Govts battle priciest food since the 1970s news of 2021



  • UN data shows global food prices were up 33% in August from a year earlier. 
  • The issue is more acute in emerging markets where the cost of food accounts for a greater chunk of household spending.
  • Unrest in South Africa triggered by the arrest of former President Jacob Zuma in July turned to food as people looted grocery stores and restaurants.

Whether
for bread, rice or tortillas, governments across the world know that rising
food costs can come with a political price. The dilemma is whether they can do
enough to prevent having to pay it.

Global
food prices were up 33% in August from a year earlier with vegetable oil,
grains and meat on the rise, data from the United Nations Food and Agriculture
Organization show. And it’s not likely to get better as extreme weather,
soaring freight and fertiliser costs, shipping bottlenecks and labor shortages compound
the problem. Dwindling foreign currency reserves are also hampering
the ability of some nations to import food.

From
Europe to Turkey and India, politicians are now handing out more aid, ordering
sellers to cut prices and tinkering with trade rules to mitigate the impact on
consumers.

The issue is more acute in
emerging markets where the cost of food accounts for a greater chunk of
household spending, and in crisis-hit nations. In Lebanon, militant group
Hezbollah has tightened its grip on
the country by distributing food. But even the US is taking action to address
affordability made more urgent during the coronavirus pandemic.

“Governments can
intervene and commit to supporting lower consumer prices for a while,”
said Cullen Hendrix, non-resident senior fellow at
the Peterson Institute for International Economics, a Washington-based
think tank. “But they can’t do it indefinitely.”

Food inflation spurred more than
two dozen riots across Asia, the Middle East and Africa, contributing to
the Arab Spring uprisings 10 years ago. Pockets of discontentment are growing
again. Unrest in South Africa triggered by the arrest of former President Jacob
Zuma in July turned to food as
people looted grocery stores and restaurants. Shortages in Cuba led to the
biggest protests in
decades.

Adjusted for inflation and
annualised, costs are already higher now than for almost anytime in the past
six decades, according FAO data. Indeed, it’s now harder to afford food
than it was during the 2011 protests in the Middle East that led to the
overthrow of leaders in Tunisia, Libya and Egypt, said Alastair Smith, senior
teaching fellow in global sustainable development at Warwick University in the
U.K.

“Food is more
expensive today than it has been for the vast majority of modern recorded
history,” he said.

Tunisia:
Crisis management

The ground zero for the
Arab Spring protests, Tunisia has raw memories when
it comes to food and politics. Just a few days after dismissing the government
and suspending parliament in July, President Kais Saied urged producers and
retailers to slash prices of selected produce.

Red meat prices fell by
about 10% almost instantly, with the nation’s main business lobby group Utica
announcing unspecified cuts in prices for staples ranging from wheat flour,
meat, to dairy, coffee and soft drinks. Fruit prices fell by as much as 20%,
Tunisian media reported. Still, consumer prices overall rose at an annual rate
of 6.2% in August.

Then there’s the prospect
of subsidy cuts. A debate is raging about a long-planned shift to focus
spending on the neediest citizens as Tunisia tries to secure a new
financing program from the International Monetary Fund. That will likely lead
to reduced support for items likes flour and sugar as well as electricity
for a substantial number of households.

North African neighbors are
also looking at subsidy cuts to help fix public finances. In Egypt,
President Abdel-Fattah El-Sisi called for a rise in bread prices. Algerian
bakers have already hiked prices of subsidized bread in an act of defiance amid
a shortage of wheat or shrunk the size of loaves. In Morocco,
authorities announced in July a plan that will see cuts to subsidies on sugar
and low-cost wheat flour starting next year, subject to the approval of
parliament.

Romania:
Rethinking trade

The cost of bread is not
just political for grain-importing countries in North Africa and the Middle
East. Romania is Europe’s top exporter this season, and yet prices have soared
at a double-digit pace. Overall inflation is set to be the fastest in eight
years in 2021.

