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Robin Lustig | 10:37 UK time, Friday, 6 April 2012

If you've already done your shopping for the holiday weekend, did you flinch as you saw the total cost at the supermarket check-out?

If you've filled up the car with petrol ahead of a weekend away, did you gasp as you saw the numbers on the pump climb ever closer to the £100 mark?

Food prices and fuel prices: both rising, not just in the UK but globally, and both with the potential to cause serious political, economic and social ructions in the months to come.

As you know, I'm just back from a reporting trip to southern Africa -- and one of the things that struck me most forcibly was how large the price of food and fuel loomed in the minds of everyone I met.

Every month, the United Nations Food and Agriculture Organisation publishes a tracker index of global food prices. The March figures, which were published yesterday, show prices largely unchanged from the previous month, but still five points higher than at the end of last year.

Figures for the UK, on the other hand, showed a big jump last month. According to the British Retail Consortium, food prices rose by 5.4 per cent in March compared to a year earlier -- and that came, of course, as most people's incomes barely rose at all.

Pick just about any conflict anywhere in the world, and I promise you that access to food and water will come very near the top of the list of reasons why.

To take just one recent example: are you puzzled about why there's been a coup in Mali, leading to what some are now calling a potential humanitarian catastrophe? Did you know that 3.5 million people there are facing food shortages after a prolonged drought?

According to a local official of the relief agency Christian Aid: "The food situation was ... desperate, with the price of staple foods having already risen by 100 per cent over the last few months."

So let's try to track back a bit. Why are food prices rising? It's complicated (isn't everything these days?). But put together repeated crop failures in sub-Saharan Africa (and yes, climate change is a factor); rising oil prices caused by political instability in the Middle East (especially over Iran), which mean that fertilisers become more expensive, as does transport and agricultural machinery use; plus growing, and wealthier, populations in India and China, leading to more demand for food, and especially more demand for meat, which is resource intensive -- well, you begin to get the picture.

Some analysts argue that slowing population growth is essential to dealing with the food crisis. Others say that improving agricultural efficiency, and encouraging more small-scale farming aimed at meeting local needs, would be far more effective.

In December 2010, we broadcast an entire programme devoted to examining the development of agriculture in Africa -- it's still available via the "Special Reports" button here. Our reporter Charlotte Ashton won a Diageo Africa Business Reporting Award for her reports from Malawi and Ghana -- and I remember one of our contributors remarking that an enormous difference could be made if only a few more decent roads were built, to enable farmers to get their produce to market. Too often, the problem isn't so much growing the stuff as getting it to where people can buy it.

So perhaps, instead of those goats that charities encourage us to give as Christmas presents to help African farmers, we should buy a few metres of tarmac to help construct a few more roads ...

The overall global food price picture is not yet as critical as it was a year ago. But the experts are predicting further price rises in the coming months, largely as a result of rising oil prices. According to one analyst: "The food price index has an extremely high correlation to oil prices, and with oil prices up it's going to be difficult for food prices not to follow suit."

Which brings us back to the dispute over Iran's uranium enrichment programme, the single biggest factor in current oil price instability. It may seem a bit of a stretch -- but it could just be that resolving the Iran issue could have a real and direct impact on whether millions of hungry children get enough to eat.

Comments

  • Comment number 1.

    Greed knows no bounds. the great Geo-political discussions are about big business and banking. the feeding of people is of no interest to the political elite. The wealthy and the political are always the last to recognize when the people have had enough. It has happened many times in history. Oil prices are about speculators and investors..supply can be adjusted by out-put....U.S. oil companies currently export oil as prices rise...the global economy has become a shell game to invent excuses for price increases that see little or no increased profit for the growers..after the financial collapse (world largest crime in history) went unpunished the multinationals realized that they are free to do as they please. Impotent governments lead by lap-dogs of contributors. It is like the Irish Potato Famine..that wasn't a famine at all...profits were being made on exports. All revolutions start in the stomachs of children.

  • Comment number 2.

     
    I am currently paying £145.9 a litre for diesel. The reason for this can be summed up in one word.

    Greed.


    Energy suppliers are no better than investment bankers. And no better than those who decide the levels of taxation.

    My only comfort comes from multi-millionaire politicians, who assure me that we're all in this together.

  • Comment number 3.

