Global food prices are going through the roof, threatening to push the world into a war over food. Earlier this month, the U.N. Food and Agricultural Organization said world food prices hit their highest level ever recorded in January and were set to keep rising in the months to come. It is a strong signal that a severe global food crisis is imminent or under way.
According to the FAO, its food price index reached 231 in January, surpassing the previous peak of 224.1 set at the height of the global food crisis in June 2008. Compared with a year ago, the prices of wheat, corn and coffee all soared by more than 80 percent, while soybean prices jumped by about 60 percent. Sugar has more than doubled in price since last June, reaching its highest level in 37 years.
The recent spike in global food prices was triggered by supply shocks resulting from extreme weather events in major food producing countries. Since last year, the breadbaskets in Russia, the United States, Australia, China, Brazil and Argentina have been slammed by heat waves, storms, flooding, droughts or cold weather.
To make matters worse, some of these countries banned grain exports, aggravating the shocks and stoking concerns that food could be used as a weapon in the intensifying global war over natural resources.
On the demand side, global food consumption has kept rising amid population growth, rising affluence in China, India and other rapidly growing developing countries, and an increased use of grain to produce fuel and raise livestock. Financial speculation on food commodities, facilitated by ultra-loose monetary policies in advanced countries, also played a significant role in sending food prices sky high.
These supply and demand shocks have taken their toll on vulnerable countries such as Tunisia and Egypt, where rising food prices fermented popular uprisings against corrupt governments. The turmoil in the Arab region sent politically unstable countries across the world scrambling to stockpile staples to head off food riots. Even some food exporting countries joined the rush to stockpile food in anticipation of a global food crisis, ringing alarm bells in many food importing countries.
Against this backdrop, President Lee Myung-bak told officials on Feb. 7 to set up a national body to procure food resources and prepare measures to secure investment in agricultural production. Although belated, the move was a step in the right direction. Among other things, Korea needs to boost its low food self-sufficiency rate, which makes it highly vulnerable to a global food crisis.
Korea’s food self-sufficiency rate stands at 25.3 percent, very low compared with 320 percent in France, 147.8 percent in Germany and 125 percent in the United Kingdom. Excluding rice, the nation’s self-sufficiency rates for major grains are extremely low ― 8.4 percent for soybeans, 1 percent for maize and 0.5 percent for wheat.
Furthermore, Korea relies heavily on transnational agro-food corporations and Japanese trading companies for grain imports. Among Korean firms, STX Corp. is the only one engaged in grain trading. To reduce reliance on these foreign firms and mitigate the impact of food price volatility, it is necessary to encourage more Korean companies to engage in global grain trading. In this regard, the government’s plan to set up a grain trading company in Chicago in the first half of this year is a sound decision.
The government also needs to encourage private companies to invest in overseas agricultural production projects. Currently, Hyundai Heavy Industries is the only domestic firm to run a farm abroad. More domestic companies should follow suit.
Given the frequent occurrence of catastrophic weather events, a steep growth in global food consumption and speculative investment in food, the current food price surge cannot be seen as a temporary phenomenon. The government needs to brace for a global food crisis and start a fundamental review of its agricultural policy.