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A global challenge

The rising world food prices, caused principally by dwindling stocks of cereals and burgeoning demand, call for concerted international intervention on several fronts. While the price of wheat has touched a 10-year high, the United States Department of Agriculture says that current world stockpiles are at a 30-year low. Any hope of improvement is said to depend heavily on the harvest in countries in the southern hemisphere, still recovering from the 2006 drought. Adverse w eather, robust demand from emerging economies, disincentives on exports, and increasing cost of freight are said to underlie the spike in prices of cereals, dairy products, and animal feed. But the Food and Agriculture Organisation (FAO) ascribes the price rise as much to the surge in biofuel production that has triggered a demand for corn, soyabean, and vegetable oil. The European Union is considering the release of additional land for agriculture — set aside under a 1992 regulation to control excess capacity — even as manufacturers of food products in France, Italy, and Britain have started passing the rise in cost on to consumers. While the U.S. is contemplating a similar move, Russian farmers face the prospect of a tax levy on wheat exports by a government anxious to ward off inflationary pressures ahead of parliamentary elections.

Against this backdrop, the U.N. World Food Programme has voiced concern that the cost of food aid has risen by 50 per cent over the past five years, imposing new strain on its efforts to save millions from starvation in the least developed countries. The current price rise has also revived interest in the system of buffer stocks in preference to cash donations by the rich countries to help the poorer ones in coping with price fluctuations. Although the idea has been in the air for some decades, it never took off. It has now become particularly relevant for sub-Saharan Africa, where 95 per cent of agriculture relies on precipitation. Data from the U.N. Intergovernmental Panel on Climate Change show that rain-dependent agriculture could be reduced by half by 2020. The current scenario on prices provides an opportunity for developing and middle income countries to invest more in agricultural infrastructure, enhance access to finance, and help boost global food supplies. But that prospect is also linked to the vexed issue of the adverse impact of high farm subsidies and trade barriers in the industrialised world. Strong lobbies tend to perpetuate the trade distorting subsidies. Aside from being burdensome for tax-payers as well as consumers in the developed countries, they undercut markets in the developing world and hamper agricultural trade liberalisation.

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