    Seasons Greetings --especially to the agnostic and and atheist contributors.

    At present we appear to agree that ´greed´is the common problem, however the ´elite´of each society or country have different structures that can be manipulated that worsen the problem.

    The UK has always been a ´closed´ system where ´supply and demand´ has not functioned. Only 10 years ago the profit for selling food was the highest in Europe. One of the reasons was (and is) the high rents and taxes demanded from the small shop owners that could not compete with the (still high prices of) the Supermarkets. There can be no ´free market system´ if most of the land and property always reverts to the original land owners at the end of a 99 year lease.

    Mainland Europe has (in general) a different problem --but no less serious when discussing food prices. Before the Euro, local food prices were kept in check by local currencies. International companies (and even those who did not export) began seeing their profits not in Drachma, Lira or Escudos but in Euros --with no relationship to their own countries´ standard of living and original currencies. The UK´s excessive prices were no longer the exception within Europe.

    One thing appears to be clear --a re-thinking of the EU agricultural subsidies must occur.

    http://www.bbc.co.uk/news/world-europe-11476656

    "But the UK wants far-reaching reform of the EU's Common Agricultural Policy (CAP), with less spent on food production and more on the environment."

    --and who owns the most land --surely not the ´Feudals´?

  • Comment number 4.

    At this time of possible financial meltdown and certain poverty increase within America, Europe and much poorer countries -- a questioning of the sanity of some World leaders has some justification if the Iranian oil embargo continues.

    This decision has (and had) nothing to do with logic -- however the ease with which it was agreed upon has hardly demonstrated any respect by those governments for their citizens.

    If Cuba and Zimbabwe are anything to go by -- I wonder how many Presidents or Prime Ministers heads are mounted as trophies in Castro´s or Mugabe´s offices ?

    The Iranian clerics also have a few replicas.

    The risk that this embargo back-fires on the instigators appears more likely than a ´fizzle-out´-- when sobbing is observed at filling stations.

  • Comment number 5.

    Part 1.
    To feed the world, the very best thing that we can do is stop the speculation, & guess who does the majority of the speculation: hedge funds. Following the sub-prime catastrophe, the global food crisis sky-rocketed. Why? Global investors led by Wall Street’s bankstas got into commodities futures - profiteering between sell & buy orders which has little or nothing to do with supply & demand. The hedge can be petroleum crude, soy beans, wheat. It doesn't matter.

    Just as collateralized debt obligations (CDOs) combined all kinds of debts, in the case of FOOD-BASED DERIVATIVES COMPLEX multi-commodity indices were generated. Even mainstream investors - like pension fund, but especially banks - started investing in these commodity index funds. Devastating prices followed.

    Countries see food-fights, food riots; in fact, Arab Spring’s origins could be said to go back to food riots in Tunisia.

    Previously, the developed world, in the wake of the last big depression in the 1930s, limited amount of hedging or risk permitted under regulation. This occurred because agriculture faced so many variables that prices - produce reached market - price was subject to uncertainty, fluctuation. Thus future price agreements (not just with food, but with almost all commodities) were entered into & this risks could be spread, shared = stability.

  • Comment number 6.

    Part 2.
    1999: following aggressive lobbying by INVESTMENT BANKERS, deregulation took place in the US Commodities Futures Trading Commission and the flood gates opened to speculative investments involving food & agricultural products.
    2000: burst of the dotcom bubble brought several stocks crashing; investment bankers rampaged into housing market till eventually that bubble burst, too; and then…

    Hedge fund managers turned to food & commodities. No longer satisfied with reasonable returns, the hedging was now after green-eyed windfalls. So you had futures contracts that were bought & sold several times WITH LITTLE INTENTION OF TAKING DELIVERY of the agricultural products. Studies indicate in the case of transactions that involved FOOD-AGRICULTURAL DERIVATIVES, less than 3% involved actual delivery whilst the rest were just speculation gone wild.
    Food prices went upwards.
    2005 - 2008: world maize prices tripled; wheat prices went up by 130% per cent & rice prices by 170%.

    Consequence:
    1. People in developed countries spent 13-15% of their income on food.
    2. People in non-developed countries spent 50 - 75% of their income on food.
    The argument is food prices are rising because of global warming, drought, floods, diversion of land to bio-fuels, increased consumption in populous countries, etc. etc. etc.

