The WTO director-general Pascal Lamy has suggested that speedy negotiations in multilateral trade can solve the present crisis of soaring food prices.
His attempt to convene a mini-ministerial on May 19 has become a distant hope and the presentation of revised texts for farm and industrial goods negotiations by the chairs of respective negotiating committees will hopefully yield results.
The issue of rising food prices was raised at the WTO General Council meeting in Geneva on May 7 for the first time and discussed in some detail. Some African countries have called for demystifying the link between rising food prices and completion of the Doha Round, instead of rushing through the deal.
Although some developing countries like Uruguay, Brazil, China and Mexico have supported Lamy?s proposal that a quick conclusion to the Doha Round would offer medium to long-term solutions to the current crisis, there are still many who view it with much scepticism. India supported successful conclusion of Doha negotiations but did not link it to the current food crisis.
The massive use of food crops for fuel in Europe and North America and displacement of food crops in many countries by cultivation of bio-fuel crops like Jatropha and other non-food crops may have perhaps engendered a food crisis. Not only this, the bio-fuel programme has created a situation not experienced earlier?the global food prices are now linked to the volatility of fossil fuel prices. The reports of UNCTAD, UN-ESCAP and OECD speak of the food crisis caused by the bio-fuel programme in the developed world.
The developing countries in general were long complaining that the heavily subsidised agriculture in other parts of the world have depressed global food prices to the disadvantage of the farmers in the Third World who do not get remunerative prices for their produce. It is a broadly held belief by a few that it was also done with the intention that the developing countries, least developed countries (LDCs) and net-food importers lower their tariff barriers and open up for imports.
The ongoing bio-fuel programme is heavily subsidised and incentivised. This highly subsidised bio-fuel programme which endangers food security should be open to revision through international agreements. For meeting energy needs other viable options should be explored.
The weakening of the US dollar, the subprime crisis and meltdown in the global equity market show that the current economic market scenario has its inherent weakness. To overcome and survive, the global players have created new problems?there is an increased investment in the commodity futures market and food trade, which have also contributed to the global food price rise. The farmers do not benefit from the current food price rise at all?only those who perhaps manipulate the market stand to benefit.
The US president George Bush and the secretary of state Condoleezza Rice have said that the food crisis was due to increased consumption in populous countries like India and China. However the annual per capita grain consumption in US is 1,046 kg, while in India it is only 178 kg.
Meanwhile, Switzerland, Japan and the US have also said that food export bans imposed by some developing countries have contributed to soaring global food prices. The fact is that some developing countries imposed export bans with a view to check their price inflationary trends.
In the midst of soaring food crisis and prevalent hunger, major food companies reaped huge profits. The net income of Monsanto for the three months ending February, 2008 more than doubled to $1.12 billion from $543 million in the same period last year. Its profits increased from $1.44 billion to $2.22 billion. Cargill?s net income soared by 86% from $543 million to $1.030 billion and that of Archer Daniels Midland soared by 42% from $363 million to $517 million.
Index-fund investment in grain and meat increased almost five-fold to over $47 billion in the past year according to the Chicago-based AgResearch Co. At the recent Agricultural Forum convened by the US Commodities Futures Trading Commission (CFTC) on April 22, 2008 to discuss these problems, while the official position was to play down speculation and stress fundamentals, such as low physical stocks and increased demand from China and India, all farmers and trade associations felt that the problem was mainly due to speculative surge from long-only funds. They pointed out that the present situation of high prices that should normally have benefitted farmers was actually causing concern.
The accompanying high price volatility has led to convergence problems, more basis volatility and a near breakdown of risk management tools that futures markets normally provide. This has increased the risk faced by farmers, and has put farmers, local elevators and other buyers of commodities under pressure of margin requirements and lending limits.
