Food shortages and rising prices scarred governments across the world in 2008. Food supplies had to be moved around some countries under the protection of the Armed Forces. There were riots in some places. Some countries responded with export bans. Millions fell back into poverty because of high food prices.
These events were another reminder that food security is critical in poor countries, since local production does not respond quickly enough to high prices and trade bans prevent imports from coming in. Agriculture remains one of the most tightly controlled and protected parts of national economies— not just in Asia and Africa, but also in rich economies such as the US and Europe. With the market not allowed to work, most countries have to buy some insurance against mass hunger by building up food stockpiles.
Illustration: Jayachandran / Mint
The Food and Agriculture Organization (FAO) said on Thursday that the second highest cereals crop is expected this year. Global reserves have been replenished to pre-crisis levels. India’s foodgrain stocks have gone up from 19 million tonnes (mt) in January 2008 to 37 mt in January 2009, according to a new report from Citigroup. “Procurement in the current fiscal (23.9 mt for wheat and 29.6 mt for rice) is already higher than last year’s total procurement (22.7 for wheat and 25.5 for rice),” notes Citigroup economist Rohini Malkani.
This may be an opportune time to build food reserves. Mint reported on Monday that weather scientists now say there is more than a 50% chance that the world will experience an El Nino pattern this year, which could affect rainfall and crop output in India and many other countries. India suffered crippling droughts in 2002 and 2004, both El Nino years. Though there is no confirmation of the threat as yet from the World Meteorological Organization, it is worthwhile to check how ready India is to deal with such an eventuality.
The rise in food stocks and the high procurement in the first couple of months of this fiscal suggest that India will have enough food in the bank in case El Nino does upset current expectations about a near-normal monsoon.
The downside is that there are huge costs involved as well. Food procured from farmers is sold at cheaper rates through the public distribution system (PDS): the difference is the food subsidy that burdens the government deficit. The new government’s election promise to guarantee every poor family 25kg of wheat or rice a month at Rs3 per kg will add to the food subsidy bill.
Too much is not necessarily too good.
Is India prepared for an El Nino-induced food shortage? Tell us at email@example.com