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Mary Creagh

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Combating Global Hunger and Rising Food Prices

Posted: 09/07/11 17:32 BST

Food is fast becoming one of the defining political issues of this century. In June the G20 held its first ever agricultural ministers summit in Paris to discuss rising food prices and the impacts of commodity trading. Similarly, the OECD and UN Food and Agricultural Organisation (FAO) last month published a new report saying that high prices are here to stay.

The UN predicts cereal prices could average as much as 20 per cent higher over the next decade compared with the last 10 years. This is a theme picked up by Oxfam, who launched a new campaign on sustainable food stating that the price of staple crops could double over the next 20 years, creating more misery for communities struggling to survive.

The challenge for G20 is set out a credible plan of action to deal with global prices and the needs of developing countries. The final communiqué from agricultural summit urged finance ministers to improve the rules and supervision of commodity markets, far short of the crackdown on speculators which Nicolas Sarkozy had campaigned for. This is something that G20 Finance ministers need to address when they meet in July. We urgently need to understand and measure the extent of speculation on commodities before governments can decide how to take international action to address the problem. I recently met with Ross Warburton, Executive Director of Warburton's bakers who have the largest bakery in Europe in Wakefield. We discussed food commodity trading. He told me that bakers to need to hedge their position on flour, but why do bankers?

In the UK families are feeling the squeeze from rising food prices, which reached a two year high in May. Rising oil prices cause higher food prices as fertiliser and transport costs increase. Despite the recent rain, the South East has just had the driest spring on record. The worst winter for 100 years followed by the drought in the south and east of England and torrential rain in Scotland is creating havoc for crops. A recent NFU survey estimates that 15% of the cereal harvest has already been wiped out by the dry weather.

Politicians can't change the weather, but we can plan for it. It does, however, require political leadership. Yet the Tory-led Government is silent on these issues. They can't decide whether food production is the sole preserve of the free market (give or take £3 billion a year in CAP subsidies) or if there is a role for regulation. Peter Kendall, President of the National Farmers Union, has criticised Ministers for their lack of a national food plan. The Sustainable Development Commission - before the Government abolished it in March - called on them to 'stop thinking it (food) is someone else's responsibility'. Food and farming are completely absent from the Government's so-called sustainable development strategy.

Labour is challenging the Government on food. We reflect the growing consensus across the country on the need for a sustainable food policy. The only long-term solution is to increase the productivity of food production and to make it more resilient to a changing climate. The Government should be investing in the future of food yet it is cutting research and development, and increasing tuition fees which will deter new research scientists. The Government is cutting its R&D budget into efficiency in the food chain by 61% (down from £3,291,000 in 2011/11 to. £1,271,000 in 2014-15) over the next four years.

In Government, Labour commissioned the Foresight report, published this year, which examined the challenges of how to feed 9 billion people by 2050 while reducing the climate impacts of agriculture. A more sustainable food system should aim to create more reliable food supplies, less susceptible to price hikes, to everyone's benefit. Labour also produced Food 2030 which sets out how Government can help ensure everybody has the chance to eat safe, healthy, affordable and sustainable food, now and in the future. The Foresight review and Food 2030, the first national food strategy for 60 years, are our building blocks to a sustainable and equitable food system.

The UK has come a long way since I presented my Children's Food Bill to Parliament in 2006. Nearly seven hundred thousand people signed the Fish Fight petition calling for an end to the disgraceful practice of discards. A petition of over half a million people caused a Government u-turn on plans to sell off England's public forests. When Heads of State and government attend the G20 summit in November we need to ensure that they are aware of our desire for action on sustainable food.

We need food security at home and abroad, and greater transparency in how food commodities are traded globally, as Oxfam and others are calling for. People power helped fuel a rethink on the Common Fisheries Policy through the work of Hugh Fearnley-Whittingstall and Channel 4's Fish Fight campaign; now we need to do the same on food.

Mary Creagh MP, is the Shadow Secretary of State for the Environment Food and Rural Affairs.

