Wednesday, April 30, 2008

The Ultimate Guide to Understanding the Food Crisis: How it Started, Who it Hurts Most, and How to Solve the Problem

If you’ve picked up a paper the last few weeks, odds are you’ve seen a frenzy of stories about rising food prices. And if even if you haven’t, you’ve definitely felt the hit in your wallet. American grocery costs have risen around 5% over the last year, while salaries have only gone up 3.5%. That means we’re paying more for loaves of bread and our paychecks aren’t making up the difference. And in certain nations? The food situation is so bad, they WISH they had our problems.

While some journalists are taking the age-old EVERYBODY PANIC! approach, most are calmly disseminating inflation information as best they can. Unfortunately, it’s complicated stuff - difficult to explain and even harder to cover thoroughly. While I’ve perused dozens of great articles on one certain aspect of the crisis (global impact, farmer prosperity, etc.), I haven’t seen one that gives an overview of the situation: why prices are rocketing, how it affects the entire globe, and where we’re going to come up with solutions.

So, here’s a shot. Hopefully, it’ll help clarify a few things. And readers, if I’ve gotten something wrong (which is pretty normal around here), please set me right.

WHAT IT IS (in a sentence)

For a variety of interconnected reasons, food prices are rising globally, causing economic strife in the U.S. and dangerous shortages in dozens of poorer countries.

WHY IT’S HAPPENING

1) Population growth. According to The New York Times, “the world’s developing countries have been growing about 7 percent a year, an unusually rapid rate by historical standards.” Simply, this increases demand for food in countries that can’t necessarily keep up.

2) Global adoption of the Western diet, especially in India and China. Newly-affluent nations are seeing high numbers of people move into the middle class. This is ostensibly a good thing, since more have access to health care and housing. However, many are also switching to the Western diet, choosing meat, dairy, and convenience foods over traditional chow like vegetables and grains. This puts a strain on current production methods, driving prices up.

3) Bad weather. This one’s pretty simple. Australia, Canada, and Ukraine, all huge exporters of rice and grains, got meteorologically screwed last year. It put stress on other sources to make up the difference. Forecasts are looking up, though, so that’s good news.

4) Gas prices. Oil is ludicrously expensive the world over, making it hard to grow, fertilize, harvest, package, and transport food – especially to places that can’t afford it.

5) Diversion of crops to make biofuel/ethanol. Since fuel prices are insane, the U.S. is trying to come up with cheaper alternatives, focusing mainly on corn-based ethanol. In fact, Newsweek's Daniel Gross states that, “Last year, one fifth of the U.S. corn crop was diverted to ethanol refineries.” This means three things: A) corn prices rise because it’s now a more valuable commodity, B) the costs of OTHER crops increase since they’re scarcer than before, and C) meat goes up as well, since corn is the main source of animal feed.

6) Investors. These guys are betting on high food prices over the next few years, driving costs up even more. This hurts every single person but the investor, “upsetting business plans, sparking inflation, causing political instability and inflicting widespread economic pain.” (If you hear of someone doing this, smack him. I give you permission.)

HOW IT’S AFFECTING/WILL AFFECT AMERICANS

First off, unless something apocalyptic happens, U.S. citizens will not starve. Many won’t even notice there’s an issue. Let’s get that out of the way, so we can stop adding to the hysteria by hoarding 50-pound bags of rice from Costco. In the meantime, here are the real effects:

1) Rising costs passed on to the consumer. This one’s the doozy. All of the aforementioned reasons (but mostly the last four) have contributed to skyrocketing prices on common edibles. According to various sources, milk is up about 15%, white carbs (pasta and bread) about 13%, and eggs a staggering 25% over 12 months ago. The New York Times claims, “With a few exceptions, nearly every grocery category measured by the Labor Department … has increased in the last year.” If this really is a full-on recession (which, yep), it probably won’t get better anytime soon, if at all.

2) Inadequate nutrition for the poor. “The Congressional Budget Office projects that a record 28 million Americans will require food stamps this year,” says Newsweek. This is not so good, as it means people in a lower economic bracket are increasingly unable to afford fundamental, healthy meals. Food banks are taking a hit, too, and one Iowa director “estimates that her group's food bills have increased 30 to 40 percent in the past year.”

3) Smaller portions and packaging. Next time you visit a supermarket, you might notice the 1.5-liter containers of soda and orange juice going for the same price the 2-liter guys used to. It’s the same with Skippy Peanut Butter (old: 18oz, new: 16.2 oz), Ramen (old: 4 oz, new: 3.5 oz), and a slew of other products, as companies are looking to save a buck wherever they can.

4) Restaurant cutbacks. Eatery owners – especially family-owned independent ones - are being hit HARD by inflation. Wholesalers raised prices over 7% last year, transportation costs are mounting, and customers are cooking at home more, reducing earnings. According to The Wall Street Journal's Juliet Chung, “Ruth's Chris Steak House saw fourth-quarter profit in 2007 fall 62% compared with the same period a year earlier. Similarly, fourth-quarter profit was down 48% at Domino's Pizza and 35% at the Cheesecake Factory.” Restaurants are compensating by serving smaller portions, using cheaper cuts of meat, and offering more pasta dishes, but the benefits may be marginal.

