Cereal offenders
Mar 27th 2008
The Economist
Curbing food exports to feed hungry mouths is a recipe for trouble
FROM a “band of bakers” protesting in Washington, DC, to rioters setting buildings alight in Ouagadougou, Burkina Faso, pressure has risen on governments around the world to bring down food prices. In the past two weeks Cambodia, Indonesia, Kazakhstan, Russia, Argentina, Ukraine and Thailand have taken the easy option, restricting food exports in an attempt to shore up domestic supplies.
Such curbs may be politically expedient, but they are economically self-defeating. They demotivate farmers, push them into growing the wrong crops and jeopardise their future access to markets. Moreover, the restrictions on supply send prices even higher on world markets. As David King, secretary-general of the International Federation of Agricultural Producers, puts it, governments are choosing to “starve their neighbours”, rather than allowing higher prices to encourage their farmers to invest in greater production.
Farmers are already frustrated. Just as they enjoy decent earnings after years of falling food prices, governments seek to push prices down. Because of export quotas, Ukrainian growers, after harvesting more than they could sell at home, were forced to toss $100m-worth of rotten grain into the Black Sea earlier this year—just when world markets were desperate for supply. The measures can also be counter-productive, forcing growers to switch into new crops to avoid the export curbs. That can make local food shortages even worse.
When the barriers are lifted, farmers may find they have lost access to once-secure markets. This happened to America in the early 1970s, when President Nixon banned oilseed exports to keep down domestic prices. The embargo caused America's customers, especially Japan, to look elsewhere for sources of supply.
Export restrictions also exacerbate the rise of global food prices. Last month, when Kazakhstan threatened to limit wheat exports, some wheat prices soared by 25%. Joseph Glauber, chief economist at America's Department of Agriculture, reckons that restraints on the export of wheat may have added as much as 20% to wholesale prices—though not as much at the retail level.
The more prices rise, the greater the incentive to hoard, which creates an upward price spiral. Across Asia, restrictions on the export of rice have helped increase its cost on world markets by about 75%. On March 26th Cambodia became the latest country to ban rice exports. Thailand, the world's largest rice exporter, is also considering restrictions. Meanwhile, there is talk that importers, like China and Japan, are stockpiling rice to safeguard supplies.
Instead of putting up barriers to trade, a better response would be a co-ordinated effort to increase supply. That is something the UN Food and Agriculture Organisation (FAO) and European Bank for Reconstruction and Development sought to broker for Eastern Europe a few weeks ago. The FAO says that 23m hectares of arable land have been withdrawn from production in the former Soviet Union since its collapse, some of which could be put to use.
In an emergency, handouts to hungry citizens are better than export curbs. They could even be paid for by the higher tax revenues from farmers' extra income.
Such curbs may be politically expedient, but they are economically self-defeating. They demotivate farmers, push them into growing the wrong crops and jeopardise their future access to markets. Moreover, the restrictions on supply send prices even higher on world markets. As David King, secretary-general of the International Federation of Agricultural Producers, puts it, governments are choosing to “starve their neighbours”, rather than allowing higher prices to encourage their farmers to invest in greater production.
Farmers are already frustrated. Just as they enjoy decent earnings after years of falling food prices, governments seek to push prices down. Because of export quotas, Ukrainian growers, after harvesting more than they could sell at home, were forced to toss $100m-worth of rotten grain into the Black Sea earlier this year—just when world markets were desperate for supply. The measures can also be counter-productive, forcing growers to switch into new crops to avoid the export curbs. That can make local food shortages even worse.
When the barriers are lifted, farmers may find they have lost access to once-secure markets. This happened to America in the early 1970s, when President Nixon banned oilseed exports to keep down domestic prices. The embargo caused America's customers, especially Japan, to look elsewhere for sources of supply.
Export restrictions also exacerbate the rise of global food prices. Last month, when Kazakhstan threatened to limit wheat exports, some wheat prices soared by 25%. Joseph Glauber, chief economist at America's Department of Agriculture, reckons that restraints on the export of wheat may have added as much as 20% to wholesale prices—though not as much at the retail level.
The more prices rise, the greater the incentive to hoard, which creates an upward price spiral. Across Asia, restrictions on the export of rice have helped increase its cost on world markets by about 75%. On March 26th Cambodia became the latest country to ban rice exports. Thailand, the world's largest rice exporter, is also considering restrictions. Meanwhile, there is talk that importers, like China and Japan, are stockpiling rice to safeguard supplies.
