Ghana And The World Food Crisis

Frankie Freeman, Analyst, Danquah Institute

Over the past couple of years, a world food crisis has emerged. The price of food worldwide has inflated dramatically, threatening the welfare of millions who are struggling to afford basic sustenance. Since 2006, the world price of soybeans has risen by 107%, maize by 125%, wheat by 136% and rice by an astounding 217%.

Although several factors have been identified as having impacted the present situation, the main catalysts in the emergence of the crisis are generally recognised as a combination of bad harvests, the increased production of biofuels, the rising price of fuel and an expanding middle class in Asia and India who are demanding a wider variety of food stuffs.

Despite assurances by powerful figures in the developed world, such as George Bush, that extreme weather, rising energy costs and increased demand account for 85% of food prices, a recent report by the World Bank, leaked to The Guardian newspaper in London in July, stated that the production of biofuels were, in fact, to blame for a 70-75% rise in food prices.

The increased use of crops such as maize for the production of ethanol results in large amounts of farmland is being used for fuel production, rather than for food, lowering food production output, and therefore raising prices. For countries such as Ghana, who rely heavily on importing certain food products from abroad, inflation such as this can be crippling.

Senior Economist in the World Bank’s Agricultural Unit, Robert Townsend, explains the problems facing West African nations, if they continue to import inflated food supplies:

“In West Africa, rice accounts for a much larger share of food consumption than in Eastern and Southern Africa. As more rice than maize is imported, local food prices in West Africa will be more affected. Countries with local supply disruptions are also particularly vulnerable to global price increases, as experience with the drought in Burkina Faso, the recent cyclone in Madagascar, and localized floods in Ghana have shown. Less local supply means more reliance on imports to meet domestic demand -- imports which are now much more costly. Within these countries, the poor will be especially vulnerable as they often spend as much as half their disposable income on food.”

In the United States, the government subsidises the production of maize for ethanol, resulting in farmers increasingly producing crops for biofuels rather than food, with the proportion of maize being farmed for ethanol rising by 6% in the year 2006-2007, and expected to rise another 37% by the end of 2008.

The rising price of fuel is another key factor in the global food crisis, not only affecting the cost of agricultural transportation and the running of machinery, but also increasing the cost of much-needed fertilisers.

Across the world, rising food prices have caused grave concern. In the United States, the average food price increased by 4% in 2007, the biggest increase recorded in 17 years. By the end of this year, it is predicted that this figure will rise by another 3 - 4%. On top of this, local food donations in the US were recorded as down 9% over the same period, prompting the California Association of Food Banks to describe the situation as the “beginning of a crisis”.

In Europe, a similar story emerges, with many nations complaining of inflation over the past year. In Germany, unusual complaints have been raised concerning the rising price of meat used in the country’s thriving donner kebab industry. Similarly, in Italy, the increasing price of wheat prompted a nationwide one-day boycott of pasta, Italy’s national food, in September last year.

In the UK, complaints over the rising cost of living fill the newspapers, with the price of inflation rising by 3% between April 2007 and April 2008. Figures from the Office of National Statistics further reveal that food prices have risen by 6% in the same period. With such pressures weighing on the British economy, the usually strong housing market is suffering, and the Royal Institute of Chartered Surveyors has noted a near-universal slump in British property prices.

Elsewhere in the world, the food crisis has created discontent, with rioting breaking out in several places, including Morocco, Mauritania, Indonesia, Italy and Mexico.

Although Ghana, like many other African countries, is feeling the strain of the food crisis, there appears to be hope yet for the West African nation.

In 2010, Ghana intends to commence work on an offshore oilfield, run by Tullow Oil and Cosmos and aims to pump approximately 120,000 b/d of crude oil.

Speaking to the Financial Times in London last week, NPP presidential candidate, Nana Akufo-Addo, explained how, if he were to come to power in December, he would utilise the estimated five-year $15bn income of the off-shore reserves to fight poverty nationwide, educate the people and improve agriculture in the north of Ghana: “We have large chunks of the northern part of our country which could assure us food security in Ghana, if we also go about the planning of the agricultural development there properly.”

Nana Akufo-Addo has also pledged to invest in the Ghanaian manufacturing sector, to create jobs in agriculture and production, generating income and increasing local food production.

With the Ghana’s harvest season approaching, the forecast is looking good for this year’s cocoa crop, according to Cocobod Deputy Chief Executive Charles Ntim. Speaking at the signing ceremony of a $1bn syndicated loan with a variety of international banks in Accra this week, the head of the state regulator expressed his optimism, saying, "We've been round the fields, we've seen the little pods coming up, we think we are in for a fairly good crop, if the weather will hold."

It must also be remembered that we are not facing a food crisis for the first time; in the 1970s and 80s, records saw world food commodity prices soar, with the price of rice in the early 1970s over four times the cost of today.

If Ghana is to move forward in these times of economic difficulty, and as many of the key food exporters lay down export bans and tariffs in a bid to protect their own economic interests, it is vital that the country does everything it can to decrease its reliance on foreign imports through the successful exploitation of its own agricultural assets.

With Mr Akufo-Addo’s proposed investment of funds from Ghana’s oil reserves, Ghana would be in a position to vastly increase food production, as access transport, power and fertilisers would be more readily available. Furthermore, by utilising arable land in the north of Ghana, a larger number – and variety – of crops could be produced, lessening the need for the country to pay for expensive imports.