Food Prices

April 23, 2008

April 23, 2008

Hello everybody out there in farm country. Common sense has finally come to the party. If we are concerned about producing enough food, we must employ the best food production technology. Thank you Monsanto. If a lot of people find that they are a little short of money to buy food and other necessities, Wal-Mart Stores to the rescue. Thank you Wal-Mart.

Now for today's commentary.

Let me read to you what Bloomberg News is saying about global trade. "The surge in world food prices is accomplishing what seven years of trade talks could not. The Doha Round of global trade negotiations has been stalled since 2001 because developing nations have rcfused to lower import tariffs that protect their farmers, and because rich countries won't give up farm price supports. Now, import duties in developing countries are being cut in response to food prices that have risen 83 percent in the past 3 years. Subsidies in the U.S. and Europe are falling like a rock."

There you have it. Maybe we should declare victory and go home.

Developing countries don't have to protect their farmers from tons of price depressing grain from the U.S. They need our grain to keep their prices down. According to the Peterson Institute, "food prices have done for import liberalization what Doha trade talks couldn't do."

Indonesia eliminated duties on wheat and soybeans. India did the same on wheat flour. The list is long -- Turkey, Mongolia, West Africa, Brazil, Peru -- more than 24 developing countries slashing their import duties.

At the same time, subsidies to farmers in developed countries are headed down fast. U.S. subsidies this year will be below 8 billion -- about half what they were in 2005. European supports are down more than 15 billion.

Countries all over the world are concerned about the rising cost of food. Their immediate way to deal with that is to import more food which means getting rid of import restrictions. In the longer run, the higher prices will give their farmers money to invest and hopefully increase their own food production. If govenunents will just get out of the way, the market system will stimulate more global food production and more exports.

We are doing our part to provide food for a hungry world. Our exports will hit an all-time record of more than 100 billion dollars this year. Global food price inflation may be a tragedy in some ways but, in other ways, it may be out salvation.

Until next week, I am John Block from Washington.