How to deal with the global food crisis

With the world currently experiencing a food shortage, the effects are starting to be felt across Australia. While we are fortunate enough to avoid famine, the implications of the global food crisis has other consequences for our agricultural industry, especially food exports.

Globally, food consumption has outstripped food production and, for the first time since the 1970s, the world is facing a food shortage. This is at the crux of what is described as the global food crisis.

For many Australians, a slight dent in the hip pocket at the supermarket checkout has been the most evidence we have seen of any food shortage. The shelves are still fully stocked and the choice of produce is extensive. Indeed, some economists are not calling it a crisis.

With Australia’s reputation for quality and efficient food production and the nation’s history of producing more food than we can consume, many may think this is a blip on the radar. But the reality is the world is facing unprecedented change and there are many challenges ahead for the world’s food producers to ensure ongoing food security for all.

While Australia, to date, has been relatively unscathed, the reaction around the globe to food shortages has been dramatic. In a July 2 statement, the World Bank acknowledged that more than 40 countries had lost between three and 10 percent of their GDP since January 2007 as a result of rising prices, and more than 30 countries had experienced food riots. “These numbers translate into broken lives and stunted potential,” World Bank president Robert Zoellick says.

The Bank predicts record oil and food prices are threatening to drive another 100 million people into extreme poverty. Andrew Stoeckel, the founding chairman of the Centre for International Economics, says when demand exceeds supply, prices increase—as we are seeing. On average Australians spend about 15 percent of their income on food compared with up to 80 percent for the world’s poorest. “It’s particularly severe for poor people and poor countries,” Stoeckel says.

But what does it all mean for Australia’s agribusiness and value-added food exporters? Is this an opportunity or a threat, and how should it be handled? The answer is complex and the possibilities varied.

While the recent price hike, which has mostly been associated with grains, has the potential to spur the world’s food producers into action, there are many other factors compounding the issue. Ultimately the world’s population is increasing, with estimates it will blow out from about 6.7 billion today to nine billion by 2050.

Terry Sheales, acting deputy executive director at the Australian Bureau of Agriculture and Resources Economics says the population growth is further compounded by higher incomes in the developing world. With more wealth, people are expanding their diets. “They’re demanding higher quality food with more animal products in their diets,” Sheales explains. “In order to produce those animal products, you have to feed [the animals] grain.”

With more mouths to feed, the pressure on supply is going to be exacerbated and so will prices. According to Stoeckel this is the natural way of things. Let demand push the prices up and suppliers will respond by growing more. He argues this will also cause a natural shift in the supply chain with consumers increasing their demand for more affordable alternatives and food producers will gravitate towards those products. Market forces, if left to their own devices, will sort the problem out.

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