Beware of the Food Crisis

In the household's across the world, people have started noticing the rising food prices. What most considered a temporary blip is assuming alarming proposition. The world is sliding steadily towards a major food crisis.

Many reasons have contributed to this global food shortage.

Any economy goes through an evolution phase of Agrarian to the value added Industrial to the value only Services economies. Various countries in the world are at different stages at any given point of time. For example, America is in the Services economy phase, China currently is an industrial economy while a country like Myanmar is still an agrarian economy. In the past there used to be a balance, with the many agrarian economy countries in the world. Globalization has speeded up the conversion of agrarian economies to industrial economies, since the wages are higher, return on investment better due to higher prices commanded by the value added products and standard of living much better in the industrial economy. There is an incentive for opting for the industrial economy. Added to this, many erstwhile industrial economies have transformed themselves to services economies. The salient feature of a services economy is that the consumption is higher. So on the one hand demand is increasing while on the other hand, supply is decreasing. A classic scenario for shortage.

Globally, the arable land under cultivation has reduced. The 1960's and 70's saw agricultural production going up due to higher levels of irrigation, better quality seeds, introduction of fertilizers and adoption of modern mechanized methods of farming. Since then not much work has gone into R&D in the agricultural field or water management. The law of diminishing marginal utility has started working. The farm sector is unable to increase their per hectare productivity drastically. With water shortages a norm than an exception, construction of dams across the world held up due to environmental issues, global warming playing havoc with the climatic conditions. lesser availability of credit for the farmers and apathy from the governments, farm sector is really struggling for survival. This leads to people moving away from farming.

But the biggest culprit is the high price of oil. Now, you may ask what has $ 100 a barrel oil got to do with food shortage. There is an increased awareness globally for actively pursuing alternatives to hydrocarbons. With the world sleeping on developing alternate fuel sources during the past three decades, there is a clamour for a quick fix. This is Bio fuels like ethanol. Arable land that were producing food has been diverted to cultivate products like maize that can be used to produce ethanol. This has led to a massive shortage of basic grains like rice and wheat.

There are no solutions in sight. Either we have to change our eating habits and move away from cereals to reduce the demand or continue to pay higher prices in the years to come. My forecast is that the food prices will rice @ 20% per year in the coming years. A scary prognosis.