What Does Wheat Mean?
Joshua Foust on Apr 10 2008 at 8:25 pm | Filed under: Developmental economics, Economics, Foreign affairs
Cross-posted to Registan.net, which also has lots of other commentary, news, and analysis from and about Central Asia.
Paul Krugman had a mostly-good column in the New York Times the other day, exploring the world food crisis. After digging through his typically overheated political boilerplate, one finds he narrows down the crisis into several unavoidable and a few avoidable factors. The unavoidable factors:
- The rise of the global middle class. This was discussed by Moisés Naim in the current Foreign Policy, and it boils down to a demand-driven price spike—more consumers means higher prices if supply is finite.
- High oil prices (which are, despite Krugman’s hemming and hawing, a relatively complex though quantifiable combination of demand-side factors and simple capacity at existing refineries).
- Massive crop failures in Australia and other producing areas were not balanced out by bumper crops in places like Kazakhstan. (Naim notes that 2007 was a record year for food production, but doesn’t really place food production in the context of demand growth and expected failures; demand growth matters a lot, but so do crop failures in accessible, traditional supply areas, as thriving areas like Kazakhstan don’t impact the world price.)
The avoidable factors:
- The drive for ethanol has placed severe strain on food prices just as the middle class is doing the same. The many issues surrounding biofuels is for another time and place, but their impact must be noted.
- Crashed global foodsticks, which is a thornier issue. Basically, national food stores have been depleted in recent years because many governments believed that a crop failure could be accounted for by cheap imports.
The confluence of so many factors—massive crop failures right with a spike in demand and a rise in transport costs in a time of sloppy and myopic policy—created a system-level shock that is rising the price of food out of many people’s hands.
How big a problem is this? Even in food-rich Kazakhstan, prices rose precipitously last year. In poorer Central Asian countries like Kyrgyzstan and Tajikistan, there were reports all winter of massive bread shortages, which is a staple food product. In Afghanistan, urban bazaar prices of some food staples are 90% higher than the four year average. As a result, a growing number of people at the bottom of the ladder simply cannot afford to feed themselves—and in some cases, have resorted to eating grass.
Except, in Afghanistan, this may have a silver lining. An embed with the British forces in Helmand province is reporting that the high prices have prompted some Afghan farmers to abandon poppy for wheat. Repeat: Afghan farmers may be ditching drugs for food. I’m skeptical of the claim without numbers (I’ll await the UNODC, which is generally reliable if not perfect, to provide its next report on the topic), but this is certainly not the victory the reporter is making it out to be.
For one, prices fluctuate, and the global food crisis is as much a result of temporary price spikes as it is some enduring fact of life (this may not be the case if more and more countries restrict exports, as that will continue to exacerbate the problem). And even in a temporary sense, while high wheat prices might help the farmers who grow it, they hurt everyone else—the typical Afghan will have a harder time buying food this year than last, even if he grows wheat.
What’s worse, the situation in places like Helmand is so bad higher gate prices almost don’t matter. The primary barriers to growing food in the south are infrastructure and security; that report on Helmand covers neither. Even falling opium prices won’t have as much of an impact as the hype seems to suggest: Afghanistan is finally, at long last, reaching an equilibrium point in its opium production (for a few years its opium exports seemed to be growing without relation to global prices). Now, poppy at an equilibrium point means it makes sense for the more adventurous farmers to try substituting for a crop of equivalent cash value—if poppy doesn’t increase in value, there is little reason to keep planting it when wheat prices are soaring.
But again, the temporary nature of this is difficult to avoid. Wheat prices have spiked before, repeatedly. I would wager it was as much luck that all those factors coincided this year to produce the nasty spike; once Australia shakes its suicide-causing drought and some other producing regions stop crashing from flakey weather, wheat prices will be lower (though not as low as if biofuel subsidies were dropped and exports reinstated). Where will these farmers be then? Is NATO doing anything to capitalize on a possible way to “wean” farmers off poppy? This is the fundamental problem with celebrating the price spike: no one knows if this was a decision made for this year, or if it will carry over into others. Until it does, and until there is evidence of the permanence of expensive food, there is no reason to assume the global food crisis happens to have the side benefit of crowding out some poppies.
Hell, with nothing really to go on save what amounts to a rumor, I’m highly skeptical of the wheat-for-poppies phenomenon. It sounds plausible from a desk in the U.S., but since when has that applied to the choices a farmer in the Registan Desert? It hasn’t—even from a PRT or FOB nearby, a western reporter has no idea what factors are influencing planting choices just up the road—especially considering the planting season is in November.
I realize I’m not really saying anything Barnett Rubin hasn’t already said, but this is a big issue that’s been lost in all the other big questions about Afghanistan. Famine is a relative newcomer to Afghanistan—as near as I can tell, it did not exist before the late 90s and early 00s, when it was used as a weapon by the Taliban primarily against the Hazara—and the effect its spectre has on society and local choices there is barely studied, much less understood by policymakers. While costly wheat may prompt more wheat planting in Helmand, it is prompting displacement in Ghazni.
In other words, we don’t really know what high food prices mean. Except for the potential they have of causing mass starvation and riots. Which no one wants.
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