I have posted a few articles about this in the "Peak Oil" thread as a lot of this food shortages can be attributed to the spike in fuel prices. But it is really a seperate issue and one that deserves scrutiny and a watchful eye. Thus I decided to start a seperate thread for it. As I feel like we will be seeing more and more of these stories in the future. And what affects the rest of the world will eventually affect us all. April 18, 2008 Across Globe, Empty Bellies Bring Rising Anger By MARC LACEY PORT-Au-PRINCE, Haiti — Hunger bashed in the front gate of Haiti’s presidential palace. Hunger poured onto the streets, burning tires and taking on soldiers and the police. Hunger sent the country’s prime minister packing. Haiti’s hunger, that burn in the belly that so many here feel, has become fiercer than ever in recent days as global food prices spiral out of reach, spiking as much as 45 percent since the end of 2006 and turning Haitian staples like beans, corn and rice into closely guarded treasures. Saint Louis Meriska’s children ate two spoonfuls of rice apiece as their only meal recently and then went without any food the following day. His eyes downcast, his own stomach empty, the unemployed father said forlornly, "They look at me and say, ‘Papa, I’m hungry,’ and I have to look away. It’s humiliating and it makes you angry." That anger is palpable across the globe. The food crisis is not only being felt among the poor but is also eroding the gains of the working and middle classes, sowing volatile levels of discontent and putting new pressures on fragile governments. In Cairo, the military is being put to work baking bread as rising food prices threaten to become the spark that ignites wider anger at a repressive government. In Burkina Faso and other parts of sub-Saharan Africa, food riots are breaking out as never before. In reasonably prosperous Malaysia, the ruling coalition was nearly ousted by voters who cited food and fuel price increases as their main concerns. "It’s the worst crisis of its kind in more than 30 years," said Jeffrey D. Sachs, the economist and special adviser to the United Nations secretary general, Ban Ki-moon. "It’s a big deal and it’s obviously threatening a lot of governments. There are a number of governments on the ropes, and I think there’s more political fallout to come." Indeed, as it roils developing nations, the spike in commodity prices — the biggest since the Nixon administration — has pitted the globe’s poorer south against the relatively wealthy north, adding to demands for reform of rich nations’ farm and environmental policies. But experts say there are few quick fixes to a crisis tied to so many factors, from strong demand for food from emerging economies like China’s to rising oil prices to the diversion of food resources to make biofuels. There are no scripts on how to handle the crisis, either. In Asia, governments are putting in place measures to limit hoarding of rice after some shoppers panicked at price increases and bought up everything they could. Even in Thailand, which produces 10 million more tons of rice than it consumes and is the world’s largest rice exporter, supermarkets have placed signs limiting the amount of rice shoppers are allowed to purchase. But there is also plenty of nervousness and confusion about how best to proceed and just how bad the impact may ultimately be, particularly as already strapped governments struggle to keep up their food subsidies. ‘Scandalous Storm’ "This is a perfect storm," President Elías Antonio Saca of El Salvador said Wednesday at the World Economic Forum on Latin America in Cancún, Mexico. "How long can we withstand the situation? We have to feed our people, and commodities are becoming scarce. This scandalous storm might become a hurricane that could upset not only our economies but also the stability of our countries." In Asia, if Prime Minister Abdullah Ahmad Badawi of Malaysia steps down, which is looking increasingly likely amid postelection turmoil within his party, he may be that region’s first high- profile political casualty of fuel and food price inflation. In Indonesia, fearing protests, the government recently revised its 2008 budget, increasing the amount it will spend on food subsidies by about $280 million. "The biggest concern is food riots," said H.S. Dillon, a former adviser to Indonesia’s Ministry of Agriculture. Referring to small but widespread protests touched off by a rise in soybean prices in January, he said, "It has happened in the past and can happen again." Last month in Senegal, one of Africa’s oldest and most stable democracies, police in riot gear beat and used tear gas against people protesting high food prices and later raided a television station that broadcast images of the event. Many Senegalese have expressed anger at President Abdoulaye Wade for spending lavishly on roads and five-star hotels for an Islamic summit meeting last month while many people are unable to afford rice or fish. "Why are these riots happening?" asked Arif Husain, senior food security analyst at the World Food Program, which has issued urgent appeals for donations. "The human instinct is to survive, and people are going to do no matter what to survive. And if you’re hungry you get angry quicker." Leaders who ignore the rage do so at their own risk. President René Préval of Haiti appeared to taunt the populace as the chorus of complaints about la vie chère — the expensive life — grew. He said if Haitians