Rise in world food prices has implications for Ghana

By Emmanuel K. Dogbevi

I first wrote and published this article elsewhere in 2008 at the onset of the global financial and food crises.
 
As the world faces the emergence of another food crisis, I thought I should share with you, especially if you didn't get the chance to read it.

Ghana’s recent successes in the agriculture sector could suffer setbacks as a result of the rise in world food prices if the appropriate steps are not taken.

Ghana is still celebrating the positive mention it received in the recently launched World Development Report 2008 of the World Bank. In this Report, Ghana was extensively used as a case study, indeed as a success story in agricultural growth in sub-Sahara Africa, including halving poverty by Millineum Development Goal benchmarks.

Unfortunately, the rise in world food prices for grains, especially wheat, could possibly erode the gains made in agriculture in the country.

The world price of wheat has risen to $19.88 a bushel on the Minneapolis Grain Exchange (MGE) according to the website, World Socialist, and that rise is 79% higher than a year ago. The site says that the surge was as a result of the announcement that Japan had purchased 190,000 tons of US wheat shortly after the Egyptian government bought 235,000 tons, and in anticipation of weather-related food disruptions in China.

The Financial Times (FT) reports that 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.

In early trading on Monday according to the FT, the new benchmark price of wheat for March delivery rose 30 cents to $10.09½ a bushel, more than 7.5 per cent higher than the expiring December contract of $9.39 and first time it has traded over $10 a bushel. The December contract expired on Friday and the March 2008 contract became the market’s benchmark on Monday.

New benchmark prices for corn are also more than 5 per cent higher than previously. Corn for March 2008 rose to $4.43¼ a bushel, the highest level in 11 years for a front-month contract.

The benchmark prices for soyabeans delivered in January rose on Friday to a fresh 34-year high of $11.92¼ a bushel.

Rice, also for January, has jumped to an all-time high of $13.310 a hundredweight.

The FT report quotes Bill Lapp, analyst at US consultancy, Advanced Economic Solutions as saying “We’ve already seen food prices increase this year at their fastest pace since the early 1980s, but the full brunt of those increases will begin in earnest in 2008.”

The agricultural commodities price rises are the result of high demand, poor harvests and low stockpiles of food. Emerging economies, where rising incomes are boosting consumption of meat and dairy products, have added to pressures already generated by the biofuel industry.

Cereal supply was this season lower than expected as several countries suffered weather-related losses. Jean Bourlot, head of agriculture commodities at Morgan Stanley in London, said: “High cereals prices are here to stay.”

The US Department of Agriculture has predicted that global corn stocks will fall to a 33-year low of just 7.5 weeks of consumption, while global wheat stocks will plunge to their lowest level in at least 47 years at 9.3 weeks.

But the World Food Programme (WFP) has predicted that the price of wheat will remain high for atleast the next two years.

According to the group, Action Against Hunger, an NGO that is in the forefront of fighting hunger in the world, the cause of the rise in the world price of cereals was due to some factors including increased consumption of cereals both as food and for animal feed in China and Brazil.

The challenges facing food production in most parts of the world according to Action Against Hunger are, biofuel production, increase in fuel prices, and global warming.

Biofuel’s effect on food production is as a result of the use of productive land for the production of non-food crops.

The increase in fuel prices has affected agricultural production, because farmers have to pay more for less energy sources to produce.

The effects of global warming on the world is being felt in the loss of water sources. Most of the world’s water sources are drying up as a result, and this is affecting agricultural production.

There is also the challenge posed by deforestation, loss of soil fertility and land degradation which have resulted from other industrial activities.

Most developing countries now have to spend a lot more on food imports. It is estimated that developing countries spend between 70%-80% of their budget on food imports.

According to the Food and Agriculture Organisation (FAO), the global trade in foodstuffs has grown rapidly and changed radically over recent decades. Between 1970 and 2001, gross world food imports, measured in terms of calorie equivalents, rose by almost 60 percent.

But this growth differed markedly among both country and commodity groups.

The FAO reports that gross imports of food by developing countries grew by 115 percent over this period. Imports by developed countries, which already import a higher proportion of their food, grew by 45 percent.

A closer look at the data reveals that food imports by developing countries increased rapidly during the 1970s, grew more slowly during the 1980s and accelerated again over the 1990s. This pattern holds true both for the volume of food imports and for the ratio of food imports to availability for consumption per capita.

The expansion of food imports meant that the food trade surplus of US$1 billion of developing countries was transformed into a deficit of more than US$11 billion during this period. Moreover, this trend is expected to continue: according to FAO projections, by the year 2030, the net food trade deficit of developing countries is expected to swell to more than US$50 billion in constant 1997-99 US$.

These figures do not portend good for developing countries in the light of the challenges.

African countries in particular, like Sierra Leone and Liberia that depend so much on rice and Kenya which depends on corn are likely to be hard hit by the developments.

Ghana, which also imports a large amount of rice would likely face great constraints on the country’s budget.

According to the FAO, at an annual growth rate of 12.84 per cent, Ghana’s rice import grew from 121,000 metric tons in 1993 to 507,600 metric tons in 2002.

An environmental group, Environmental Rights Action, based in Nigeria, has put Ghana’s rice imports from the USA alone at 166.400 metric tons between 2004 and 2005.

The challenges that the rise in world food prices could pose to Ghana, is the diversion of funds for other sectors into food importation.

This could bring short term relief. But for a long term approach to the challenge, the Ghana government must go back to the drawing board and have a second look at agriculture in the country.

Particular attention should be given to developing irrigation systems.

Agriculture research institutions should also be given attention and the funding they require to develop new varieties of crop for farmers, especially pest and disease resistant varieties.

While Ghanaians are entitled to celebrate the achievements documented in the World Bank’s World Development Report 2008, the challenges posed by the rise in world food prices, should goad the country on to more pragmatic and goal oriented agricultural practices.

It is time to move away from lip service to the agriculture sector, it is time to put more money where it is needed most, and that is the agriculture sector, so that Ghanaians can be well fed, because well fed citizens always have the energy to build a better, stronger nation.