Does any of the above sound familiar? It should; that is how I started a column I wrote 11-and-a-half months ago, in May 2007. The gist of it was that our economist prime minister and his team of experts had done a poor job of managing food stocks and that the situation was about to explode in their collective face. I could repeat that article word for word today without changing as much as a comma.
No, sorry, I am wrong, I would change a couple of things. In May 2007, I had written that wheat was changing hands at the Chicago exchange at $4.9555 a bushel on April 30. When the markets closed on the afternoon of April 15, 2008, the price was $8.9575 a bushel -- an increase of just over 80 per cent in a little less than a year.
With two weeks to go before April ends we may yet reach double last year's figure. In fact, wheat futures did cross the psychological US $9 a bushel barrier on April 15, briefly hitting $9.16 a bushel.
Meanwhile -- and neither of these items received the coverage they deserved in the Indian media -- there were two more pieces of bad news. First, as of April 15, British laws came into effect that make it mandatory for all petrol and diesel to have a minimum of 2.5 per cent of bio-fuel in it, with European Union regulations calling for 10 per cent by 2020.
Second, on the same day, Kazakhstan, the fifth largest wheat exporter, announced that it was banning all exports in an effort to bring down food prices in Kazakhstan itself.
If you are a Briton, or a European at large for that matter, bio-fuels are a win-win proposition. The farmers get assured high prices, consumers get cleaner fuels and less polluted air, and governments in Europe get to cut their collective petroleum import bills. But it is horrible news for poorer parts of the world because European farmers are now beginning to divert from wheat for human consumption to lower-quality maize (called 'corn' in America) for making bio-fuels (ethanol).
By 2020, at least 15 per cent of Europe's arable land will be used for growing maize, according to the European Union's own reckoning.
Europe's population is small enough and rich enough that wheat can be imported at open market prices if necessary. India has many more mouths to feed, much less money to spend, and in any case there just might not be enough wheat to buy.
The Canadian wheat crop will be a full fifth lower than last year, 20.6 per cent less to be precise. And when Kazakhstan put a stopper on exports it was only following in the footsteps of Russia, Ukraine, and Argentina, all of whom have either placed outright bans on grain exports or are taxing them so heavily as to make exports unprofitable. (Kazakhstan had, in fact, imposed export tariffs on wheat in February, before deciding to ban exports outright.)
Some of these countries are better placed than the others to cope with the situation. Russia, for instance, can fall back on its oil exports, since oil too hit a new record of $114 per barrel on April 15. Higher global crude prices shall hit everything from fertiliser (which uses oil products) to the cost of actually transporting grain from the farm to your local market. Very briefly, there is more bad news in store for all of us.
Please note that so far I have mentioned only wheat, not other staples such as rice and pulses. It is practically the same story, of global shortages leading to governments clamping down on exports to satisfy domestic demand even at the cost of losing markets abroad.
Thailand, Vietnam, and China have all placed stringent controls on rice exports, to name but three large global players in this market. Most of these governments were putting long-prepared contingency plans in operation. These had been drawn up because all the data revealed that 2008 would be a year of food shortages. I claim no prophetic powers but if I could foresee it one year ago I am sure the Manmohan Singh ministry could have done so given that governments possess a wealth of information not available to individuals.
Yet the fact remains that our economist prime minister -- not to mention his ministerial colleagues and his hand-picked team in the Planning Commission -- essentially lost the plot. It was, quite literally, at the eleventh hour that the Union Cabinet woke up, announcing a slew of measures at a press conference just before midnight of March 31.
It now turns out that M S Swaminathan, one of the fathers of India's Green Revolution back in the late 1960s and early 1970s, warned the Manmohan Singh ministry of impending disaster two years ago. The current prime minister, his finance minister, his commerce minister, the head of the Planning Commission, and other such worthies have, of course, all been at their jobs for close to four years. It beggars imagination that all of them were so assured of their own economic expertise that they turned a deaf year even to someone as eminent as an M S Swaminathan!
Forget two years ago, was anybody in the central secretariat paying attention even four months ago? India then had the opportunity to pick up three million tonnes of rice from Myanmar (Burma). The great economic experts in Delhi dilly-dallied. Today, there is only a million tonnes left -- and the price is over 40 per cent higher.
The scale of the mismanagement is so great that both sides of the food supply chain are suffering, the Indian farmer and the Indian consumer alike. The Government of India is buying wheat at a higher cost from abroad than it is prepared to pay to the Indian agriculturist.
Wouldn't it make more sense to raise the minimum support price of wheat in India, thus giving more money to the farmer and providing an incentive to others to grow grains rather than, say, flowers? Well, apparently not, since the day after that midnight drama on March 31 the government announced that it would not raise the minimum price. (Do I need to tell you what day succeeds March 31? It was certainly appropriate!)
The ancient Roman emperors ruled by two maxims -- Divide et impera (Divide and rule) for the colonies, Panem et circenses (Bread and circuses) for the citizens of Rome itself. Panem meaning cheap bread, is now little more than a dream, but our current ministers are liberal with the circenses, or entertainment. Feast over these examples of ministerial wit:
South Indians are eating too many chappatis, which is why there is so much demand for wheat. So says the Union agriculture minister. North Indians are eating too much rice, which is why there is so much demand for rice. So says the Union civil aviation minister.
The poor are eating two meals a day, rather than just one, which is why there is so much demand for food. So says the Union commerce minister.
Go ahead and crack a grin, we have little enough to smile about these days!