could afford cellphones, which many do carry, they should be able to feed their families. "If there is a protest against the rising prices," he said, "come get me at the palace and I will demonstrate with you." When they came, filled with rage and by the thousands, he huddled inside and his presidential guards, with United Nations peacekeeping troops, rebuffed them. Within days, opposition lawmakers had voted out Mr. Préval’s prime minister, Jacques-Édouard Alexis, forcing him to reconstitute his government. Fragile in even the best of times, Haiti’s population and politics are now both simmering. "Why were we surprised?" asked Patrick Élie, a Haitian political activist who followed the food riots in Africa earlier in the year and feared they might come to Haiti. "When something is coming your way all the way from Burkina Faso you should see it coming. What we had was like a can of gasoline that the government left for someone to light a match to it." Dwindling Menus The rising prices are altering menus, and not for the better. In India, people are scrimping on milk for their children. Daily bowls of dal are getting thinner, as a bag of lentils is stretched across a few more meals. Maninder Chand, an auto-rickshaw driver in New Delhi, said his family had given up eating meat altogether for the last several weeks. Another rickshaw driver, Ravinder Kumar Gupta, said his wife had stopped seasoning their daily lentils, their chief source of protein, with the usual onion and spices because the price of cooking oil was now out of reach. These days, they eat bowls of watery, tasteless dal, seasoned only with salt. Down Cairo’s Hafziyah Street, peddlers selling food from behind wood carts bark out their prices. But few customers can afford their fish or chicken, which bake in the hot sun. Food prices have doubled in two months. Ahmed Abul Gheit, 25, sat on a cheap, stained wooden chair by his own pile of rotting tomatoes. "We can’t even find food," he said, looking over at his friend Sobhy Abdullah, 50. Then raising his hands toward the sky, as if in prayer, he said, "May God take the guy I have in mind." Mr. Abdullah nodded, knowing full well that the "guy" was President Hosni Mubarak. The government’s ability to address the crisis is limited, however. It already spends more on subsidies, including gasoline and bread, than on education and health combined. "If all the people rise, then the government will resolve this," said Raisa Fikry, 50, whose husband receives a pension equal to about $83 a month, as she shopped for vegetables. "But everyone has to rise together. People get scared. But we will all have to rise together." It is the kind of talk that has prompted the government to treat its economic woes as a security threat, dispatching riot forces with a strict warning that anyone who takes to the streets will be dealt with harshly. Niger does not need to be reminded that hungry citizens overthrow governments. The country’s first postcolonial president, Hamani Diori, was toppled amid allegations of rampant corruption in 1974 as millions starved during a drought. More recently, in 2005, it was mass protests in Niamey, the Nigerien capital, that made the government sit up and take notice of that year’s food crisis, which was caused by a complex mix of poor rains, locust infestation and market manipulation by traders. "As a result of that experience the government created a cabinet-level ministry to deal with the high cost of living," said Moustapha Kadi, an activist who helped organize marches in 2005. "So when prices went up this year the government acted quickly to remove tariffs on rice, which everyone eats. That quick action has kept people from taking to the streets." The Poor Eat Mud In Haiti, where three-quarters of the population earns less than $2 a day and one in five children is chronically malnourished, the one business booming amid all the gloom is the selling of patties made of mud, oil and sugar, typically consumed only by the most destitute. "It’s salty and it has butter and you don’t know you’re eating dirt," said Olwich Louis Jeune, 24, who has taken to eating them more often in recent months. "It makes your stomach quiet down." But the grumbling in Haiti these days is no longer confined to the stomach. It is now spray-painted on walls of the capital and shouted by demonstrators. In recent days, Mr. Préval has patched together a response, using international aid money and price reductions by importers to cut the price of a sack of rice by about 15 percent. He has also trimmed the salaries of some top officials. But those are considered temporary measures. Real solutions will take years. Haiti, its agriculture industry in shambles, needs to better feed itself. Outside investment is the key, although that requires stability, not the sort of widespread looting and violence that the Haitian food riots have fostered. Meanwhile, most of the poorest of the poor suffer silently, too weak for activism or too busy raising the next generation of hungry. In the sprawling slum of Haiti’s Cité Soleil, Placide Simone, 29, offered one of her five offspring to a stranger. "Take one," she said, cradling a listless baby and motioning toward four rail-thin toddlers, none of whom had eaten that day. "You pick. Just feed them." Behind the Food-Price Riots By VINCENT REINHART April 18, 2008; Page A17 With a dramatic rise in the prices of foodstuffs, riots have flared up in dozens of hotspots around the world. Panicky