  • Comment number 7.

    Part 3:
    Fredrick Kaufman, I believe, was the first to label this the "The Food Bubble: How Wall Street Starved Millions and Got Away With It in Harper’s Magazine. Kaufman points out that price of hard red spring wheat that had been stable for a 100 years in America - trading between $3 - $6/ 60 pound bushel, suddenly started to rise. And on February 25, 2008, it rose to an unfathomable, ridiculous high $25 per bushel. Given 2008 saw record wheat productions, there was clearly some unregulated, unbridled speculation going on.

    FACT: bio-fuels currently account for only 6% total grain production.

    a And then there was the incredible story that food prices were going up because Indians & Chinese were devouring more because of the growth to their middle-class.
    July 2011 report, Food & Agriculture Organization of the UN, entitled “Price Volatility and Food Security,” attempts to set the record straight. Olivier de Schutter, UN special Rapporteur, cites FAO data and points to the fact that India and China are seeing FALLING PER CAPITA FOOD GRAIN CONSUMPTION. So, what was really at work?
    Gambling, speculation, derivatives.

  • Comment number 8.

    Part 4:
    Some of these DERIVATIVES are so complex that regulatory bodies & law makers simply do not understand them. How can they regulate them? Most of the knowledge resides with the financial business sector. There is an urgent need to regulate over-the-counter trading (OTCs) which are bilateral agreements on DERIVATIVES executed & sold far away from the purview of established exchanges. That makes monitoring OTCs difficult. But transparent information is essential as these will establish real supply & demand re essential food items & other commodities. International co-operation on harmonising regulations is a must; otherwise speculators, like flies, will flock to countries with lax regulations.
    Contracts involving food supply designed for facilitating supply must never end up in the shark-infested speculative waters. This gives new light to the need to monitor FreeTrade Agreements (FTAs). Speculation in food, rising food prices should never be subjected to complex DERIVATIVE SPECULATION.
    Stop this and you stop world hunger.

  • Comment number 9.

    The so-called food crisis cannot be separated from the financial and economic crisis faced by the West since 2008. This is evident to anyone living in the US which remains one of the most productive agricultural countries in the world. Despite the abundance of food production, the number of Americans dependent on food stamps provided by the Federal government has soared in the past decade. As much as 50 percent of children live in families that depend on food stamps support in this country. A large part of the problem is attributable to policies that favor multinational food companies against small farmers. Corn production in the vast corn belt states has soared in past decades so much so that much of the production now goes into biofuels rather than food. This has also resulted in the proliferation of unhealthy prepared foods available in supermarkets which are saturated with corn syrup sugars. The epidemic of Type 2 diabetes in the US in the past two decades is largely the result of the introduction of vast amounts of corn syrup sugars in the food supply. Also notable has been the proliferation of agricultural production devoted to wine production in the US especially in the state of California.

  • Comment number 10.

    While Bluesberry and Smartsceptic have valid points, they do not explain all the prices of unprocessed foods at local or at the national level in small countries that ´got by´ before speculation and ´Supermarket Power´.

    I give this typical example --

    http://www.athensnews.gr/portal/9/53585

    Anyone who visited Greece in the 70´s saw prices ´in line´with salaries --with often a ´tourist bonus´ thrown in for good luck in Tavernas.

    That EU agricultural subsidies has ´warped´ supply and demand --can be seen in any supermarket. One is lucky if loose tomatoes, potatoes or lemons are on sale --and if they are, the ´mark up´ is well into the 100´s of percent. (Bio even more)

    The Euro has further allowed international (and national) distributors and food processors to calculate in one currency -- especially their wished profits and CEO salaries, but the wages of most employees remain at the old local currency levels of improvement (if any).

    As Bluesberry noted -- very few speculators take ´delivery´. This means that honest ´Hedgers´(large companies) are more than often forced to set their Hedge at bloated prices --nothing to do with ´supply and demand´. The same for NGO organizations -- where taxpayers are being ´robbed´ by paying exorbitant prices to feed the World´s starving.

    Perhaps the Capitalistic idea of ´supply and demand´ went out the window when the first American Homesteader sold his hogs to the slaughterhouse and bought his own meat back again from the supermarket ?

