The Food Game

6 March 2012

In the past three years food prices have doubled, dropped and risen again. In January 2011, food prices reached their highest price point since 1950. Food volatility is so alarming that the word ‘crisis’ is used to describe the jump in price of the world’s three staple foods – rice, wheat and maize. While the consequences have been felt to some extent in the Western world, it has been the grim reaper of the African continent. The reasons for Africa’s food vulnerability are many, but some are due to developments within the last decade, namely Africa’s ‘Green Revolution’ and the boom of food price speculation in the commodities exchange market. Both phenomena have helped re-shape Africa’s agricultural industry, but not all for the better.

Africa’s Green Revolution is being hailed as the continent’s propellant into economic independence. Its consequences will be wide-reaching – seven out of ten Africans derive their income from farming. Africa has 45% of the earth’s untapped farm land. As farming is commercialized, jobs will proliferate. The Ethiopian Commodity Exchange, which opened in 2008, traded over $1 billion in food commodities last year alone. The Exchange created hundreds of new jobs in the manufacturing, construction and engineering sectors. 

Commercialized agriculture is helping Africa become the world’s new bread basket, but not without a price. Countries like the United States profit from selling hybrid-seeds, petrochemicals and agricultural machinery to Africa. These products are the engine of the Green Revolution, but they also have detrimental consequences, like soil degradation and human illness from pesticides ingestion. Swaths of fertile land are being leased out to foreign national governments like China who have land or food shortages of their own and hedge funds who lease land for investors. Since the 2008 food crisis, the amount of leased land has increase by a factor of 14 – from 4 million hectares in 2008 to 56 million hectares in 2009 in Sub-Saharan Africa alone. African farmers are often taken advantage of in these deals, leasing their land for an unjustly low price or being ill-informed of their ownership rights.

Since the U.S. deregulated commodity exchanges in 1999, investment in food speculation has radically changed the value of food. Since 2003 investments in food derivatives have increased from $3 billion to $126 billion. Food becomes a derivative when traders make a contract on what the future price of it will be, enabling it to be traded and allowing the price to fluctuate according to supply and demand on the market.  Food speculation has radically affected the lives of both farmers and consumers in Africa. Food speculators trade agricultural derivatives based on food staples like rice, corn and wheat. These derivatives are traded like any other commodity, and their value is based on what speculators think they will be worth in the future. Speculation can create artificial scarcities that push the price of food upward, causing countries to hoard their food supplies; countries act as if there is an actual shortage of food, and so the supply chain is disrupted. The U.S. Department of Agriculture said that in 2008 food price spikes were in large part caused by speculation rather than an actual shortage in food. But whether food shortage is real or imagined, it hurts those who produce, sell and consume these traded foods. Rice, corn and wheat make up a third of the caloric intake of Sub-Saharan Africans. 

The consequences of food price volatility reach far beyond Africa. According to Charity Action Aid, 7 billion people live in countries that are vulnerable to food scarcity. Farmers cannot re-invest in their farm lands if their goods are not competitive on the market. Solutions vary, but the Food and Agriculture Organization (FAO) says that government investment in agriculture is vital to protect farmers from price fluctuation and unfair land sales.  Unless this problem is taken seriously by central governments, there is no real protection for people whose livelihoods depend on an accessible and fair agriculture market.

Whitney Purdum

The School of Oriental and African Studies