Opinion
The global threat to our food security
Summary
We must raise procurement to prepare for a possible rise in inflation as global food supplies shrink
Recent data on inflation suggests a softening of the trend of rising inflation in retail prices. Much of the inflation this year has been driven by rising food prices, particularly edible oil and more recently cereals, primarily wheat. This has followed the global trend in food prices, which softened last month, even though they remain 13% higher compared to last year. While overall domestic food inflation has moderated, both rice and wheat prices have been showing an upward trend. Wheat retail inflation in July reached a high of 11.7% while wholesale wheat inflation has been at 13.6%, July being the 9th month with double-digit inflation in wheat. Rice inflation has been lower so far, but has shown a retail and wholesale uptick. While these numbers do not suggest any cause of worry so far, data on production domestically as well as globally suggest that the threat to food security isn’t over.
In India, wheat production has already suffered downward revision due to an untimely heat wave this March. The rice situation is also not encouraging. As on 19 August, sowing of paddy is 3.1 million hectares less than last year’s and 5.3 million hectares less than the normal paddy acreage. With reports of the standing paddy crop in major rice-producing states witnessing a mystery dwarfing disease, the net decline in paddy production could be anywhere at 15-20% compared to normal levels. This is likely to strain the domestic food situation.
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A similar heat wave and drought is also threatening the global supply of major cereals and other food crops. Unlike previous such episodes, where these were localized, the current heat wave and resultant drought has spanned continents. While the drought in Europe after last month’s heat wave has been declared the worst in five centuries, its impact on food production is worrying. The Global Drought Observatory has reported that drought is likely to affect 47% of European soil. The latest EU forecast suggests a decline of 16% for maize to 5% for wheat and 8-10% for edible oil. With parts of Ukraine witnessing lower sowing due to the war, the net impact of global food supply shocks will be felt everywhere.
A similar situation has been reported in other two major food producers. While China has seen heat waves and drought in several parts of the country, the US is also suffering a dry season with extreme heat and deficient rains. Similar conditions have affected Brazil, with its agricultural value output declining by 8% in the first quarter, leading to high food inflation. With most large food producers reporting drops in production, there appears to be a strong likelihood that the coming months will see global supply shortages for most farm commodities. But it is the shortage of food products which is likely to contribute to food mark-ups and thus overall inflation.
Given the precarious supply of foodgrains in our domestic economy, any complacency on ensuring food security to Indian citizens will have severe consequences. While the situation is not yet alarming, there is an urgent need to build enough stocks and prepare for any contingency. Global inflation in wheat prices and a domestic policy flip-flop had an unintended consequence: procurement this year has been the lowest in the last three years, with the total intake at less than 19 million tonnes, as against an average procurement of 39 million tonnes in the past three years. The track record of the government in distribution is no better. Irrational attempts at cutting and switching allocations between rice and wheat across states have led to a scenario where the lifting of foodgrains as part of Prime Minister Garib Kalyan Anna Yojana (PMGKAY) in the current phase has dropped to 42%, as against more than 95% in earlier phases. The offtake of wheat as part of food schemes under the National Food Security Act and other welfare schemes is at 43%, whereas it is only 36% for rice, as against almost 100% offtake last year for both rice and wheat. With a reported rise in retail and wholesale prices of wheat and rice in recent months, an extension of the PMGKAY is an important step. However, this needs to be supplemented with adequate stocks and a restoration of the original allocations.
While ensuring adequate food supply and improving efficiency in distribution is likely to help the poor, who suffer the worst impact of inflation, what is also needed are proactive steps to increase the incomes of farmers in our drought and disease affected states. The best way to do so would be to prepare for higher procurement during the kharif season. Ensuring food security to the poor is not only essential to protect them from another impending global food crisis, but also important for alleviating distress in our rural economy.
Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.
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