Food crisis: Land reform blamed

Speaking to the Cape Town Press Club on Thursday Vink said there is now general global consensus about what caused the recent rapid rise in food prices, and also about what can be done to contain them, but because farmers react to prices, we can expect a rapid increase in agricultural surpluses from this coming harvest onwards.

"How big will the surplus be?" he asked. And he answered: "Estimates differ, but if you find out what the biggest and most optimistic forecast is - it will be bigger than that."

He listed the drivers of the price increases as firstly the two years of drought in Australia - the biggest wheat exporter in the world. Secondly world food stocks are at an historic low - because people see no need to hang on to stocks when prices are high. There is an argument, he said, that speculators have also contributed to high prices, and it is true to the extent that with the turmoil in the bond markets thanks to the sub-prime melt-down, investors have been looking elsewhere to place their money. The agriculture commodity market is not large and increased activity greatly increases price volatility.

Exports cut

Increased price of oil has affected agriculture in two ways: firstly it has increased the cost of running machinery - tractors, harvesters and so on - and has increased the cost of other inputs like fertilisers, which are produced from fossil fuels. Secondly it has increased the cost of getting food to market.

Exporting countries like Philippines and Argentina have cut back on exports either through outright bans or by export tariffs. The increasing demand for animal protein in Asia - especially China and India - and in other developing countries is another factor, as is the growing concentration on producing biofuel from maize in the US and sugar beet in the EU.

In addition there are South Africa specific reasons. "The issue of the gap between commodity prices and food prices is an important one," Vink said, "and we have evidence now of price collusion, insufficient competition in the food processing industry and there is a need there to strengthen the competition authorities."

He also blamed the fact that there is very little investment in agriculture because of uncertainty over land tenure.

The lack of strong supply response in the region, particularly because of what has been happening in Zimbabwe, is significant too.

Vink made reference to an unpublished report from the World Bank, which has been quashed, because it would be unpopular in the US, which reckons that much the most important factor in all of these has been the biofuels industry, which the author reckons can amount to as much as 70% of the cost drive.

SA not as badly affected

Another World Bank report published on Thursday indicates what the general consensus is on what to do about food prices. First, pay attention to locally specific problems; second, take measures to alleviate the pressure on the poorest sections of society; and third, work to increase agricultural production.

Looking at our local situation, Vink said this country is not as badly affected as some other developing countries, so one must be careful not to overreact.

Secondly the domestic supply response is already under way, so the maize crop in the current harvest is going to rise from where it has been at between seven and nine million tonnes. "It is going to be around 11 million tonnes," he said

"We are looking at crops around that size for the next couple of years - weather permitting."

He also noted that there was scope for lowering the "pretty high" import tariffs on meat, particularly red meat.

But one of the main contributions needed is very specific kinds of support to small farmers, particularly in helping them to coordinate the interface that they have to the supply chains that lead up to the supermarkets "Unless you do that you are wasting your time with your small farm programmes," he said

"South Africa has lost a golden opportunity for the land reform programme. If the land reform programme had been doing what it was supposed to be doing for the past 14 years, we would have had small farmers agitating against the trade unions because small farmers would like, as much as big farmers do, they would like these high prices. But we don't have that. Instead we have a failed land reform programme."

- I-Net Bridge I-Net Bridge