 

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06:09 PM on 07/10/2011
"bakers (to) need to hedge their position on flour, but why do bankers?"

By hedging his position, the baker is locking in price guarantee, ie regardless of a price increase in the underlying commodity he will pay that price.

For example, the price of commodity x is currently £20 a ton. The manufacturer knows he will need a ton in six-months time. He can wait six months to buy but given price volatility (inflation, supply) this presents a risk (to his profit margin). Therefore, he locks in the current price by buying a "future" or "foward agreement".

Now, if he is buying, there must be someone he is buying from, ie a seller. These sellers are the banks, investors, speculators. If they didn't exist, the manufacturer could not lock in his price and remove the uncertainty of price volatility.

Can he lose? If the price increases, he will pay the original, lower price, not the higher price. If the price falls, he still pays the original price, not the lower, current price. He would have been better off in this case to wait but this isn't the point: he has removed the uncertainty of price movement.
05:45 PM on 07/09/2011
Mary Creogh draws attention to probably the most serious crises we are facing globally. The effect of surging population growth and expanding economies on the capacity and sustainability of our planet's resources. A recent video posted by The Institute for new economic thinking covers an interview with Professor William Rees, founder of the ecological footprint analysis, where he stresses the need to address Ecological Economics. In a nutshell we have been in denial and are relying on outdated models past their sell by date. We must urgently reassess what the planet can deliver now and in future.

All credit to Mary Creogh for confronting the problem. But rising food prices essentially reflect supply and demand dynamics. She represents us and we need informed political power. Not people power..

Only by embracing Ecological Economics and recognizing the biophysical basis that underpins the global economy will we secure the sea changes necessary for sustainability.

The link for the Rees interview is:
http://ineteconomics.org/video/interview/william-rees-dangerous-disconnect-between-economics-and-ecology.

The All Party Parliamentary Group on Peak Oil also hosted a presentation on a similar theme last week. I found Professor Rees's analysis more compelling.
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05:50 PM on 07/10/2011
TheGoldwatcher,

Interesting comment. Supply and demand dynamics is pretty well understood, whereas price inflation is somewhat grey. Price increase is also determined by what the market (consumer) can stand, over and above the supply equation. If a producer or supermarket decides to increase prices of my staple foods, even where demand is static, by necessity I will (have to) pay the higher price as long as I can afford to. And given that wage inflation is lagging far behind food/commodity price inflation, this apparent anomaly or mis-match seems to indicate a degree of latitude inconsistent with the simple supply and demand equation. Perhaps this needs to be addressed.
11:30 AM on 07/12/2011
Thanks for drawing attention to the subjects of inflation measurement not being simplistic and weak demand acting as a brake on price expansion.

While there are times when inflation rates can be seen as predictable,straightforward and reliable there are also times when confusion creeps in via measuring criteria, exceptional events or monetary expansion. Current measuring criteria based on baskets of goods that exclude food and fuel are clearly misleading. Further, measurement criteria that are tweaked over time loose comparative validity.

We are experiencing exponential population growth, expanding economies and rising standards of living. For food prices to remain stable production will also have to expand exponentially. Professor Rees's comments appeared to suggest we can't count on exponential production growth. Prices have been rising and, absent recessions or other misfortunes, food prices are likely to continue rising.
11:41 AM on 07/09/2011
UK consumers waste billions of pounds worth food each year. In addition, we as a society eat more than required. If we manage to cut down food waste by 20% we can tackle the food crisis partially. There is no point in just blaming supermarkets for the tempting us to buy more. We as a society need to look at our food habits. When we go to office meetings or workshops, there is always plenty of food around. People who normally would not take any mid-morning snack, will have a coffee with couple of shortbread biscuits. Lack of exercise and stress makes us more hungry and still leaves us unsatisfied. We need to cut down our consumption and wastage.

There is no need to hunt for 'rocket science' solutions. We can definitely make big impact on our food budgets and hence contribute to lowering the prices by simple changes to lifestyles. There is no point in blaming the emerging economies. They are just copying our bad habits.