May 16, 2008 | posted by Michael Baxter in Cost of food |

Two pieces of evidence emerged in the last few days to suggest that, in terms of the price of food, the worst may be over.

A global food price index produced by The  United Nations Food and Agriculture Organisation (FAO) dipped in April, for the first time in 15 months.   First the bad news: last year the index stood at 141.7, and in April it came in at 216.7.  So that is a huge jump – but then again, you shouldn’t be surprised by that, we all know the price of food is up.

But at least in April it fell from the March figure.  Okay it was a tiny fall, in March the index reached 217, but the point is, the trend of steady rises was reversed.

Now, just as one swallow doesn’t make a summer, one set of good results doesn’t mean a crisis is at its end.  And frankly, the index will need to fall quite sharply before we can say things are really better.

But then earlier this week also saw news from FAO that rice production in Asia, Africa and Latin America is forecast to reach a new record level in 2008.

“World paddy production in 2008 could grow by about 2.3 per cent, reaching a new record level of 666 million tonnes, according to our preliminary forecasts,” said FAO rice expert Concepcion Calpe.

“Major gains are expected all across the region. Bangladesh, China, the Philippines, Thailand and Viet Nam could register the largest gains. Prospects are also buoyant for Indonesia and Sri Lanka, despite some recent flood-incurred losses,” Calpe said.
 
Assuming normal rains in the coming months, rice production in Africa is forecast to grow by 3.6 per cent to 23.2 million tonnes in 2008, with large expansions anticipated in Ivory Coast, Egypt, Ghana, Guinea, Mali and Nigeria. Paddy production in Latin America and the Caribbean is expected to rebound by 7.4 per cent to 26.2 million tonnes in 2008. Production prospects, however, are negative for Australia, the United States and Europe.

It’s good news, but on its own, not enough.  But as we have long predicted, the high price of food will have two effects.  Firstly it will lead to falling demand, secondly it will lead to rising supply as producers invest in technology and more land is devoted to food production.

In the US there is growing realisation that biofuel as an alternative to oil presents almost as many difficulties as it solves. 

The US made the mistake of believing it could somehow painlessly adjust to the high price of oil, just by getting its subsidised farmers to produce more corn.

The truth is that there are alternatives to oil out there, there are plenty of potential sources for renewable energy – but they all come with a price.   

Just as there is no such thing as a free lunch, there are no alternatives to oil out there that don’t come with some kind of economic cost.  The US foolishly thought by growing its fuel in the ground, it could  solve the energy crisis and create jobs in one fell swoop.