Instead of putting up barriers to trade, a better response would be a co-ordinated effort to increase supply. That is something the UN Food and Agriculture Organisation (FAO) and European Bank for Reconstruction and Development sought to broker for Eastern Europe a few weeks ago. The FAO says that 23m hectares of arable land have been withdrawn from production in the former Soviet Union since its collapse, some of which could be put to use.
In an emergency, handouts to hungry citizens are better than export curbs. They could even be paid for by the higher tax revenues from farmers' extra income.
9 comments:
Well, you have a choice of making farmer richer or making people richer or balance of the two. I propose the latter of the three.
What would the opposition do?
KI Media may know why the SRP has been so quiet.
0000
"...higher prices to encourage their farmers to invest in greater production."
Let be honest here! Do dirt poor Cambodian farmers have the capability to invest in high production technology such as pumping system, fertilizer, crop rotation, automation, and more mechanize farming equipment to achieve greater production? Of course not!
As long as dirt poor Cambodian farmers continue to sell their raw materials abroad without turning the raw material into value added products and I don't see how dirt poor Cambodian farmers can become rich from farming! In Cambodia to be a farmer is to be poor! And I don't have to wonder any longer why Cambodia is such a poor country because 90% of Cambodian population is farmer!
The issue that facing dirt poor Cambodian farmers right now is not the issue of greater production! The real issue here is the lack of specialize technology to turn their raw materials into value added products which can bring them more money!
For example, grain can be turn into wine for drinking, ethanol gasoline for cars, and dry noodle pre-package ready to serve, flour, bread, animal feed...
Dear KI,
While rice price is rapidly rising, it is the Government right strategy to ban export and boost supply by releasing from the country stock. It is both socially and politically as well as economically right choice. On the social front, price stabilization will help urban poor and rural landless who potentially creat social unrest by demonstration or riot or robbing. Politically, it shows how responsive/accountable is the government to citizen. Economically, it helps to maintain the competitiveness for long term growth of the country economy. If social unrest emerging now, the economic performance will be hit. And rising cost of living in a way that much faster than the pace of productivity and wage increase, it will shy away production/businessess. Then consequently, factories/businesses are closed and no body can find job.
Thus it is not economically self-defeated.
Dear KI,
While rice price is rapidly rising, it is the Government right strategy to ban export and boost supply by releasing from the country stock. It is both socially and politically as well as economically right choice. On the social front, price stabilization will help urban poor and rural landless who potentially creat social unrest by demonstration or riot or robbing. Politically, it shows how responsive/accountable is the government to citizen. Economically, it helps to maintain the competitiveness for long term growth of the country economy. If social unrest emerging now
, the economic performance will be hit. And rising cost of living in a way that much faster than the pace of productivity and wage increase, it will shy away production/businessess. Then consequently, factories/businesses are closed and no body can find job.
Thus it is not economically self-defeated.
KI-Media turned this article into a condemnation of Hun Sen while it was meant to describe the situation in all rice-growing countries. Shame on you for your slanted demagoguery.
The farmers still get the same price for their rice. It is the wholesalers and exporters who rake in the big profits.
So the article is not quite accurate in its interpretation.
Sorry, 9:39, KI is a Hun Sen bashing site. Even if someone sneeze, Hun Sen will get the shaft, one way or another. What else can I say?
Maybe you can try to sweet charming KI to turn CPP. It's worth a try.
Some of the Vietcong bitches in here claimed that KI is always against AH HUN SEN but what they fail to understand is that all AH HUN SEN policies are set up to fail Cambodian people from beginning and even before this rice crisis and dirt poor Cambodian never get enough rice to eat anyway and they always pay high price for everything!
AH HUN SEN economic policy always walks one step behind the need of Cambodian population! This mother fucker has no vision, no unity and no leadership!
Nowadays it seems that the Thaicong and the Vietcong are controlling Cambodian economy because they can move Cambodian natural resources at their given price! I have to wonder if dirt poor Cambodian farmers are getting a fair international market price! I really hate the concept when the Thaicong and the Vietcong can put a price on Cambodian people head!
By the way, AH HUN SEN doesn't need to get another shaft from anybody because his dick already got a shaft unless you are a Vietcong bitch!
Wrong, CPP is the most unified party of all. We got royalist, SRP, and all. And we are the one who revived the Khmer from their dead.
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