It is perhaps an understatement to say that 2007 has been the most eventful year for Bangladesh since at least 1975. Even in such a year, rising food prices stand out as a problem that, if left unresolved, could derail all political calculations and spell disaster for the country in 2008. In this post, I point to a global cause behind rising food prices that needs co-ordinated attention of activists and policymakers.

Food price inflation — agflation — is a global phenomenon that is set to continue in 2008. According to a Financial Times front page article from 17 December:

Global food prices will come under further pressure today as benchmark prices for cereals at much higher levels kick in, making it almost inevitable that a second wave of food price inflation will hit the world’s leading economies. In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time record, soyabean prices are at a 34-year high and corn prices at an 11-year peak. Knock-on price rises are set to hit consumers in coming months, raising inflationary pressure and constraining the ability of central banks to mitigate the slowdown in their economies. A first wave of surging cereal prices hit the wholesale market during the summer and has fed through the supply chain and contributed to rising inflation.

Here is an Economist piece that discusses the main causes of this rising agflation: rising incomes in the emerging world and subsidies for ethanol, a bio-fuel, in the United States. The first is a welcome development that the world will need to cope with. The second, however, is a result of American subsidies and other interventions that need to be campaigned against globally.

With oil prices rising to nearly hundred dollars a barrel, it is not surprising that consumers are looking for alternatives. One alternative presented to the American consumers, however, is skewed by subsidies and interventions (‘more than 200 different kinds’ according to the Economist) that are playing havocs in the world cereal markets. American government subsidises the production of maize for ethanol. American farmers react to this by diverting productions away from other crop. According to the Economist:

This year the overall decline in stockpiles of all cereals will be about 53m tonnes—a very rough indication of by how much demand is outstripping supply. The increase in the amount of American maize going just to ethanol is about 30m tonnes. In other words, the demands of America’s ethanol programme alone account for over half the world’s unmet need for cereals. Without that programme, food prices would not be rising anything like as quickly as they have been.

Relying on the data from Goldman Sachs studies, this chart shows the rising contribution of growth in world grain consumption. It shows that most of the projected rise in grain consumption between 2006 and 2015 comes from rises in fuel demand, not from feed or food.

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Is the American ethanol programme about ridding the world’s addiction to fossil fuel? Hardly. If that was the case, why would the American government slap a 54-cents-a-gallon tariff that keeps greener sugar-produced Brazilian ethanol out of the market?

And what is the real price of this subsidy? The Economist quotes studies thus: the grain needed to fill up an SUV would feed a person for a year and the expansion of ethanol and other biofuels could reduce calorie intake by another 4-8% in Africa and 2-5% in Asia by 2020.

What are the realistic chances of scrapping this programme in 2008? Most of the frontrunners in the American presidential race are for the subsidies. They play big in Iowa, the first state to choose the nominees.

But can this change if there is a co-ordinated worldwide campaign? The grain needed to fill up an SUV would feed a person for a year — how can the global conscience not move?

This is a global issue that needs a global campaign. Our governments need to act through intergovernmental channels. But activists need not wait for the governments. Dear readers, what can you do? What will you do?