politicians are responding with precisely the wrong policies, including production subsidies and trade controls. The problem is clear enough: According to the International Monetary Fund, food and beverage prices have risen 60% in the past three years, and more than doubled since 2001. Even in the U.S., increases in the food-price component of producer- and consumer-price indexes over the last 12 months have been in the neighborhood of 5%. What is going on? We can discern four forces at work today pushing up food prices – forces that were also at work in the 1970s, the last time food prices increased so rapidly on a sustained basis: - Monetary policy in overdrive. Consider the real federal funds rate – that is, the nominal funds rate less inflation. A low real fed funds rate both encourages interest-rate sensitive spending, such as business investment, and discourages global investors from supporting the dollar on foreign exchange markets. At 2.25%, the nominal fed funds rate is now below the prevailing rate of consumer price inflation. The last time the real fed funds rate was negative for a prolonged period was the mid-1970s. This was also a period when overstimulated demand pushed food prices up and the dollar depreciated sharply. In the end, economic growth suffered as well. Remember stagflation? - Exchange-rate arrangements in disarray. The 1970s were also noted for turmoil in exchange markets, following the breakdown of the Bretton Woods system. The schism today is that some exchange rates move too little and others too much. The exchange rates that are moving too little are those of emerging market economies and oil producers. China, India, Korea and Taiwan, and key oil producers such as Saudi Arabia, have been preventing their exchange rates from appreciating significantly by rapidly accumulating international reserves. They've also effectively adopted the monetary policy of the Federal Reserve by keeping their domestic interest rates close to the fed funds rate. That way, no interest-rate wedge opens between their markets and our own that would otherwise put pressure on their exchange rate. As a consequence, they are following an accommodative monetary policy strategy totally unsuited to their already overheated domestic economies. Higher inflation has followed. With exchange-rate movements capped by policy makers in so many parts of the world, the burden of adjustment falls more heavily on the nations that allow their currencies to float freely, such as Canada, those in the Euro area, and Japan. The depreciation of the dollar against these currencies is yet another reminder of the 1970s. As a result of these exchange-rate changes, the purchasing power of these regions for any internationally traded good denominated in dollars has gone up. Hence, it is no accident that the dollar price of food is up sharply. - Unsound market interventions. Policy makers flailed about in the 1970s, enacting environmental legislation without due deference to the costs imposed on industry. They also tried to impede market forces with gasoline rationing and a brief flirtation with outright price controls. This time round, our government has been force-feeding the inefficient production of ethanol. The result: Corn prices have more than doubled over the past three years, adding to price pressures on commodities that are close substitutes, or which use corn as an input to production. Meanwhile, policy makers in emerging market economies have bent under the weight of popular unrest to raise food subsidies. This strains their budgets. They are also imposing restraints on exports, thereby losing gains from trade. - Oil prices on the rise. The lines stretching around filling stations in the 1970s should remind us that large energy-price increases are disruptive. And we have had a large one: Crude prices have more than quadrupled since 2001. Any industry dependent on energy will feel those cost pressures, and modern agriculture, with its oil-based fertilizers and large machinery, is no exception. But there is an important difference between our troubles today and those of the 1970s. In that decade, aggregate supply sagged as oil producers scaled back production and anchovies disappeared off the coast of Peru. The 2000s have been about demand expansion. Millions of workers in China, India and Vietnam, among others, have joined the world trading system. Beginning from a point close to subsistence, most of their additional income is being spent on food. Thus, the price of food relative to other goods and services has risen. The good news is that producers respond to relative prices, although it can take some time. Already, the acreage in which corn is planted in the United States is back to levels of the 1940s. More of a production response should follow in other areas as well. Challenges abound as supply catches up with higher global demand. The Federal Reserve has to be sensitive not to stoke inflation pressures, and to monitor inflation expectations closely. The subsidies proffered to corn producers have to be trimmed, in part to set a new standard for emerging market economies to emulate. And the gains from an open trading system have to be protected to keep our economy efficient. Mr. Reinhart, a resident scholar at the American Enterprise Institute, was director of the Division of Monetary Affairs at the Federal Reserve. Asia Teeters Toward Food Crisis from Lack of Water By Daniel Pepper, AlterNet Posted on April 17, 2008, Printed