to produce and supply more. Eventually, if market processes are allowed to function without a flurry of bans and controls, the laws of demand and supply will ensure that prices will end up at an equilibrium level. And they are getting there.
If anything, international cooperation is needed to further reduce distortions in the trade of agricultural goods. The appropriate forum for such negotiation is the WTO. Pressure must be applied particularly on developed countries?the US, Japan and EU member states?to reduce subsidies to their farmers. Their subsidies unnecessarily depress world agricultural prices and prevent developing country farmers from getting a reasonable return. Again, some people will falsely argue that this will raise the global prices for food and should not be done?it may lead to a temporary spike but eventually it will shift the bulk of agricultural production from developed to developing countries. As the supply from developing country farmers increases in response to higher prices, supply responses will work better. This will just be a distributional change away from farmers in the developed countries to farmers in developing countries. Developing countries will see a rise in incomes and a decrease in farm poverty. Global consumers, including in the west, will get cheap food. If only more international summits were held to address this fundamental point, there would be little need for panic.
