Breadbasket inflation

Wheat prices are out of control. Corn and soybeans and rice, too. Is this good or bad news for the biotech industry, and Africa?

Published February 26, 2008 10:49PM (EST)

In the rising price of my sweet baguette, hope or doom for Africa, biotech salvation or disaster?

In January, prices for bakery products in the United States rose 2.7 percent, the sharpest increase since March 1974. Blame the price of wheat, which set new records on Monday and Tuesday. In 1974, the Soviet Union's agricultural woes put upward pressure on global wheat prices. Today, a complex mixture of global weather problems, rising energy costs, growing worldwide consumer demand, and the diversion of cropland in the developed world to biofuels are combining to push grain prices upwards.

The scope of the problem is daunting. On Tuesday, Julian Borger reported in The Guardian that rising food commodity prices will prevent the United Nation's World Food Program from maintaining its current food deliveries to 73 million desperately hungry people. In China, the fourth consecutive year in which grain harvests lagged consumer demand impelled the government to slap a raft of export tariffs on grain exports. Russia, Argentina, and Kazakhstan have also imposed export restrictions. (Thanks to Energy Bulletin for the links.)

The worst-case scenario is obvious: mass starvation. Short of that, crippling inflation.

Enter the biotech industry.

In the Capital Press, "the West's Ag Web site," Scott Yates writes that the U.S. wheat industry is warming to the prospect of genetically modified wheat. In the past, farmers worried that moving to genetically modified wheat would cut them off from markets in Japan or the European Union, where consumer sentiment is still strongly anti GMO.

But times are changing:

Vince Peterson, vice president of overseas operations for U.S. Wheat Associates, said current high prices have given his organization a particular opportunity to get the biotech message out to customers.

"We do have their attention. This is a good time to talk about it," he said, adding that in every meeting the organization attends, the need for biotechnology to be in farmers' toolbox is incorporated into supply and demand and price outlook presentations.

Global population growth, the scarcity of arable land, strained water supplies, surging fertilizer prices, are all combining to make the prospect of drought-resistant, nitrogen-fixing, high-yielding genetically modified wheat more attractive.

And it's not just Monsanto and Syngenta that are pushing farmers towards a biotech solution. As reported in Time magazine last week, China also sees transgenic crops as a potential answer to its own food scarcity issues. Bur for global consumers who have become wary of Chinese quality control, the prospect of insufficiently vetted genetically modified Chinese food products is troubling.

Last Tuesday, the European Commission enacted an emergency regulation on Chinese food imports: Starting April 15, food products containing Chinese rice will require mandatory certification that they've been tested for the experimental GM variety called Bt63.

The measure underscores a discomfort in the West with China's growing dominance in the business of inventing and selling genetically modified seed. Faced with feeding every fifth person on the planet with less than one-tenth of the world's farmland, Beijing has been pumping hundreds of millions of dollars into transgenic crop research and development, hoping the plants, whose DNA is combined with genetic material that programs them with traits like pest and weed resistance, will help farmers yield more food and commodities at a lower cost -- especially as farmland is being lost to development and drought. Most of China's cotton is already transgenic, and rice, wheat, maize, soybeans and livestock are in the pipeline....

It's a shift that's causing second thoughts on both sides of this enduringly controversial technology. The United States is the world's most enthusiastic adopter of GM crops, growing vast amounts of crops like herbicide-tolerant soybeans and insect-resistant corn; here, the seeds of globally operating companies like Monsanto and DuPont have passed health and environmental muster. While U.S. regulators have determined GM foods are safe to eat, China's fast growth raises the question of whether one country's health safety trials can translate in another. "We've been saying, 'Trust us,'" says Gregory Jaffe, director of the Biotechnology Project at the Center for Science in the Public Interest in Washington. "Now the shoe is on the other foot. And we're not sure we like that system."

So: High food commodity prices will create an economic incentive for transgenic crops, which if handled carelessly, could cause disasters far more catastrophic than a few thousand poisoned pets. There's a happy thought. How the World Works is reminded of how high oil prices have made possible a landscape of environmental devastation in the Alberta oil patch that defies imagination. The price mechanism is not always our friend.

But could it be Africa's savior?

In the short term, rising food prices pose a direct threat to malnourished Africans. But as Josette Sheeran, the director of the World Food Program noted two weeks ago, even as she lamented the devastation being wrought by rising prices, in the long term, there could be a positive outcome.

"More food will be produced. Farmers will respond, and maybe there'll be investment in the African farmer for the first time, for example, in many decades," she said.

"When that happens we'll get increased food in the food supply system. But there's a lag, so we have people very vulnerable right now who can't afford the food."

Low global prices for commodities have been an ongoing disaster for African farmers, who do not have the capital or technology to compete with subsidized Western farmers. But labor and land abound in Africa. All that's missing is investment.

The BioPact Web site has long made the argument that investment in biofuels in Africa could drastically reduce poverty and kick start local economies. On Friday, the site argued that doubling food production in Sub-Saharan Africa is eminently possible, without requiring massive biotechnological inputs.

The lengthy post is well worth reading, if only for its discussion how cheap inputs of lime can make a huge difference in African agricultural productivity. But the magic bullet for attracting investment doesn't have to be biofuels, with all their associated environmental complexities and food vs. fuel tradeoffs. Just substitute the phrase "Rising food prices" for each mention of biofuels in the following passage:

Biofuels open a new market that allows the world's poor -- 70 percent of who make a living in agriculture -- to sell more farm products at better prices. Gone are the days when millions of poor farmers were kept in deep poverty because of low commodity prices; gone are the days when world markets were saturated and poor cash cropping farmers despaired because of a lack of opportunities; gone are the days of the need for American and European farm subsidies which have kept millions of ruralites in abject poverty.

The new market at last offers hope for better farm incomes for the bulk of the world's poor. This money is crucial as it will be used to modernize agriculture and make it far more efficient. Modernization of developing world agriculture means more sustainable production and lower pressures on the environment. It also means more land becomes available for energy crops, because it is well known amongst agricultural economists that if, for example, all African farmers were to adopt the most basic of modern farming techniques, they could triple, quadruple, even quintuple their output with ease.

They would not need to take new land into production, but could use the same plot to boost their production again and again. Later on, they can (1) reclaim the vast depleted land resources they abandoned long ago, and (2) invest in the enormous land resources that remain untapped today (most Sub-Saharan African countries use less than 20 percent of their potentially arable land; very large countries like the DRCongo, the Central African Republic or Angola use less than 10 percent). It is this dynamic that makes any attempt to re-introduce Malthusian perspectives into the current world agriculture debate, futile.

The rising price of wheat is putting a crimp in my personal breadbasket. But could it be the key to unlocking Africa's?

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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