by Piet Coetzer

Food inflation set to soar

Biofuels eat up corn crops

Biofuels eat up corn crops
Biofuel.jpg

On the back of the worst drought in the United States in more than 50 years, crop failures elsewhere, and competition for food crops from the biofuels industry, farmers across the globe have started to slaughter cattle and pig herds. This can cause world-wide food inflation to rise to 14% over the next 12 months. For those who can afford it, now might be a good time to stock the freezer with some pork. 

Across the globe farmers who are attempting to cut costs in the face of rocketing feed prices have started to 'liquidate' pig and cattle herds. In a just-released report Rabobank says that this process of the mass slaughter of millions of farm animals will drive food inflation to its highest levels ever.

Because it only takes six months to raise a pig to be ready for slaughter compared to 18 months for cattle, it would be easier to replenish pig herds once conditions improve. 

The Rabobank report says the mass slaughter of pigs has led to a steep decline in the price of pork for delivery in October. However, a rise in  the price of as much as 31% by July next year, is predicted.

US farmers have already reduced their cattle herd to the smallest since 1973. It is also expected that US livestock herds are likely to be liquidated at an accelerating pace during the first half of 2013.

Because meat and dairy products already account for 52% of the cost of the average global food basket, the report predicts the overall price of the basket will soar to a record 243 on the United Nations Food and Agriculture Organisation (FAO) index by mid 2013.

The impact of the US drought on global food security and the broader world economy stems from the fact that in the 'global village' the US generates about 25% of both Gross Domestic Product (GDP) and basic foods. It is also the largest producer of food surpluses and about half of all basic food trade emanates from the US.

Unlike the 2007/8 food riots in developing countries there is no shortage of wheat and maize and people can switch to staples in their diets. There are, however, already indications of countries starting to stockpile supplies, which could threaten global stability.

Biofuels

The situation is exacerbated by the fact that 40% of the US maize crop is used for the production of ethanol while the land used to meet European biofuel targets could produce enough wheat and maize to feed around 130 million people.

According to a recent report by the aid organisation Oxfam(http://reliefweb.int/report/world/hunger-grains-fight-time-scrap-eu-biofuels-mandates) Europe’s growing appetite for biofuels is pushing up global food prices and driving people off their land, resulting in deeper hunger and malnutrition in poor countries.

Current European Union (EU) law requires 10% of transport energy to come from renewable sources by 2020, with almost all of it expected to come from biofuels made from food crops.

“Europe has helped spark a global rush for biofuels that is forcing poor families from their homes, while big business piles up the profits. Biofuels were meant to make transport greener, but European governments are pouring consumers' money down the drain, while depriving millions of people of food, land and water,” said Natalia Alonso, Head of Oxfam’s EU Office at the release of the report The Hunger Grains.

Maize and soy prices reached record highs this summer in the northern hemisphere, hitting poor people the hardest since they can spend up to 75% of their income on food.

By 2020, EU biofuel mandates alone could push up the price of some foods by as much as 36%. This would affect us all but would have a particularly severe impact on poor people who are already struggling to afford the food they need to survive, Alonso said.

Africa

Much of the African continent is especially vulnerable to the developing situation in global food supply.

Africa was the region with the largest food deficit last year, importing in the order of 150 million tonnes of maize and grain from surplus regions.

South Africa, which had a nine million tonne carryover surplus three years ago, is expected to experience a shortfall of about 500 000 tonnes this year.

 

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