Sunday, July 1, 2012

Book Review: Endless Appetites

Endless Appetites was written by Alan Bjerga.  It is a book about food crisis.  The conceit of the book is that it uses one burning guy instead of what this one guy represents.  This is the one individual that went viral. Bjerga chooses Mohamed Bouazizi rather than any other self immolator. It is useful to make his point but it undermines the reading of the rest of the book for me as it seems to discard this practice as a means of protest.

So, getting my bug out of the way.  I really enjoyed the rest of the book.  Enjoyed might be a bit of wrong word to use but I was informed about how Bjerga sees the unfolding of the commodification of food and some of the impacts.  

In many parts of the world, there is uncertainty over one's next meal.  One of the recurring themes is that growers can't afford their own food.  Think about the current quinoa example. The first world gets its hyper health consciousness raised over the effects of a super grain with a lot of protein and everyone has to have it.  The problem is that for a poor region, the fact that they can grow a grain with... is a survival thing.  It now makes more sense for them to sell their food for profit then eat it, especially if they are part of an organized business.  But they are not able to purchase new food at local prices but rather inflated world prices.  The reasons for that is complicated but it wouldn't be too unfair to point directly to communication and futures markets where every farmer can see what is being traded for what price and act accordingly.

 It is really ironic that even Henry Ford understood the need to ensure that workers afford the goods they are making or in this case, growing. We, the world, have not found a way to address the problem on a global level even though it was Ford and his ilk that started us on this path.  A country should be able to afford its own produce.  Put another way, globalization turns regional problems into global problems.

Bjerga gives a history of Chicago Board of Trade.  It created grading standards for wheat that along with rise of telegraph allowed for communications of standard, prices and arrival dates for wheat.  The world now sees these prices and reacts to them. Chicago kept dominance by; 1. making it easier to do deals on the floor, 2. physical ownership of a good that degraded quickly, 3. Limit of contracts traded by traders were intended to limit speculation.  This kept everything manageable.  

Then in the 1990s brought on the big boys to start trading; Goldman created an index and ways around the limitations of trading started to develop.  They found a way to game the system.  They weren't trading food anymore but had found a way to make money that impacted actual food prices.  Think about fluctuations on the stock market now applied to the stalk market.  

China used to be excluded from analysis as they were largely self sufficient.  Not true anymore. A rise in wheat can cause a rise in rice and the spiral begins. And of course, oil prices affect transportation and therefore food costs.

Local trading networks in places like Ethiopia are falling.  So, instead of buying grain at a reasonable price locally, grain is bought at world market prices that are higher.  People who can grow for themselves start hoarding making local grain much harder to buy.  Many local markets set their prices to the world market (Chicago), the internet and cell phone technology has made this easier.

Higher food prices means an increase in costs for food which means less money to plant crops. This leads to richer countries to buy up land in poor countries to plant, a form of land grab.  So, multinational seeing dollar signs and wanting to ensure that they can continue their food supply begin to own some of the best growing land in the world.

Then the world markets start tightening as supply becomes scarcer.  If countries stop trading, that leaves the market at a deficit, driving prices even higher. Even if the tightening is not based on the reality but rather the perception of what is going on in the market.  If someone thinks that a place like China will be needing more wheat and tries to hold back to get a better price, that could set off this spiral.

Throughout the book, there are small vignettes of people who work - a trader in Chicago, a farmer in Ethiopia, and UN food aid bureaucrats.  These issues transcend the right and left that so mark many of these issues.  It allows for a lot of the high finance bugaboos to be turned into human faces and actions.  All in all, this is a really depressing book.  It is a descriptive one and that means there are some silver linings but I leave the book for you to read to find them.  Hint:  It involves Africa.  

There are case studies of better ways. These include; coffee, banana, and Thai rice.  That brings me to my favourite chapter.  The Price of a Cup of Coffee.  Ethiopia is working to creating a coffee market.  This will likely lead to the increase of the quality of coffee overall but might destroy the specialty coffee market as I know it.  I love some of the special coffees that come from specific plantations but I will gladly give that up, if one of the solutions lead to overall better coffee and better ability for the local markets to create a better living for all farmers. 

I may not have to give up Ethiopian coffees completely as those specialty beans are only 4% of the Ethiopian market.  The Exchange does makes it harder to find the gems of the beans.  However, there are some coffee merchants who will still go all the way to the plantation.  Most other buyers had issues with coffee bean quality but did not have the ability to trace the beans back to the farmer who grew it.  So, many buyers had to forgo the opportunity because of the risks.  This means that sometime soon there will be more Ethiopian beans for the world for a quality that can be trusted and a lesser selection of specialty beans from single source plantations.

Look, this book is definitely worth reading to try and gain an understanding of food riots in Egypt, rising bread costs, and the impact of globalization on food.  It is a fairly equitable tale that didn't hit you over the head with prescription.  This makes it a harder book but a more enlightening one.

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