The Hindu Business Line : Responding to high food prices

If major agrarian economies such as India and China can strengthen their farm production base and turn self-sufficient in food, the global market will have enough to feed the really poor elsewhere.

“Agricultural commodity prices are expected to remain high over the next 10 years and the market may become more volatile. High food prices will hit the poor and hungry people the hardest”. This timely caution provided by the Food and Agriculture Organisation (FAO) in its forthcoming Agricultural Outlook is something India can ill-afford to ignore. The current high price levels were not entirely unexpected. For over a year it was seen coming, what with an unusual combination of robust demand growth, supply constraints, weather aberrations, and rampant speculation. Yet, many of the food-import-dependent countries woke up to the reality only after prices began spiralling out of control. All is not lost, though.

While the era of low prices may have ended for the time being, there is the distinct possibility that the food market can be transformed into a more consumer-friendly one, provided there is political will. It is likely the FAO is a little too cautious in suggesting that high food prices will sustain. History tells us that bull markets in agricultural commodities do not last long. At any given time, somewhere in the world, there is either planting or harvesting of crop taking place. Supplies usually respond to prices. But supply responses are currently constrained by factors as diverse as competition for acreage, global warming, water shortage and biofuel policies of industrialised countries, not to forget border-restrictions by some countries. It is also not inconceivable that the benefit of high prices has not been passed on to farmers in full measure. Food production and transportation costs are likely to stay high because of rising energy prices.

In this scenario, major emerging economies that are largely agrarian — such as India and China — can save the world by strengthening their farm production base. If the two Asian giants turn self-sufficient in food, the global market will have surplus to feed the really poor and hungry elsewhere, say in Africa and Latin America. So, in some sense, India may have contributed to the worsening global food crisis. Also, the country is home to a large number of the world’s poor and malnourished. As a nation, if we are serious about fighting poverty, there must be a genuine commitment to pursuing a sustained policy for high farm growth. Investments and time-bound implementation of projects and programmes — irrigation, input supplies, technology infusion and farm infrastructure — leave much to be desired. The extant mismatch between demand and supply could be bridged and price levels brought under control by working towards ensuring higher yields. Without farm resurgence in the next three-five years, the apparently buoyant economy runs the risk of confronting socio-political turbulence.

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