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BBC NEWS | Special Reports | The cost of food: Facts and figures

The cost of food: Facts and figures
Explore the facts and figures behind the rising price of food across the globe.

Line graphs showing rising food prices 2005-07 and price rises by food type, 2007

Graphic illustrating price rises in corn, rice, soya and wheat

As biofuels get the blame, the BBC provides a FAQ which provides some analyses into the real causes.

What are the main causes?

The first reason why prices are rising is growth in the world’s population, which is expected to top nine billion by the middle of the century.

That is an incredible number of mouths to feed and will put pressure on a range of resources, including land, water and oil, as well as food supply.

But lurking behind the headline figures for population is an even more significant factor pushing up prices, and that’s the economic miracle driving emerging economies such China and India.

To put it bluntly, rich people eat more than poor people, and all this economic growth is generating a whole new tier of middle-class consumers who buy more meat and processed food.

The FAO estimates that processed food now accounts for 80% of food and beverage sales.

What other factors are involved?

There is also the added environmental pressure all these extra people are loading onto the planet, as well as the impact of climate change.

Desertification is accelerating in China and sub-Saharan Africa, while more frequent flooding and changing patterns of rainfall are already beginning to have a significant impact on agricultural production.

And global warming has played a significant role in another driver of rising prices: the shift in agricultural production from food to biofuels.

Ethanol production is on course to account for some 30% of the US corn crop by 2010, dramatically curtailing the amount of land available for food crops and pushing up the price of corn flour on international commodity markets.

So what is happening in India? The report argues that the real issue is the purchasing power of the poor and farm productivity.

There has never been an acute shortage of food in India, not even during the infamous famine in Bengal in 1943 in which more than 1.5 million people are estimated to have died of starvation.

The problem then - and now - is entitlement or access to food at affordable prices.

Given the low purchasing power of India’s poor, even a small increase in food prices contributes to a sharp fall in real incomes.

The current crisis in Indian agriculture is a consequence of many factors - low rise in farm productivity, unremunerative prices for cultivators, poor food storage facilities resulting in high levels of wastage.

The Tata Mundra power project has been provided the necessary loans and subsidy by the IFC to start the project. As I argued yesterday in Coal power or no power, the power plants need to be built.

Dot Earth considers the dilemma and provides more stark numbers.

India faces power shortages that leave more than 400 million people without access to electricity, mainly in poor rural areas. The country needs to expand generation capacity by 160,000 megawatts over the next decade, and this new project helps address this gap.

As Michael Wines reported last year, the 700 million people of sub-Saharan Africa outside of South Africa have access to the same amount of electricity used by the 38 million people of Poland.

Dot Earth concludes, “Is all of this bad? If you’re one of many climate scientists foreseeing calamity, yes. If you’re a village kid in rural India looking for a light to read by, no.”

Six Environmental groups, Environmental Defense Fund, Friends of the Earth US, National Wildlife Federation, Bretton Woods Project and the International Accountability Project are fighting the World bank to stop providing a subsidy for the construction of the Tata Mundra coal plant which will provide electricity to 16 million people in 5 states in western and northern India.

The IFC says that the Tata Mundra Project (PPT)

• will have amongst the lowest GHG emission rates globally - lower by 40%, 18% and 16% compared to the average GHG emission rate of coal based plants in India, across the globe and OECD, respectively

• first supercritical project sets a precedent for efficient coal usage: consumes 1.7 million tons of coal less per year than traditional subcritical plants of comparable size

The environmental groups want to consider the costs to the environment and have suggested wind and solar technologies as alternative to the coal plant. The coal plant would cost about $4.2 billion with the World bank providing a subsidy of $450 million. The wind or solar alternatives would cost around $24 billion for the same capacity.

Clearly, coal is the cheapest option at this point in time.

The question that these groups need to consider is this - what happens when there is no power? What are the costs and benefits of providing the least cost power to poor people in a developing country to providing no power at all? Who is working on the side of the people?

The following image from the German Advisory Council on Global Change’ provides a good idea of the countries without power.

The interesting option is the reliance of people on biomass. In some ways Coal may be a better option.

It is a very clear case that development around the world has been due to the emergence of cheap power. What these environmentalists miss in the entire picture is the case for the poor people to come out of poverty using energy. What about the person who dies since there was no electricity in the hospital? What about the child who cannot study because of the lack of electricity?

