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A Global Food Fight

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The 2011 food crisis is quickly turning into a global food fight. The U.N.'s Food and Agricultural Organization (FAO) this month issued a new report ("Guide for Policy and Programmatic Action at Country Level to Address High Food Prices") that urges countries to refrain from export bans and other actions that could exacerbate the current food crisis. The FAO's advice, however, is being widely ignored.

During the 2007-8 food crisis, major grain exporters, like Argentina and Vietnam, imposed export bans that led to even higher prices. And it's happening all over again.

Last year, Russian and Ukraine imposed export bans on wheat in an effort to control domestic food prices. In India, where food prices are rising at a rate of nearly 20 percent a year, the government has banned exports of onions and other food products. After the collapse of the government in Tunisia, Algeria and other governments in North Africa are now buying large amounts of grain and building up grain reserves in an effort to stave off potential domestic strife over higher food prices. In Ethiopia and other least developed countries, governments are imposing prices controls, even though such practices hurt local farmers.

From the standpoint of global food prices and long-term agricultural development such actions may be counterproductive, but politically they are proving irresistible, particularly to countries in the Middle East that are concerned about popular uprisings.

The hope is that stronger harvests in the year ahead will take some of the pressure off global food prices and countries will lift their export bans, but if the past four years are any indicator, food inflation is becoming a chronic problem. A growing population and the rising demand for meat products are boosting the world's demand for grain, while water shortages, rising energy prices, loss of arable land, and extreme weather are depressing the supply of grains and other food stuffs.

Part of the problem is that prices for non-food agricultural products, like cotton and biofuels, are rising even faster than the price of food products. While corn and wheat prices have gone up about 50 percent in the past year, cotton prices have nearly doubled.

The larger problem, however, is that farmers simply can't keep pace with rising demand. It's used to be said that the best cure for high food prices is high food prices. But higher prices are no longer generating the kind of boosts in food production needed to moderate food prices. Demand, quite simply, is outstripping supply.

This week Indonesian President Susilo Bambang Yudhoyono warned the World Economic Forum in Davos that the next economic war could be over scarce resources, if problems of rising food prices, poverty and population growth are not addressed. Back at home in Jakarta, Indonesia's Minister for National and Development Planning, Armida S. Alisjahbana, says that climate change and severe weather already poses a serious threat to national food security. In Indonesia, the price of chili peppers, a basic food staple, has soared by 120%, and high rice prices are forcing many families to reduce their rice consumption.

In the short term, it's important that countries follow the FAO's advice and refrain from policies, like food export bans, that could push global food prices even higher. In the longer term, the only way to avoid a global "food fight" is to deal with the structural causes of the growing gap between supply and demand.