5) Ethanol controversy. Expect this to be a hot-button issue over the next presidency, as we search for alternatives to oil. The problem is, a lot of people are making bucks off ethanol, including farmers who’ve never seen that kind of money before. Which brings us to …

6) Happy farmers. One of the positive side effects of this whole conundrum is that American farmers are finally seeing profits. David Streitfeld of the New York Times says, “The Agriculture Department forecasts that farm income this year will be 50 percent greater than the average of the last 10 years.” Of course, fuel, fertilizer, and labor (among other things) are becoming more expensive, too, and there’s that whole volatility/who-knows-what-will-happen-next-year issue. But for now, Mr. Green Jeans in Nebraska is probably doing okay.

WHO IT’S HITTING HARDEST
(Hint: it’s not the U.S.)


If prices have skyrocketed for Americans, they’ve been blown out of the stratosphere for a number of nations around the globe. This sampling of statistics from the Economist is just to give you an idea:

"Last year wheat prices rose 77% and rice 16%. These were some of the sharpest rises in food prices ever. But this year the speed of change has accelerated. Since January, rice prices have soared 141%; the price of one variety of wheat shot up 25% in a day."

The U.N. has called it "a silent tsunami which knows no borders sweeping the world,” and it’s no wonder why. 121 countries are experiencing crisis-level food shortages, and there are estimates that 100 million people “on every continent” will go hungry. Egypt, Mexico, India, Cameroon, Indonesia, and Haiti have already seen protests and riots, and if food production and distribution continues as-is, the situation will only deteriorate.

The saddest part is, according to one economist, “In 2003, we were talking about ending world hunger—and it looked like a sensible target.” It’s something to think of next time I complain that egg prices went up again.

LARGE-SCALE SOLUTIONS

1) The United Nations task force. The U.N. has developed a two-pronged plan to address the immediate needs of the hungry and provide tools needed for self-sustainable farming. This will come at a cost of $1.7 billion, $475 million of which has already been secured.

2) Small-scale agriculture. Globally, farmers have suddenly become V.I.P.s, as millions increasingly depend on their crops and labor opportunities to survive. Due to this trend, many are citing smaller, more localized growing as a possible fix to the food shortage. Malawi in particular has been heralded as an example, as their harvest increased 100% in a single year after officials “established a special fund to help its farmers get fertilizer and high-yield seeds.”

3) Moving away from ethanol. Again, a controversial subject, but experts say it could help alleviate budget strain.

4) Time. Since growing food takes awhile, new agricultural strategies won’t produce results for a few years now. But positive weather forecasts, a slight shift back toward wheat farming, and plans put into affect now mean good things for the future.

PERSONAL SOLUTIONS

1) Economize. Plan ahead. Recycle. DIY. Cut costs. Shop smart. Employ ideas you’ve only read about up ‘til now.

2) Stay informed. Watch the news. Read the paper. Research the issues.

3) Take action. Brush up on local politics. Attend a town hall meeting. Write your senator. Boycott. Protest the shameful profiteering of oil companies.

4) Donate and volunteer. The benefits of giving money are immediate and apparent. As for volunteering, it will not only cut labor costs for philanthropies, but you’ll get to experience up close what the food problem means for so many people. Charity Navigator and Idealist.org are great places to start.

5) Don’t panic. And stop hoarding food, dangit!

And that’s it. Readers, I’d love to hear opinions and (definitely) corrections. Where do you see this all going? What are you doing to alleviate the situation? Bring the noise.

FURTHER READING/SOURCES

Assessing the Global Food Crisis (BBC, 4/08)
Biting Into Your Budget (Newsweek, 4/08)
Costs Surge for Stocking the Pantry (New York Times, 3/08)
Cutback Cuisine (Wall Street Journal, 3/08)
How to be a Foodie Without Breaking the Bank (SFGate, 3/08)
How to End the Global Food Shortage (Time, 4/08)
The New Face of Hunger (Economist, 4/08)
Now it's the $6 Loaf of Bread (Newsweek, 5/08)
Price Volatility Adds to Worry on U.S. Farms (New York Times, 4/08)
Readers Write in With More Examples of Shrinking Products (Consumerist, 3/08)
U.N. Sets Up Food Crisis Task Force (Time, 4/08)
What's Going on With Rice and Flour? (Chicago Tribune, 4/08)
The World's Growing Food-Price Crisis (Time, 2/08)

(Photo courtesy of Flickr member (kerry) .)

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17 comments:

Andy said...

A thorough review of the morass of information out there, but just two questions:

1) I'm not convinced food speculation drives the price of food up. There is, after all, a reason it's called "speculation." If speculation did drive the price up, there would be no ceiling, and every option would be a good buy, because you'd know that you could always buy at below market prices. In short: what's your source for that?

2) I recycle, but how does recycling drive down food prices?

Kris said...

Hi Andy,

1) Quite a few sources mentioned the investor angle, including both The New York Times and Newsweek.

