Food shortages not going away soon



NEWS CLIPS: In Haiti, deadly riots over food prices. Costco is now limiting purchases of rice. Winter wheat in Kansas City's up 25 cents.

KAI RYSSDAL: Those wheat prices? Doubled since last fall. Corn has tripled in the past couple of years. Premium-grade rice has hit $1,000 a ton. I could reel-off a whole list here, but you get my drift, so for the rest of the week on the program, "Food Fight," a special series about the global food crisis. Agricultural economists have been saying for years that this was going to happen, but for most of the rest of us, the worldwide spike in food commodity prices has come pretty much out of the blue.

DAN BASSE: You know, in our research it really comes down to the globalization of the world economy.

Dan Basse's an economist with AgResource. That's a consulting group out in Chicago. For him, globalization's a fancy way of saying supply and demand. Globalization, the theory goes, brings rising standards of living to developing countries. That brings more money, and that brings the demand.

BASSE: When these people all make more money, they spend a lot of it on diet.

Diets like ours, Basse says.

BASSE: If everybody ate like an American, as I go around the world that seems to be their goal, we'd need about another 2.3 globes.

Agricultural economists working in developing countries saw today's shortages coming long ago. They laid in reserves, food stockpiles, just not enough of them.

BASSE: For five years it was those extra government stocks that the Indians and the Chinese and a lot of governments, including the Philppines and South East Asia, had really satisfied their demand, but at some point, the cupboard ran dry, and that seems to be about 12 months ago. It was that, that tipping point if you will, that really turned everyone towards looking at rising food prices. Speculators poured into the marketplace and it kind of got us to where we are here today.

Throw in the rising cost of oil, and the unanticipated consequences of turning food into biofuel, you get a world caught unaware, and deadly food riots like we've seen this week in Somalia. Basse says though, that as grim as the situation appears right now, the law of supply and demand does offer some cause for optimism.

BASSE: There's an old saying that goes there's no cure for high prices like high prices.

Higher prices drive better profits, which will in turn drive farmers to plant more of those profitable crops, but the fix, like everything in agriculture, is not going to be quick. Basse says it's going to be six or seven years before prices get even close to where they used to be.

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