One thing is clear - the globe is experiencing a shortage of food and a spike in prices of critical agricultural commodites. But the reasons behind this crisis are many, ranging from U.S. ethanol subsidies and mandates and the rise of biofuels; a draught in Australia that's killed wheat production; increased demand for beef in India and China; and so on.
Of particular note, however, are domestic and international trade policies that have distorted the flow of commodities across borders. Victor Mallet in the Financial Times takes a closer look at trade as a contributor to the current crisis.
Let's first start with how food exporters in some countries are now holding onto their exports to ensure a level of supply for domestic consumption and to retain inventory as hard times worsen. By hoarding supply, the shortage is worsened. As Mallet points out, "Trust in the efficiency and liquidity of the market has collapsed."
Domestic agricultural production in general has lagged in the last couple of decades, says Mallet. He uses the example of Asia, which as a region has done little to liberalize domestic markets, offer credit to farmers, or promote more modern means of production.
Then there's lack of progress on Doha and the reluctance of the EU and US to reform their ag policies -- it's not clear what impact this is having on the food shortage right now, but it reveals just how tough reforming agriculture trade is.
Also check out a piece by Swaminathan Aiyar in PostGlobal on biofuels and the food shortage.
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