2) I meant "recycle" in terms of recycling food - roasting a chicken, using the leftovers for additional meals and the bones for soup. The linked article gives the right idea, but in retrospect, I could have used a much better word for it.

Aryn said...

And how does our Congress respond to the increase in corn prices? Why increase the subsidies, of course, which leaves the average person paying twice for food - once in subsidies taken from our taxes and once when we buy it in the store. This crazy system has got to be stopped!

KMunoz said...

What a great way to condense all the crazy, alarmist articles out there and present a clear, organized view. Thanks!

Finally Frugal said...

I enjoyed this post! I wrote about the 'rice panic' on my website, along with a recent NY Times article encouraging Americans to stockpile food. Our food prices are rising, but compared to 99% of the world, we're still doing just fine. We're not facing food riots or starvation and we should be grateful for that.

We'll need to adapt to the higher prices, but that could be beneficial: eating less meat (and fewer resources used to 'grow' that meat), buying more raw food (less packaging and more support for local growers) and less waste of leftovers.

Frantic Home Cook said...

As far as America is concerned, we have no idea what deprivation is. (And I say that as someone who grew up eating only what we received from food banks and food stamps.)

Hopefully, America will find a way to share our bounty with those in need and look beyond our own cupboards. Great article.

Jill said...

Thanks for the well reasoned, rational post. I agree that the likelihood of food shortages here in the US is slim (other than the current lack of rice due to the "Oh my gosh, we're all going to starve" panic that seems to have gripped a large group of people in my area!).

I do, however, practice measured food storage. For instance, I'm currently buying large amounts of sugar when it is on sale. I know I will be canning peaches, pears, jams, jellies, etc this summer and I'm buying it now rather than wait because, in all likelihood, it will be more expensive this summer. I am only buying what my family and my canning frenzy will reasonably use in the next few months. I don't call this hoarding because I'm actually going to use this and we are not talking hundreds of pounds!!

Glad I found your blog. I enjoy reading stuff written by like-minded people! Keep up the good work.

Jill

Keith said...

You forgot one of the most important reasons for high food costs (at least in the US), and that is government subsidizing of farmers, encouraging them to not grow crops.

Jennifer said...

I am surprised you forgot one solution: grow your own food. Even without a big backyard or even any backyard, you can manage to grow a couple of plants in containers. Not only does it reduce your costs, but it reduces the demand on the supply for every one else. Plus, you can't get produce any fresher and more local than your own backyard!

Anonymous said...

It's good to hear someone with some perspective on this. Why does the news always try to put more drama into our lives. Walmart of course responds by putting rice on sale. Go figure.

Autumn said...

Thanks for the clear, succinct overview--I've been trying to wade through all the details in the news to get the big picture, without much success.

To contribute to efforts to alleviate hunger, web surfers can visit www.freerice.com to simultaneously sharpen their vocab skills and donate rice to developing countries (the rice is given through the UN World Food Program).

Kris said...

Thanks for your comments, everybody. They've been great to read so far.

Aryn and Keith: I'm not 100% clear on farm subsidies, which is why I chose not to mention them. My sources kind of stayed away from that area, too. Thanks for bringin' it up, though, because it's important.

Jill: Right ON, sister. Stockpiling is totally fine, I think, and different than hoarding. Thank you for making the distinction. It's (yet another) thing I should have mentioned in the post.

Finally Frugal and Jennifer: Great solutions. Definitely going up in Saturday's Comments of the Week post.

Stephanie said...

Well said Kris!

The reaction and solution here has been gardening. There are so many new garden spots being tilled around me. Many who did have gardens before have increased the size of their gardens. We are a very rural state, and the pressure of rising food prices pushes us back to our roots.

MommySecrets said...

Thanks for doing and sharing all the research - that's very helpful and enlightening.

Leanne said...

It would surprise you as well just how much will actually grow in a pot or hanging basket, even with a tiny garden you can make good use of any wall space growing berries, peas and any other trailing or climbing plant. It may not be much but it's a start.

Harper said...

As for solutions, I would like to add that we can all help a little by changing what grains we eat. I am in the process of using up and switching away from wheat, rice, and corn. I, because I live in a wealthy country (the US), have more options than most people when it comes to food, so rather than take up the grains that everyone else is forced to eat, I'm doing my best to give them my portion and encourage the production of alternative grains. I'm experimenting with teff and couple other options that are more expensive than wheat, and otherwise switching to oat and barley, which are less expensive than wheat right now.

As for meat, I'm trying to spend the extra money for grass-fed meat, which is healthier, usually from smaller farms, and does not cut into the grain supply.

Anonymous said...

I would dispute the majority of the causes of the food crisis listed in this posting, or at least the context in which they're presented. I would recommend exploring sources outside of the mainstream media (i.e. BBC, Newsweek, NYT, Economist, etc.) for more historically substantive accounts. There are good summaries at the following organizations websites: Food First/Institute for Food and Development, Transnational Institute, and GRAIN. If you're looking for a single article, check out Fred Magdoff's recent article.