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The Effect Of Rising Food Prices On Political Stability

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The Effect Of Rising Food Prices On Political Stability

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The Effect Of Rising Food Prices On Political Stability

The Effect Of Rising Food Prices On Political Stability

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While the Tunisian riots may be against political repression, they were sparked by an individual protest against the lack of economic opportunity. In neighboring Algeria, rioting broke out recently when food prices went up. For a look at rising food prices and how they affect political stability in poor countries, host Robert Siegel speaks to Gary Blumenthal, president and chief executive officer of agricultural consulting firm World Perspectives.

ROBERT SIEGEL, host:

While the Tunisian riots may have been against political repression, they were sparked by an individual protest against the lack of economic opportunity. In neighboring Algeria, rioting broke out recently when food prices went up. And here's the really bad news: this is not just a problem for North Africa. The United Nations Food and Agriculture Organization, the FAO, keeps an index of food prices, and it is at a record high. Poor countries with big food import bills are facing a very tough year.

Gary Blumenthal is president of World Perspectives, a Washington, D.C.-based agricultural consulting firm and he joins us now. Welcome.

Mr. GARY BLUMENTHAL (President, World Perspectives): Thank you. Good to be here.

SIEGEL: And, first, why are food prices so high?

Mr. BLUMENTHAL: Well, fundamentally we don't have enough supply for the demand that's out there. We had weather last year that wasn't as good as it could've been and so our supply is a bit tighter than usual. At the same time, we've got very good growing demand due to economic growth, particularly in Asia. And so basically imperfect weather has collided with perfect food demand.

SIEGEL: Imperfect weather in Russia, in Ukraine.

Mr. BLUMENTHAL: Russia, Ukraine. There's even an argument, you know, our own crops here in the U.S. came in a little bit lower than expected because of imperfect conditions.

SIEGEL: But as you follow events in Australia, say, or Brazil for that matter, where there's a great deal of flooding, we can only imagine it's getting worse.

Mr. BLUMENTHAL: Well, weather's never perfect everywhere. And so this has certainly been a factor in many years. You know, 2008, we had a similar situation. We've visited here before.

SIEGEL: 2008 is not a comforting thought, though. During that year, when food prices hit their previous peak, there were food riots in Bangladesh, in Haiti, Egypt, Cameroon. Dozens of countries were said to face food crises that year. Where are people this year most vulnerable to food price increases and where might those increases jeopardize even political stability?

Mr. BLUMENTHAL: Well, just about any country where you have the population expending a large share of its income on food, you're going to have a problem. And we have many countries where 50, 60, 70 percent of their income goes to pay for the cost of food. So when you have, say, 25 percent increase in its cost, that's going to be a substantial impact on them.

If we look at Tunisia as an example, it's not unusual. You mentioned the political circumstances there. If we look at the Food and Agriculture Organization, which lists generally about 50 countries that are food insecure, one of the common factors across most of them is corruption, poor governance, followed by civil strife. And then in the lower category would be adverse weather conditions.

SIEGEL: You're describing countries that are spending a big share of their income on food. What do we spend on food in this country?

Mr. BLUMENTHAL: Nine percent or less. It depends on how you want to calculate it.

SIEGEL: I noticed that the FAO's food price index stood at 90 in the year 2000, the turn of the century. It's at 215 as of December of last month and that just describes a huge increase in food prices.

Mr. BLUMENTHAL: Well, some might say that when it's at 90, it describes a very extraordinarily too low a price for agricultural commodities. And one positive out of this is that it's bringing a lot of capital into the industry. I can tell you from having lived through the early 2000s, that we couldn't attract people, we couldn't attract capital. And therefore, there was no preparation for an expanding world population with a capacity to buy more food.

SIEGEL: So you're saying the potential good side of this is there's money to be made in raising food that should in theory attract investment in people and increase production over time.

Mr. BLUMENTHAL: It is attracting capital right now.

SIEGEL: Gary Blumenthal, thanks for talking with us.

Mr. BLUMENTHAL: My pleasure.

SIEGEL: Mr. Blumenthal is president of World Perspectives, which is an agricultural consulting firm in Washington, D.C.

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