    --one thing is clear --the simple views of Capitalism have been proven wrong in this day and age -- the views expressed in ´Das Kapital´ remain valid, especially with food production and its sale.

    --- I cannot eat my Mac.

  • Comment number 11.

    #2 Scotch Git

    "I am currently paying £1.459 a litre for diesel. The reason for this can be summed up in one word.

    Greed."


    -- compared with the price of a good beer --its a bargain.

  • Comment number 12.

      
    quietoaktree,

    Thank you for moving the .

    Not only can you not eat your Mac, you couldn't afford to drink the ink!

    http://en.wikipedia.org/wiki/Ink_cartridge


    Some estimates go as high as $10,000 per gallon.

  • Comment number 13.

    #12 Scotch Git

    Both the high price of Scottish oil and Scottish beer has much to do with the excessive taxes on both.

    As usual, Mr. Lustig has posed the dilemma, ´was ahead of the curve´ and threw his ´curved ball´ with the last sentence.

    The oil embargo is in the process of doing more political and financial damage to others than the intended target.

  • Comment number 14.

    Robin, your apocalyptic diatribe misses one essential and vital point the dramatically increasing levels of inequality that leave the few with access to funds on such a scale that they can bathe in asses milk whilst the many can't even have a splash in their tea.

    The food is not the problem it is inequality that is the problem - so long as the establishment pays homage to the arrant nonsense of trickle-down economics the starving will die in increasing numbers. Tax the so 'n sos till they are poor! No man is worth more than twenty times the poorest man. For as long as we persist in sustaining this inequality more and more people will starve.

  • Comment number 15.

    PS

    Robin get a more efficient car; if it is costing your nearly £100 to fill up - you must have a gas guzzler. Shame on you!

  • Comment number 16.

    This is the reality of capitalism. It is no coincidence that Glencore issued an IPO a couple of years back when it saw that the low interest rates and QE, amongst others, was going to lead to investors putting their tax-free dosh in commodities with food being the safest bet. The rich are going to make a killing out of the poorest people in the world starving to death. If you don't like it then do something about it. Me thinks Robin that you and everyone reading this blog will do exactly what the world's poorest have for dinner - nothing! Actions speak louder than words.

  • Comment number 17.

    #15 not guilty, John. I drive a Hybrid. £40 pm max. How about you?

  • Comment number 18.

    #17 Ans: Small diesel estate, 119 grams/km CO2, £30/annum vehicle duty. I don't go far, but when I do, I get upwards of 60 mpg (with the climate control on) so my fuel costs about the same as yours £35-£40 pm! (And of course there is the Freedom Pass for aged Londoners!) I have toyed with buying a hybrid, but I think I'm going to wait for a diesel hybrid, but I don't like any of the current offerings as vehicles.

    So how do you square the £40 pm fill up, in #17, with the £100 you used in your article? Journalistic hyperbole, perhaps!!

  • Comment number 19.

    # 16 RR

    "Me thinks Robin that you and everyone reading this blog will do exactly what the world's poorest have for dinner - nothing! Actions speak louder than words."

    And what do you think the readers (and participants) should do ?

    Take to the streets and demonstrate -- probably most of us have done. Pick up weapons probably none have done. With most of us having now at least ´one toe in the grave" and others "one foot in the grave" --what is the alternative for us ?

    We can only tell our life´s experience to the younger generation and hope that our sight of someone coughing their lungs out with TB on a Mumbai (Bombay) street is not forgotten --as is the children with deliberately broken and bent limbs to improve their ´begging potential´.

    How much some of us have attempted to bring some ´momentary joy´ to one or two of the world´s poorest´appears unimportant to you --and with the scale of the World´s poverty --it is !

    I throw you the sword as I fall.

  • Comment number 20.

    #18 JfH

    -- I can´t explain why -- but I was betting you were riding a bicycle.

    ---my ´outing´ is that I only take taxis --not young enough that owning a car offers any advantage.

  • Comment number 21.

    Today's NY Times has an important article on America's food stamp program, aka Supplemental Nutrition Assistance Program or SNAP. Though not well known even among policy makers, SNAP is one of the largest antipoverty efforts in the country. It is credited with reducing poverty by 8 percent in 2009. More than 46 million people are served by SNAP. Children make up about half of the recepients and SNAP helps to reduce poverty most among children because they are the most likely to be poor. Enrollment in SNAP rose by 45 percent between January 2009 and January 2012. Republicans have tried to reduce subsidies to SNAP in the past but President Obama's economic stimulus package since 2009 has helped to restore funding for the program.

