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Monday, May 05, 2008

Another Core Issue Behind Today's Food Crises

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Published on 4 May 2008 by Resource Insights.
The just-in-time economy crumbles
by Kurt Cobb

Almost two years ago I wrote a piece called "Is just-in-time nearly out of time?" laying out how completely the just-in-time inventory management idea had infected businesses, governments and even nonprofit organizations. I catalogued concerns that the practice of holding razor-thin inventories of many critical items such as food, fuel and medical supplies could potentially imperil our ability to provide them in circumstances where 1) supplies grow unexpectedly tight, 2) logistical lines are impaired or cut, or 3) a large humanitarian catastrophe requires surge capacity for food aid and medical treatment.

Fast forward to 2008. Food riots are spreading across the world as soybean prices have more than doubled, corn and wheat prices have tripled, and rice prices have risen to more than five times their low of $4 in 2003. As a result of two decades of low agricultural prices, many governments became complacent and paid scant attention to food issues. They drew down grain stockpiles, neglected agricultural research and rural assistance, and generally took the attitude that market forces should increasingly dictate food production and prices. Food was becoming just another input into the world industrial system.

All that has changed as swiftly as grain prices have risen. India, which has always maintained a government stockpile of wheat, purchased several million tons in the international markets last year after six years with no imports. Malaysia announced a plan to "develop stockpiles of essential foodstuffs like rice and cooking oil." Guatemala announced plans to address food prices that include increasing food stockpiles within the country. Several countries announced bans or restrictions on rice and wheat exports.


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