Interestingly, there are other people supporting the environmental groups. For example, Sreekumar Raghavan at the International Business Times. He provides examples of countries like Australia and the US where there is a movement towards not supporting coal powered plants unless there is a carbon capture mechanism. That is a really good initiative. However, he misses the point. Firstly, Australia and the US do not have millions of people without electricity in their countries. If that is the case, they would have gone ahead with the coal powered plant like the UK has done recently. Also, the US and Australia are highly dependent on coal powered plants. 75% of Australia’s electricity comes from coal.  Second, the per capita GDP of these countries are way above India. There is no comparison at all. It is foolish to think that India can solve its poverty issues without abundant and cheap energy.

Robert Zoellick, the president of World Bank,  makes an important point. He said, “…that if developing nations are deprived of energy it will be counter productive and a setback for the larger issues of climate change.” Mr. Raghavan calls this a weak defense. However, it is he who needs to understand that this is an important argument. The capacity to fight and adapt to climate change is dependent on the ability of nations to develop economically. And to develop economically, we need to have cheap and abundant energy.

There is another argument too. The IPCC predictions for future increases in CO2 emissions have already considered the growth of transport, energy and other emissions in their calculations. This growth would mean the building up of coal powered plants and small cars like Nano. If the cuts suggested by IPCC are to be followed by the world, then there should be no opposition to the current growth of power and CO2 for developing countries.

Well, the point is simple. Coal power or no power. Which is better?

The Martu people are Australian Indigenour people living in the western desert. The Age reports that they have formed a deal with Reward Minerals, which will reward them with 7 million options at a strike price of 50c, valid for 4 years, amounting to 10% of the shareholding of the company.

This deal is being suggested a landmark deal in terms of securing appropriate compensation and ownership to the traditional owners of the land, the Martu people. The share price traded up to tis highest ever and at the current share price, the deal is is worth a little above $ 5 million.

The indigenous community believes that “the presence of a generous indigenous equity component as part of the transaction is the way of the future in mining negotiations,”.

This could well work out in a positive way, depending on the development of the mine. It may also act as a blueprint for deals in India where tribal people are being evacuated for industrial and mining projects with payments in cash now. With many issues around compensation arrangement including the sensible use of cash for the financial inexperienced tribals, a cash+stock compensation option may be a good deal.

The recent editorial on The Age in regards to public transport is telling.

The figures for rail patronage clearly show that given a service — reliable, comfortable and inexpensive — people will use it. Two other factors have a strong bearing on public transport: the rising cost of petrol and emissions from vehicles. Cars and trucks not only choke the roads, they choke the atmosphere.

It may seem a small byway in the argument, but the fiasco of the proposed bike ban on trains, illustrates a telling point in why clear-headed thinking is needed. Ms Kosky is to review her ban after she said yesterday that she had been “misinformed” by her department. (On the same day, the Government announced a $52 million upgrade of Clifton Hill station.)

Of all the options a government could take in the transport sector, moving against the most environmentally friendly set of wheels on the road was madness. What message could people derive from the ban but that the Government not only did not care about sustainability but actually worked against it? It is welcome news that the minister is reviewing the ban, but there should not have been a need for it in the first place.

What is true for Melbourne is true for most cities around the world. In my recent visit to India, it was clearly evident that public transport is the solution and that has the least amount of focus from policy.

Last month I quoted an article by Michael Backman writing about population and emissions. Backman assets that population is the major contributor to emissions growth.

Two commentators on the article did not agree with Backman.  John Brisbin comments that  ”The only obvious thing about sustainability is the per capita resource usage”. He wants to believe in a world where “20 billion living in peaceful resonance with the planet and requiring only the simplest of material inputs?”

I think that is next to impossible. The past has shown that people cannot be expected to behave like that.
It is tough, I know that from personal experience.

The consumer culture is all fine to moan about however, we need to remember that it is the present culture. There is a limit to what you can expect people to change. We need to work with what we have…and what we have is an increasing consumer culture all around the world.

Also, we need to remember that population as such creates problems in other areas - public health, infrastructure, provision of other services, standard of living etc.

And the second comment from Dani where he angrily writes that “Getting rid of all americans will drop carbon emissions far more quickly than all the population control in South Asia.”