  • Comment number 22.

    #20 I do have a bicycle which gets some use, but I also need to transport goods (shopping mainly, but also gardening stuff) and people (far older and less mobile than me, incl. a centenarian).

  • Comment number 23.

    #21 Food stamps... Does not the necessity of this programme also indicate that the country that created the evil philosophy of trickle-down economics has within itself the antithesis and so disproves the validity of this insane backwater of perverted economics?

  • Comment number 24.

    '18. At 23:06 10th Apr 2012, John_from_Hendon -
    So how do you square the £40 pm fill up, in #17, with the £100 you used in your article? Journalistic hyperbole, perhaps!!'


    Just wondering, on the shuttle between London and Salford now being engaged upon by many, even in a worthy hybrid, how that works out at 70mph on a motorway.

  • Comment number 25.

    #24

    London- Salford shuttle mmmm

    I get a real 64 mpg at the speed limit on motorways. London to Salford = about 206 miles or about 3.2 gal or about £21.10 each way.

    How does this compare?

    Well National Rail = £74.20 day return or £37.10 each way or if you can't use a day return ...

    What of the other non-marginal motoring costs?

  • Comment number 26.

    #23 Trickle-down economics: associated in the US with the Ronald Reagan presidency. Reagan is still considered one of the most popular presidents in history despite the by-now clear failure of his economic policies. He started the era of trickle-down economics (with his British counterpart Margaret Thatcher) encompassing a whole host of policy volte-faces from the Keynesian economics of the post-war era. Drastically reduced taxes for high-income taxpayers, deregulation of financial services, reduced welfare and safety net subsidies for the poor, and increased military spending were some of the most reactionary and lasting changes in economic policy that Reagan introduced. The deregulation of financial services alone can be credited with the financial crash of 2008 according to many liberal economists. And despite these disastrous policy volte-face there is no sign that we have learned any lessons from this experience.

  • Comment number 27.

    '25. At 10:22 11th Apr 2012, John_from_Hendon -
    What of the other non-marginal motoring costs?'


    I was rather teasing initially, given the BBC's commitment to cost-savings and climate change that seem less walked than talked often.

    It is a matter of interest to me, both financially and environmentally.

    Ignoring shared travel (which can add a 4x value multiplier to care travel, ex. parking - I wonder how the new tax proposals and that would get passed on via expense claims?), it is interesting.

    On my LPG Volvo I get about 30mpg at motorway speeds. Pricewise that equates to about 60mpg, plus a more fragrant exhaust.

    Not sure, but with a hybrid on such trips one suspects that pretty soon the fossil engine is lugging a heavy battery along just for the ride.

    On a purely cost to driver vs. compensator (licence fee payer?) basis, I have found mileage allowances can range from 14p to the sky's the limit, with the Inland Revenue at the 40p/m mark.

  • Comment number 28.

    #27

    The total cost of car travel...

    Fuel, vehicle excise duty, repairs/maintenance, cleaning, depreciation and of course insurance. Some of these vary with mileage some do not. Travel just a few miles a year and the cost per mile of these fixed costs is far higher than the tax man allows - without detailed actual computations and records!

    An elderly neighbour did very few miles a year, less than a couple of hundred - he hardly knew how to re-fuel his car. His main cost was insurance over a grand a year - about £5 a mile! He could not walk well and still needed his own car - his wife insisted up on it - and this may well be what eventually killed him!

  • Comment number 29.

    #28 J_f_H

    " and this may well be what eventually killed him!"

    --and the moral of the story ?

  • Comment number 30.

    #29

    The man died of an aneurysm exacerbated by the drugs given after knee replacement surgery. The surgery which was necessary because he was bullied into keeping a car so big that he could hardly open the door in his garage, which hurt his knees. Nice chap, a bit weak and somewhat snobbish - hence the giant car - to cart his wife about in, rather than one he could get in and out off easily.

    Moral: don't be bullied into taking the wrong decision!

  • Comment number 31.

    #30

    -- Seems to be that marriage killed him.

    -- what I had suspected.

 

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