on April 18, 2008 http://www.alternet.org/story/82225/ Just before dusk on the central plain of India's northern Punjab state Naresh Kumar, 22, crouches under drill and sprinkles mustard oil, turmeric, raw sugar and confections inside a 10-inch circle traced in the rich soil. Hands clasped and head bowed, he offers a short prayer to a Sufi saint asking for a bountiful supply of groundwater. He then cranks up his coughing and wheezing diesel engine, lines up the tube well drill over the offerings and releases a lever that brings an iron cylinder crashing into the earth, turning a parcel of India's fertile breadbasket into Swiss cheese. "Business is growing by the year," says Kumar. "But we've placed about as many tube wells as we can in this area." As the water table in Punjab drops dangerously low farmers across the state are investing heavily -- and often going into debt -- to bore deeper wells and install more powerful pumps. On either side of Kumar's drill the calm beauty of emerald rice patties belies a quiet catastrophe brewing hundreds of feet beneath the surface. A prayer might be this region's best chance for survival. India's groundwater woes are, in places, at crisis levels. But the problem is not confined to a few corners of the subcontinent; groundwater depletion is a major threat to food security and economic stability in China, the US, Mexico, Spain and parts of North Africa -- just to name a few. All of these regions are grappling with the problems inherent in extracting groundwater from deep below the earth's surface. But the problem is most acute in India for two reasons: the country has long prided itself on being self-sufficient (not importing food) and because in this messy democracy free electricity is provided to farmers to win votes. Punjab, a wealthy state favored by the central government in New Delhi is just 1.5 percent of India's total landmass, but its annual output of rice and wheat contribute 50 percent of the grain the government purchases for its food distribution programs that feed over 400 million poor Indians. Experts are now saying that the 375-foot deep tube well and 7.5 horsepower pump Naresh Kumar's installs for a local sharecropper is at the eye of a storm that threatens India's food security, environmental health, and economic progress. "We have depleted the ground water to such an extent that it is devastating the country," says Dr. Gurdev Hira, an expert on soil and water quality at the Punjab Agriculture University. Dr. Hira estimates that the energy used in subsidizing rice production alone costs the state of Punjab US $381 million a year. Dr. Hira and other experts warn that if left unchecked this system will bleed state budgets, parch aquifers and run small farmers out of business. Though the pace of growth in its cities has put India in the limelight, over 60 percent of the economy is directly or indirectly engaged in agriculture with more than two out of three Indians living in the rural areas. In China, the agricultural use of groundwater has skyrocketed, and the fall in water tables has created a potential environmental catastrophe. "The breadbasket of China -- north of the Yellow River -- have millions of people dependent on groundwater," says David Molden, Deputy Director General at the International Water Management Institute in Colombo, Sri Lanka. With the water table dropping in many places across China at a rate approaching or exceeding 1.5 meters a year, "It's sitting there like a time bomb," says Molden. Aside from India and China, the two other regions where groundwater depletion is at its worst is perhaps North Africa and the Middle East, where groundwater extraction depletes aquifers that are not annually recharged. In India the problem is exacerbated by the fact that farmers in three states -- Punjab, Tamil Nadu and Andhra Pradesh -- pay nothing for electricity -- throughout India farmers' electricity is either heavily subsidized or completely free. So farmers run their pump sets with abandon, which further depletes the water table. Any farmer with the cash or collateral invests in larger, heavy-duty, power-hungry pumps capable of withstanding the grid's voltage fluctuations and frequent brown-outs. "All these issues are interconnected: water, electricity and agriculture," says Saurabh Kumar, who heads up the government's Bureau of Energy Efficiency in New Delhi. "But agreeing on a simple thing is asking for the moon." That is exactly what he hopes to do: get politicians, farmers and bureaucrats all to sign onto a set of reforms that will save billions of dollars for the farmers, state and central government, and reduce the amount of water pumped (some say unnecessarily) out of the ground. A pilot program for Kumar's nation-wide scheme is set to launch in the next three months. Farmers will receive new, efficient ground water pump sets, with meters, for which the farmers would receive pre-paid electricity credits allowing them to draw roughly the same amount of water they use now, allowing them to either pocket the savings if they pump less or pay to pump more. The utilities will upgrade their transmission and distribution lines to cut losses and improve service. The program comes at considerable cost (US $7.5 billion altogether), even greater savings (US $2.2 billion per year) and includes a considerable amount of private investment. Kumar is realistic about the challenges ahead. Unlike many academics and policy wonks who simply say the answer