The former eastern bloc
country also has a dark history when it comes to feeding its population. Severe
shortages were a hallmark of communist dictator Nicolae Ceausescu before he
was overthrown and
executed in 1989.

Prime Minister Florin
Citu’s government wants to cut dependence on imported processed food products
as a way to reduce costs and narrow the trade deficit. He is already
under pressure after the collapse of his
coalition and faced a backlash over his answer to a question about the cost of
a loaf of bread. “I don’t eat bread,” he answered.

Romania earmarked 760
million euros ($896 million) for investment in farm storage and
processing, Agriculture Minister Adrian Oros said. “We’re one of the
biggest exporters of cereals and yet we import frozen bread products,” he
said. As of this month, the government is waiting for farmers to submit
eligible projects to tap the money over the next two years. However, while
Romania’s agricultural potential is one of the biggest in Europe, it so far
failed to use EU money to improve its local production.

US:
Increasing aid

Rich countries are having
their headaches too as the pandemic hits incomes. In the US, the world’s
biggest economy, 8.6% of people said they sometimes or often didn’t have enough
to eat during the prior week in a survey completed on
Aug. 30.

In a reversal from the
Donald Trump administration, President Joe Biden is increasing government assistance
to low- and middle-income Americans with the biggest long-term rise in food stamp benefits in
the program’s history.

The increased dispersal of
stamps to buy groceries adds to temporary pandemic measures such as child tax
credits and broadened access to school meal programs. Critics have said the
government subsidy is inadequate though.

The government in
Washington has been showing concern about rising consumer prices as the
economy rebounds from Covid-19. It’s taking aim at major meatpackers, charging
that “pandemic profiteering” is squeezing consumers and farmers
alike.

India:
Cutting duties

With one of the largest
malnourished populations, India is also dispersing more aid. Prime Minister
Narendra Modi’s government is distributing 20.4 million tons of free rice and
wheat, spending 672.7 billion rupees ($9.1 billion) on extra grains subsidies
to reach potentially more than 800 million people.

The country has also
implemented trade measures to shield consumers from spikes in global prices.
The government has cut duties on palm, soybean and sunflower oils as
well as lentils.

India isn’t the only nation
to use trade to intervene in the food market. War-torn Syria has tightened
imports of items ranging from cheese to cashew nuts to safeguard its dwindling
foreign currency reserves for wheat purchases. Argentina and Bolivia have curbed exports of
beef to keep prices at home in check, as has drought-hit Kazakhstan, which
forbade exports of oat, rye and forage and added quotas for forage wheat.

Turkey:
Market action

In Turkey,
President Recep Tayyip Erdogan’s popularity has slumped because of
the economy and cost of living. Food inflation accelerated for a fourth month
in August, to 29%.

The government is making
another attempt to control prices through threats of fines for businesses
selling at elevated prices to an investigation into higher costs. Trade
ministry officials are ordered to inspect allegations of excessive price
increases in food products at wholesale markets in major Turkish cities,
including Istanbul, Ankara and Izmir.

Erdogan’s government is
also working on some legislative changes to curb food inflation. From October,
fresh fruit and vegetables that may have been wasted on farms will be brought
to an online market, and an early weather warning system will be put in place
to spot potential supply shocks. There’s also the prospect of tax incentives
and more trade measures. Turkey removed import duties on grains and
lentils on Sept. 8.

Russia:
Losing battle

The world’s top grains
exporter shows the limitation of adjusting trade rules to curb prices. Russia
introduced a wheat export tax in February, but it’s also paying with a loss
of market share. The nation’s wheat is no longer as competitive, derailing
exports to Egypt, one of its biggest customers.

At home, the measures
haven’t helped curb food inflation, either. It’s hovering at a five-year high.
Domestic wheat prices jumped
in August to levels typically not seen this time of year as farmers and traders
were reluctant to sell.

– With assistance from Souhail
Karam, Irina Vilcu, Mike Dorning, Nariman Gizitdinov, Cagan
Koc, Jihen Laghmari, Yuliya Fedorinova, Pratik
Parija and Amogelang Mbatha.