By Guilherme Cassel
(Brazil’s Minister of Agrarian Development)
We are convinced that the present crisis puts the world model of production and supply of food into discussion.

The world at present witnesses a rise in the price of foodstuff of alarming proportions, with deep repercussions on the global food safety. The present situation requires serious and responsible thinking. There are, at least, four major factors that explain the rising motion of agricultural prices.

The first factor is maize-based ethanol production in the USA. That country is now using 10% of the world maize output in order to produce ethanol. That is equivalent to two Brazilian harvests of maize. In 2007 alone, there was a 37% rise in the consumption of maize for ethanol production in the US.

The second factor is financial speculation. As a consequence of the US real estate crisis, with the attendant dollar depreciation coupled with new surge of inflation and low economic growth in developed countries, commodities have become the target of financial speculators.

Another factor is the growing demand from developing countries, especially China and India, pulled by population growth and changes in nourishment patterns. However, as FAO has pointed out, there is a small decrease in the per head consumption of grains among all developing countries.

What explains the apparent contradiction between those phenomena is the fact that large sets of the populations of developing countries have adopted middle class consumption patterns. For instance, over the last 15 years, meat consumption has risen 100% in China, 70% in Brazil and 20% in India. As, on average, 7 kilograms of cereals are required to produce 1 kilogram of meat, that change in food diet is also pushing the grain prices upwards. On the other hand, that overall price rise negatively and deeply impacts 2.5 billion people worldwide that have incomes lesser than USD 2.00 per day.

Finally the rise in world petroleum prices and the bad harvests of grains brought about by global warming also contribute to that overall difficult situation. In Australia and in some African countries there have been significant losses in production due to climate problems.

It is important to stress that Brazil is managing to face the present crisis of world food prices owing to her strong household agricultural sector, which is responsible by 70% of national output. Since 2003 that sector has been stimulated by credit policies, agricultural insurance, technical assistance and rural extension. At the same time, Brazil has successfully implemented a national policy of food safety based on the programme Zero Hunger. The Household Agricultural Act and the Organic Law on Food and Nutrition Safety have also made major contributions to the attainment of that goal. Over the last 36 months, while the world food price index has risen 83%, the Brazilian similar index has risen just 25%.

The price of milk, a good traditionally produced in agricultural household units in Brazil, has risen just 25% in the last 24 months, while it has risen 120% in world markets. Brazilian milk production has risen from 16 billion liters in the 1990’s to 27 billion liters in 2008, which ensures national self sufficiency, as a result of several public policies in favor of household agriculture and land reform.

Other countries that paid scant attention to regulation policies and that turned their agricultural output entirely to foreign markets now face supply crises and inflation. But Brazil is not completely immune to those events and must consolidate the progress already made in order to reduce possible negative impacts, such as decrease in purchasing power, concentration of land ownership and distribution chains and harms to domestic supply.

The long term solution for food safety and price stabilization involves several structural steps. For that purpose it is necessary to ensure adequate food supply by means of strengthening household agriculture and implementing land reform, so that agriculture will be mostly devoted to food production and not to speculation. Brazil aims at reaching those goals in order to ensure full sovereignty and food safety for all her citizens.