to India's ground water and energy woes is to charge farmers the real cost of electricity, he realizes that, "for political reasons for the next 50 years you cannot charge for energy in the agriculture sector. There would be riots." Farmers say they would be happy to pay for electricity if it were constant, consistent and didn't burn out their pumps. Except for receiving free power four years ago Darshan Singh, 55, has seen little change in government policies or investment in the last fifteen years. "Water. Managing water is the biggest problem we have," he seethes through gritty yellow teeth ground down to the size of small kernels. "This problem doesn't just have to do with farmers -- it effects everyone. If we don't have water it's the general population that will suffer." Singh has nine-and-a-half fingers on his thick hands, a stocky frame and a salt-and-pepper beard. He manages twenty-five acres of wheat and rice, the main crop rotation of Punjab, on land that has been in his family for generations. Like farmers across Punjab and the rest of India, Singh disparages the subsidies he ostensibly benefits from and says that he is happy to pay for electricity, as long as "it's the correct voltage and there are no fluctuations." The profusion of pump sets and tube wells for extracting ground water is also a result of the lack of infrastructure investment in rural areas by the central government. "No new irrigation potential has been created for about 20 years now. The state prefers to dole out subsidies rather than make capital investments," says Mohan Guruswamy, who heads the Centre for Policy Alternative, a New Delhi think tank. Furthermore, Guruswamy also points out, unlike under the British, farmers' produce in India is not taxed "so the rationale for [government] investing has gone." The government's introduction of hybrid seeds, agrochemicals, tractors and irrigation in the 1950s and 60s, during India's "green revolution" meant for the first time farmers were feeding the rest of the country, not just themselves and their families. As India's rice yields went up the country stopped importing grain (self-sufficiency being a core point of Gandhi political philosophy) the country never again faced the prospect of a devastating famine, as it did in the mid-1940s, claiming 4 million lives. But as the cost of electricity went up in the 1970s, 80s and 90s the state utilities simply ate the costs. Theft from the cheap, inefficient, long-distance and low-voltage power lines as well as corruption in the electricity boards led to a quickly antiquated, dilapidated network, especially in eastern India, which is abundant in groundwater. Back then India had only 200,000 electric pumps; today it has 12 million, and an additional 8 million diesel pumps. Like so much else in the country, the government is trying to catch up with the pace of growth and investment in the private sector without making hard choices (like charging farmers according to the amount of power they use) and disenfranchising voters accustomed to government support. China has 4.5 million pumps and the United States 200,000. But India's pumps are less than half as efficient China's and only 1.8 percent as efficient as those in the United States, according to Tushaar Shah, a chief scientist with the International Water Management Institute in Gujarat. India's power sector looses US $8-9 billion annually subsidizing farmers' use of electric pump sets. That's half of what the country spends on health and twice what it spends on education. In a country with child malnutrition rates worse than those of sub-Saharan Africa, experts are starting to question the wisdom of the system. "These subsidies hit very hard at health, education and other government programs, and they are being taken by a few select farmers," says Bharat Sharma, with the International Water Management Institute in New Delhi. The power utility covers the cost of electricity through cross-subsidies from industry, by dipping into the state coffers and by getting bailed out by the central government in New Delhi. Power sales to agriculture are one-third the total electricity consumption in the top agricultural-producing states, but it's less than a tenth of the cost recovered. "It's one classic example of bad economic policies having very serious environmental consequences." Says Shreekant Gupta, a professor of economics at Delhi University. But other options are available, ranging from different discharge systems such as drip tubes, sprinklers and more efficient pumps to different models of convening stakeholders. Spain is currently experimenting with a communal model of groundwater management in which groups of individuals have to collectively decide how to utilize a court-ordered quota of water. And in India Dr Rajendra Singh, known as the Rain Man of Rajasthan, has already shown 1,058 villages how to collect and harvest rainwater so that parched areas can blossom. By building earthen structures at low cost where the aquifer reaches the surface villagers have been able to collect rainwater and once again make an arid climate hospitable. Says David Molden, with the Institute for Water Resource Management "you've got to get the communities involved, groups of people talking to each other recognizing they've got a problem and regulating the groundwater use." Daniel Pepper is a writer and photojournalist whose work has appeared in Time, Newsweek, Fortune, the New York Times Magazine and others.