The cost of food is a recipe for disaster: Alan Kohler

Turns out that replacing petrol with ethanol to do something about the global warming crisis and the oil crisis wasn’t such a good idea after all.

Turning grain crops into ethanol instead of food has produced a food crisis that is worse than either the energy crisis or the credit crisis, according to the IMF, the World Bank and the United Nations.

So great has been the global enthusiasm for ethanol that by 2020 the world will be putting 400 million tonnes of grain a year into cars – equal to the entire current global rice harvest.

On Sunday, during the meeting of finance ministers in Washington, World Bank president Robert Zoellick said the doubling of food prices over the past three years could push 100 million people into poverty. He and IMF chief Dominique Strauss-Kahn called for urgent action, as food riots break out around the world.

Last week medium quality rice exported from Thailand – a de facto benchmark price – shot to $US795 a tonne, up from $US360 at the end of last year. According to a story in the Bangkok Post, the price is expected to reach $US1000 a tonne in three months.

People are protesting and rioting in Haiti, Cameroon, Mauritania, Ivory Coast, Senegal and Zimbabwe, among others.

According to an investment presentation by fertiliser group Incitec Pivot to an Asian investment conference in March, global cereal stocks are at a record low – down to just 10 weeks production.

Ethanol production is just part of the cause of this crisis. A longer term and more difficult issue to solve is the massive increase in demand for protein – meat, eggs and milk – in developing countries, especially China.

As China has become more prosperous, its meat consumption has tripled in the past seven years. While global grain production has increased 89% since 1980, production of meat, egg and milk has increased 6.4, 11.2 and 20.8 times respectively, according to the Incitec Pivot presentation.

It takes a lot more grain and land to produce meat, eggs and milk than just grains for direct consumption. The addition of ethanol to this accelerating demand for protein has turned cereal shortage into crisis.

A paper by Professor Julian Cribb, a science communicator and adjunct professor of Science Communication at the University of Technology Sydney, published in January, concluded that global food output must rise by 110% over the next 40 years to meet demand, but key indicators are pointing in the other direction. Surface water available for agriculture is contracting due to city demand, arable land area is shrinking, agriculture research is declining, marine harvests are dwindling, biofuel production is continuing to rise and global warming is contributing to regular droughts.

Professor Cribb pointed out that two centuries ago Thomas Malthus predicted a food crisis as a result of population growth and that in the mid-1960s the Club of Rome repeated the warning.

“Criticised by some because their predictions did not ‘come true’, it is more accurate to say that their warnings aroused the world to its peril in time for solutions to be developed. These were the 18th century agricultural and 20th century green revolutions.

“A third global food revolution is now necessary.”

The world’s population is now growing at 200,000 per day and it’s all in the developing countries, where there is also a diet switch from grain to protein as a result of rising prosperity. But half the world’s population still depends on rice and its price has doubled in three years, and is still rising.

So that makes four crises at once – the credit crisis from winding back America’s over-consumption of debt; the oil crisis, with the crude price hitting $US110 a barrel; the carbon price crisis in response to global warming; and the food crisis.

Which crisis is the worst? Perhaps the sum of them is greater than any of the parts.

This story first appeared in www.businessspectator.com.au