Sunday, December 23, 2007

Food prices face new surge

Global food prices face a new surge. In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time high, soyabean prices are at a 34-year high and corn prices at a 11-year peak. The agricultural commodities price rises are the result of high demand, poor harvests and low stockpiles of food.

Food prices in the UK are more than 5 per cent higher than a year ago. Bread prices have jumped 11.6 per cent over the last year, double the increase for cake or biscuits. Butter and eggs are about a third more expensive than last November, milk prices are 16.6 per cent higher and cheese is up 8.8 per cent.

Eurozone food price inflation was up to 4.3 per cent in November. It was one of the main reasons for the jump in the zone's annual inflation rate from 2.6 per cent in October to 3.1 per cent, the highest level in six years. In the US, annual food price inflation of 4.8 per cent in November combined to a rise in the inflation rate to 4.3 per cent.

Deeper long-term economic influences are likely to have more influence on the future supply and demand of major food commodities and therefore on medium to lomg-term price levels, than the current boom in biofuel production. This is the main conclusion of a new report from the International Food Policy Institute: Food . One might add, however, that biofuel demand is more susceptible to the effects of policy initiatives, in particular over generous subsidies and tax reliefs.

The report points out that while overall world economic growth is likely to remain in the 4 per cent a year average range, growth in the developing countries with expanding food demand is expected to average 6 per cent a year well into the next decade. IFPRI points out that of the world's most food insecure countries, which have the greatest propensity to import food, twenty-two had average annual growth rates ranging from 5 per cent to 16 per cent between 2004 and 2006.

What IFPRI characterises as 'diet globalisation' is also a major long-term demand changing factor. More affluent city-dwelling Asian consumers are increasingly seeking non-traditional foods. This is leading to reduced rice consumption and increased consumption of wheat and wheat-based products, temperate-zone vegetables and dairy products - and increases in demand for animal feeds for the livestock producing many of these foods.

One by-product of rising food prices is that import tariffs for agricultural commodities, in paricular cereals, vegetable oils and rice, are being slashed in an effort by developed and developing countries to cushion their local markets against rising food inflation. On the other hand, export tariffs have been raised by several key exporting countries such as Argentina in an attempt to keep local markets well supplied.

Given that the rise in food prices is not likely to be a short-term phenomenon, one might question why the commercial aspects of farming continue to require subsidy.

Thursday, December 20, 2007

Wine reform watered down

EU farm ministers have agreed a reform package for the wine sector that dilutes the package proposed by Commissioner Fischer Boel. Pressure from France and Italy means that fewer vineyards will be scrapped and the surplus of low quality wine will continue to be distilled for industrial use over a four year period.

The Commission's plan to outlaw chapitalisation (using sugar or must to add sweetness to alcohol) has been scrapped and it will still be allowed in those statements where it is already legal. This proposal was opposed by Austria, Germany and Hungary. One consequence is that subsidies will have to be prolonged to producers in the southern states which use must as the grape juice is more expensive.

Traditionalists will also be pleased that an overall harmonisation of labelling practices throughout the EU as planned by the Commission will not take place. However, winemakers not using geographical indications and designations of origin will in future be allowed to indicate their wines' grape variety and vintage on the label.

In this connection, UK Labour MEP Brian Simpson commented, 'This is the battle for the £6 bottle. There is too much snobbery about wine, which has caused the resistance.'

Much of the annual €1.3bn EU wine budget, about half of which buys up unwated wine, will be put into national envelopes for member state governments to use in promotion and restructuring.

Putting a brave face on the deal, Commissioner Fischer Boel admitted, 'We didn't get everything we wanted, but we have ended up with a well-balanced agreement.' In other words, the wine producing states have exerted effective pressure to defend their interests.

The underlying problem is that traditional growers like France and Italy have been consuming a third less of their own crop. Where consumption is growing in countries like Britain and Sweden, it is often being driven by 'New World' wines which are perceived to offer better value.

Whether the EU wine lake can be drained in five years as is hoped remains to be seen. Much will depend on effective implementation at member state level.

Monday, December 17, 2007

Join the CAP health check debate

You can do so at: Debate . Jack Thurston of starts off with a critique of the shortcomings of the Health Check, but gets slagged off later for 2nd rate left-wing journalism! Inevitably, those with axes to grind are there whether ideological (GM) or particular (suckler cows in N.Ireland). There is also a plaintive plea for more information in Bulgarian.

I suppose that my view of these exercises is that they give the semblance of participation while the real decisions are taken elsewhere. As a debate, it is very difficult to get people to move from their fixed positions.

Launching the debate, Fischer Boel once again showed her susceptibility to food security discourses. Referring to an 'atmopshere of anxiety' surrounding the markets, she said: 'Renewed awareness of the importance of food is a good thing. We should never be complacent about supplying life's basic necessities.'

Given that farmers (other than livestock farmers) are now getting a better return from the market, one might think that now was a good time to substantially reduce subsidies.

In her presentation to the European Parliament Agriculture Committee, Fischer Boel seemed to go further than the Communication itself, for example by clearly indicating her preference for a longer-term shift towards a flat rate Single Farm Payment or for ending the 45€/ha. energy crop premium.

Tuesday, December 04, 2007

Meat: facing the dilemmas

The excellent Food Ethics published by the Food Ethics Council has devoted its latest issue to this theme. You can read excerpts online at: Meat

There are a lot of issues related to increasing meat consumption: climate change; health issues; water scarcity and biodiversity loss from clearing forests to make way for pasture and feed production; and animal welfare, which is certainly not a luxury we can no longer afford. The FAO calculates that livestock account for 18 per cent of total anthropogenic greenhouse gas emissions. Cows and sheep burp a lot releasing methane, which has a global warming potency 21 times greater than CO2.

In his introduction to the edition, Tom MacMillan suggests that 'the challenge is not only to eat less but also to eat better meat - produced in more humane and environmentally sound production systems yielding a better quality product.' Henry Buller reports in the issue from his innovative 'Eating Biodiversity' project on this theme.

I have not yet read all the articles, but what strikes me is that although there are plenty of references to the FAO and some to the OECD and WTO, the EU and the CAP are conspicuous by their absence. Surely the EU should be contributing to this debate and developing proactive policies that bring together a number of related objectives in different spheres of policy? Or is that too much to hope for?