Across the world, there was stampede in Chongqing, China, when a store announced a cooking oil promotion in November 2007. The stampede in the store left three dead and 31 injured. Last year, China was the world's biggest palm oil importer. In Malaysia tropical forests were cleared to make way for palm plantation to meet the demands of the European nations for biofuel.
Dairy and poultry Increase in per capita income has led greater demand for meat and milk products worldwide, inducing a price rise. India and China have seen a significant shift in this regard. With increasing consumption of livestock products more grain is being diverted as feed. Today 200-250 million tonnes more grain is being fed to livestock than 20 years ago, according to FAO. It forecast an increase in production of beef and sheep and goat meat owing to a growing demand in developing countries.
Developed countries will witness a fall in the meat production. Asia, especially China and India, is estimated to have witnessed maximum growth in milk production. According to the US Department of Agriculture, milk prices jumped 12 per cent in 2007 and production is expected to rise by 2.7 per cent in 2008.
In India, milk and egg prices have risen by about 20 per cent in a year. In China in 1985, a person on an average ate 20 kg of meat annually. Now he consumes almost 50 kg. EU expects milk demand to rise in 2008. The European Commission predicts the need for an additional supply of about 8 million tonnes of milk in EU by 2014.
Clearly, there is a mismatch between demand and supply of cereals. And the factors contributing to this widening gap are more than just population growth. Although the reasons for shooting prices vary from cereal to cereal and region to region, there are certain overarching trends that have contributed to the crisis-like situation. While climate changes played spoilsport by constraining supply, biofuel and changing dietary preferences pushed up demand. Fall in soil fertility and rise in prices of fertilizers, due to increasing cost of oil, and seeds raised production cost.
The search for solutions has divided the world between those advocating GM crops and those opposed to it.
"In 1973, a jump in oil prices had doubled grain prices and now oil is again set to change the trend in grain prices. Only this time there is a search for a substitute for oil," says Ramesh Chand, national professor, Indian Council for Agricultural Research, Delhi. Globally, the shift towards biofuel and cereal being used for the production of ethanol are being seen as the main factors pushing up foodgrain prices. More and more land is being diverted to biofuel than to food. Since most of the maize, used as cattle feed, was being diverted to biofuel, its prices shot up and wheat soon replaced maize as feed in several countries. Much of the 5 per cent growth in global cereal production in 2007-08 is attributed to a sharp increase in maize output.
In the US, one-fourth of the total maize production and one-fifth of the total corn output is being used for biofuel generation. The US plans to increase its biofuel production from the targeted 34 billion litres in 2008 to 136 billion litres in 2022, of which 75 billion litres can come from grain. This impacts the food price. According to a World Bank report, filling up an SUV with ethanol once means having used up enough maize to feed a man for a year.
Stavros Dimas, European environment commissioner, admitted that the EU had underestimated the dangers of food shortages and rain forest destruction when setting a binding target for 10 per cent of all EU fuels to come from "green" sources by 2020. According to EU, its biodiesel industry uses 60 per cent of the rapeseed oil output. In the US, the biofuel industry is likely to absorb 20 per cent of the domestic soya oil production.
According to a 2007 study by the International Water Management Institute, China aims to increase biofuel production fourfold to 15 billion litres of ethanol-9 per cent of its projected petrol demand-by 2020, from 3.6 billion litres in 2002. India is also focused on ramping up ethanol production. In October, the government approved a plan to require oil companies to sell petrol with a blend of at least 10 per cent ethanol by next year, which is double the current levels. The study states that to meet their biofuel targets, China will need to produce 26 per cent more maize and India, 16 per cent more sugarcane.
"We need to understand the cost of producing biofuel. Not only will we use fossil fuel to run biofuel plants, we are also clearing fields and forests to make way for biofuel crops," says Praveen Jha, professor, Centre for Economic Studies and Planning, Jawaharlal Nehru University (JNU), Delhi.
The impact of climate change is beginning to show across the world. Drought-like conditions in major cereal producers Australia, European Union and Canada have affected cereal production. Central Asian countries are facing extreme cold conditions with temperatures dipping to a 25-year low, hampering agriculture.
A December 2007 report by the International Food Policy Research Institute, Washington, warns that climate change is likely to add to food insecurity, further fuelling prices. The report, World Food Situation: New Driving Forces and Required Actions, projects that by 2020 the production of all agricultural produce in developing nations will decline by 20 per cent, while that in industrial countries by 6 per cent. It estimates that a 3°C rise could lead to a 40 per cent increase in the prices of foodgrain.
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