The UN Food and Agricultural Organization issued its biannual Food Outlook. Everyone from commodities traders to those who follow the news only occasionally knows what it says. Food prices are near all-time highs. The problem will persist this year and probably next.

What was not stated explicitly in the survey is that food prices may stay high for years, under certain circumstances, and there is no reason to believe that the developed world can easily solve the problem.

One of the reports most alarming conclusions was that:

In international food trade, the global food import bill is expected to reach a new record of $1.29 trillion in 2011 — 21 percent more than in 2010.  Low-Income Food Deficit Countries (LIFDCs) and Least Developed Countries (LDCs) would be hardest-hit since they would likely have to spend respectively 27 and 30 percent more on food imports than last year.

In other words, poor nations have no access to reasonably price food and their people will have to spend an extraordinary portion of their incomes to feed themselves, if they can feed themselves at all. Starvation rates in these countries will rise. There are absolutely no short-term solutions because the problem is so vast and the ways to rectify it are so expensive.

The developed world is preoccupied with its own troubles brought on by the financial crisis which lowered government receipts and raised expenditure for stimulus packages which have barely worked. Those countries which once could afford to buy tens of millions of tons of food and ship them overseas for hunger relief can hardly afford to make the sacrifices created by their own austerity-driven budgets.

Most of the developing world, particularly China, Brazil and India, either have food shortages of their own or face inflation pressure because of the prices they must pay for imports. Their best counter to inflation is to increase food stocks and thereby make food less available to the balance of the world. China may have political incentives to aid nations in regions like Africa, but the People’s Republic is unable to do so with exports of its agricultural products.

Austerity is costly in terms of its effects on the people in countries which have to adopt it. That is particularly true in debt-ridden nations like Greece and Ireland. Similar problems exist in the largest economies like the US and Japan, which currently struggle to fund basic programs like Medicare and Social Security. The generosity of these countries has largely disappeared as they try to restart GDP growth.

The UN report is more than a warning. It is a log of a problem that exists now and will worsen due to the economics of countries still in recession or which face inflation because of shortages of agricultural commodities. People will starve without relief in many nations in sub-Saharan Africa and the poorest Asian nations and the UN report shows that there is no end in sight.

Douglas A. McIntyre

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