What we need to think about is the future. I think we should not take Backman’s analysis personal. I am an Indian and I do know where you would come from.

We cannot change the past. Can we rid of all the Americans? Totally not possible and not ethical. We need to work with what is possible. Controlling population in South Asia is a very good thing in many ways.

Atanu helped me understand the consequences of population growth many years back. Lets read what Atanu Dey has to say on this:

In 1965, about 40 years ago, there were less than 500 million of us. By 2004, the population of India has more than doubled. The effect of this incredible increase has been a falling standard of living in general, shortages, untold misery and conflict. It is foolish to expect that we can provide a decent standard of living to so many in such a short time. The vast majority of us do not have adequate drinking water, sanitation, health care, education and job opportunities. The preceding statement does not even begin to indicate the amount of human misery and sorrow which it implies. It hides within it the teeming millions who suffer without the slightest hope of ever seeing a future remotely human.

Read the entire article. Atanu talks about the limited time available to create a standard of living for a huge population. In another post he quotes Joel Cohen’s book How Many People Can the Earth Support? (1995). Here Cohen explains the finiteness of time.

The finiteness of time, the second thread in the book, limit’s the abilities of individuals and of societies to solve problems. For each human being, time is finite. I want to eat and drink today. As a privileged inhabitant of a wealthy country, I can postpone buying a new car for several years, but the requirements of poor people for subsistence are not so elastic in time. Those who want firewood to cook a meal today will break branches from the last tree standing if they believe that otherwise their children may not surive to lament the absence of trees 20 years hence. In the American legal system, the finiteness of time to satisfy basic human wants is recognized in a phrase: justice delayed is justice denied.

Efforts to satisfy human wants require time, and the time required may be longer than the finite time available to individuals. There is a race between the complexity of the problems that are generated by increasing human numbers and the ability of humans to comprehend and solve those problems. Educating people to solve problems takes time. Developing traditions of stable, productive cooperation takes time. Building institutions with the resources to make educated people into productive problem-solvers takes time. Even with educated, cooperative people and appropriate institutions at hand, understanding and solving problems take still more time.

Re-read the paragraph above twice. The difference between the commentators and Cohen’s and Atanu’s arguments  is that they accept human wants as a given. And secondly, they work with current statistics and situation in many parts of the world. This is not a Malthusian type of argument for sure. It is far bigger than that.

Michael Backman in his latest Age column writes about the issue of population and its connection to greenhouse gases.

WHAT is the ultimate cause of greenhouse gases? Excessive reliance on cars? Coal-fired power stations? Clear-felling forests? The answer is none of these. The ultimate cause is people and population growth.

Having one child with your partner instead of two or more is the biggest contribution to reducing greenhouse gases you can make. Have one child instead of two and you will be directly responsible for cutting your family’s greenhouse gas emissions by about 50% in the next generation.
[...]
Determining which countries have been responsible when it comes to population growth generates a different picture when it comes to developing countries. China is a big and growing greenhouse gas emitter. But it has one of the lowest population growth rates in the region due to the success of its one-child policy and also due to its rising wealth levels — richer people tend to have fewer children.

India, on the other hand, is not yet as big a gas emitter as China. Gas emissions per head are about three times less — but its population is growing much faster than China’s. Its population will overtake China’s in the 2030s, when both countries can be expected to have populations of about 1.5 billion. But South Asia, taken as a whole, is already the clear winner in the population stakes. Had partition not taken place in 1947, then India would have overtaken China for the No. 1 spot years ago. The combined population of pre-partition India today (India, Pakistan and Bangladesh) is 1.4 billion, compared with China’s population of 1.3 billion.
[...]
Indeed, the population of pre-partition India is expected to rise by another 900 million people in the first half of this century. Changing to energy-saving light bulbs will be a drop in the ocean compared with this

Africa’s tryst with development continues and the theories of development are never ending. Now, Reuben Abraham points to a Business World article titled “Can Greed Save Africa”. Or what can be more appropriately called “profit making”, it provides an example of how plain business sense can provide development opportunities to Africa.

