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Walker's World: The U.S., China and food

S. Lanka warns of high food prices after floods
Colombo (AFP) Jan 17, 2011 - Sri Lanka warned Monday that food prices could shoot up after devastating floods in the north and east of the country destroyed rice and vegetable crops. Disaster Management Minister Mahinda Amaraweera said vegetable prices had already been affected because of the impact on growing areas that were swamped by unusually heavy monsoon rains. More than a million people were displaced by the floods that began nine days ago and at least 40 people have died. "We have a buffer stock of rice that is good for three months. That means there will be no immediate impact on the price of rice, but vegetables are already going up in price," Amaraweera told AFP.

Sri Lanka's annual inflation rose to 5.9 percent in December compared to 3.4 percent a year earlier, with the issue set to figure in local government elections due by March. Sri Lanka recently began importing chicken and eggs in a bid to stabilise local prices, but the minister said it would not be practical to import vegetables as well. He said the authorities were still working out the economic cost of the devastating floods, which some local experts have said could amount to $500 million. The United Nations' Deputy Emergency Relief Co-ordinator Catherine Bragg will visit Sri Lanka on Wednesday to launch an international appeal for funding.

"The purpose of Bragg's mission is to highlight all humanitarian needs in Sri Lanka, and the UN ongoing commitment in providing humanitarian relief and assistance," the UN said in a statement. "During the visit the UN will also launch a Flash Appeal for emergency funds to respond to the flood crisis." The UN has warned that mines left over from Sri Lanka's separatist war, which ended nearly two years ago, may have shifted during the floods and could pose a threat to relief workers and residents. The disaster management centre in Colombo said the number of people in state-run relief centres dropped to 58,000 on Monday morning, down from about 240,000 on Sunday. Water levels have fallen, but the weather office said monsoon conditions would last until mid-February.
by Martin Walker
Washington (UPI) Jan 17, 2011
Of all the geopolitical and geoeconomic issues that the Chinese and American presidents will discuss in their Washington summit this week, the looming world food crisis isn't on the agenda. It should be because, each in its own way, these two countries share a massive responsibility.

They are the world's largest food producers and the largest consumers of meat protein. Since it requires 13 to 17 pounds of vegetable protein to produce 2 pounds of meat protein, their appetite for meat is a major strain on the world's limited supply of arable land.

China's total meat consumption is close to double that of the United States. As they clamber up the prosperity ladder, the Chinese are also clambering up the protein ladder, shifting from a rice diet to hamburgers and fried chicken. Along with the new diet and urban lifestyle comes obesity and diabetes.

Americans, who love their meat and poultry, consume 240 pounds per head each year, the American Meat Institute says. (The Chinese consume just more than 100 pounds per head, triple their consumption of 1980.) But the real U.S. contribution to the global food crisis is ethanol.

Lester Brown, founder of the Earth Policy Institute, says of the 416 million tons of grain produced in the United States in 2009, 119 tons went to produce fuel for cars. This, alone helps to explain why world grain demand has almost doubled over the past 20 years. Demand grew at an average 21 million tons a year from 1990-2005 but in the last five years the growth in demand has soared to an average 41 million tons a year.

This isn't solely an American phenomenon. Grain is being turned into fuel in vast amounts in Brazil and Europe. The surge in ethanol production has affected the world food supply, even as the world's population is growing by 80 million new babies every year.

On Jan. 5, the food price index maintained by the U.N. Food and Agriculture Organization hit an all-time high, higher even that in the summer of 2008 when the world was wracked by food riots. Although wheat reserves are higher than in 2008, corn and soy reserves are low and the index is being driven by dramatic surges on the prices for sugar, cooking oils and fats.

The 2008 crisis was driven in part by unusual weather factors, as well as the ethanol boom. Until recently, this year's food crisis was being driven by greater demand but now there are floods in Australia and Brazil, which threaten this year's harvests. And Russia's drought and fires last year means that Moscow has barred grain exports.

And just as in 2008, the rising oil price is going to add to the food crisis. Speaking Friday at the Organization of Petroleum Exporting Countries in Cairo, Kuwait's oil minister declared that the world could tolerate an oil price of $100 a barrel. Oil is a crucial component in the food price because of its role in fertilizer and in fueling farm machinery and food transport costs.

The price the world pays for the remarkable economic growth enjoyed over the past decade by emergent economies like China, India, Brazil and others is higher demand for meat protein, for cars and domestic appliances and for electricity. That means higher demand for food and water, for energy and for raw materials like iron and copper, which is why the world has been going through a dramatic boom in commodity prices.

Over the past year, the index of all commodity prices maintained by The Economist magazine has jumped 34 percent in dollar terms and 50 percent in euros.

So even without short-term factors like floods and droughts and the oil price, there is a long-term trend of rising demand that is steadily pushing food prices higher. The era of cheap food that the world has enjoyed since the "Green Revolution" of the 1960s is coming to an end.

This is an issue of global concern that is likely to affect stability in countries across the globe, which is why the food crisis should be on the agenda of Barack Obama and Hu Jintao this week. But there was no sign of the food issue in Secretary of State Hillary Clinton's preliminary policy statement Friday, which listed trade, security, human rights along with Iran, North Korea and Taiwan as key themes, along the real threat of geopolitical rivalry.

"Some in the region and some here at home see China's growth as a threat that will lead either to Cold War-style conflict or American decline," Clinton said. "And some in China worry that the United States is bent on containing China's rise and constraining China's growth ... We reject those views."

But even with massive political goodwill on both sides, managing the new era of food crisis the world in entering is going to be difficult.

"It is no longer conflict between heavily armed superpowers but rather spreading food shortages and rising food prices -- and the political turmoil this would lead to -- that threatens our global future," argues Lester Brown. "Unless governments quickly redefine security and shift expenditures from military uses to investing in climate change mitigation, water efficiency, soil conservation and population stabilization, the world will in all likelihood be facing a future with both more climate instability and food price volatility."

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