In many ways, Africa’s economic situation seems hopeless. While $625 billion in foreign aid has poured in since 1960, there has been no rise in the region’s per capita gross domestic product, notes William R. Easterly, economics professor at New York University. What’s more, from 1976 to 2000, Africa’s share of global trade dropped to 1%, from an already negligible 3%. The U.N.’s scale of human development, which considers health, education, and economic well-being, ranks 34 African nations among the world’s 40 lowest. Thus far, foreign aid hasn’t made a dent.

Greed, however, might. Thanks to the global commodities boom of the past few years, sub-Saharan Africa’s economies, after decades of stagnation, are expanding by an average of 6% annually—twice the U.S. pace. And like bees to honey, investors are swarming into the region in search of the enormous returns that ultra-early-stage investments can bring. Blue Financial, for example, has already netted its early private equity backers a ninefold gain thanks to the 385% rise in its stock since its October, 2006, initial public offering in Johannesburg. Emerging Capital Partners has bought all or part of 42 African companies this decade and cashed out of 18, with gains on their investments averaging 300%. “The money we can make is matchless,” says Emerging Capital Partners CEO Thomas R. Gibian, a former Goldman Sachs (GS) banker.
[...]
Masoud Alikhani is no moral crusader; he thinks the “We Are the World” movement of the 1980s, which sought donations to end African hunger, “made beggars of whole nations.” The burly 66-year-old is among the new wave of investors at the tenuous nexus of venture capital and agribusiness in Africa. Five months ago he pitched a large hedge fund in New York on the merits of ESV Biofuels, as his company is called. The fund’s partners agreed to take a tour of the facility in January. “We are capitalists and opportunists,” says Alikhani. “We are doing this to make money. That’s the only way to help.”

For more on this Profit vs Aid question, check out the work of William Easterly.

The example below is the best example of the growing infrastructure problems plaguing the country and which could halt the 9%+ growth it has been enjoying for sometime now.

If bijli (electricity) and sadak (roads) are the new buzzwords in the Indian economy, nothing
better illustrates the long road ahead than a short stretch in Kasara
Ghat on National Highway 3 between Mumbai and Nashik. Here, sadak
stands in the way of bijli: for three months, a 200-wheel trailer
carrying critical components of the most advanced turbine for an Indian
power plant is stuck here because the road wasn’t upgraded and so
couldn’t take the load.

The result: National Thermal Power Corporation’s 1980 MW power plant in
Bilaspur, Chhattisgarh, for which this turbine was imported, cannot be
completed on time. And, of course, the stuck trailer has set off a
daily traffic nightmare.

Most of the problems are due to neglect, lack of planning and the huge red tape.

Nikhil Swaminathan in Scientific American: (hat tip: Atanu Dey)

The researchers mathematically modeled these factors according to population growth to see how each respond when more people move to a city. They found that human needs, such as employment, utility consumption and housing, correspond directly with the population: As the number of people doubles so does the need for housing, jobs and electricity infrastructure, which encompasses the number of roads, gasoline stations and the like already in place and does not necessarily keep pace with individual growth—the ratio of user to facility simply rises. (And so, for example, there are simply more customers at the available gas stations.) At the other extreme, researchers found that increases in social activity and production outpace population growth. In other words, if the number of city denizens doubles, these factors—both negative (crime) and positive (wealth creation, total wages and gross domestic product)—will more than double.

“These scaling laws give you some suggestion of …[how] … your city will behave as it grows,” in terms of economic activity, resource consumption, etc., Bettencourt says, adding that smaller cities, like Portland, Ore., and huge epicenters, like New York City, fall along the same continuum and are subject to the same multipliers.

“The practical application of this work is that the problem is not large cities, the problem is the conditions in which some people live in large cities,” says study co-author Jose Lobo, an economist at A.S.U.’s School of Sustainability in Tempe. “Policies should be directed to making large cities more livable”—for instance, enacting legislation or spending money to alleviate poverty and crime, the negative effects of growth.

Thomas Parris, director of sustainability programs at iSciences, a Burlington, VT, research company dedicated to improving understanding of sustainability, agrees that the main message of the paper is a recharacterization of cities so that better decisions can be made as urban areas continue to grow. “This is a fascinating paper that quantitatively explores the complex interactions between urbanization, sustainability and social innovation,” he says. “Insights, such as those presented in this paper, will help guide our collective choices as the pace of socioecological change accelerates.”

You can read more about the importance of cities in the context of India in the Ten part series on Cities and Urbanization by Atanu Dey.