Global food crisis 'one or two bad harvests away'
The fast growth in resource demand from emerging markets has contributed to “a period of intensified resource stress,” a report said
The scale and speed of demand growth from emerging countries, coupled with a decade of tight commodity markets, has created the current period of intensified resource stress, the report, published by London-based think-tank Chatham House, said.
The outlook is one of supply disruptions, volatile prices, accelerated environmental degradation and rising political tensions over resource access, according to the report.
It noted that some analysts have suggested that the resource boom that took place over the past decade was coming to an end, because of the maturation of technologies to access non-conventional gas and oil and of the global economic downturn.
In the case of food, the world remains only one or two bad harvests away from another global crisis, the report said.
Lower prices in the meantime may simply trigger another bout of resource binge, especially in the large and growing developing countries.
The report said the growth of China and India, both as consumers but also as producers, affected many resource markets, adding that over the last 10 years, global use of coal, palm oil and iron ore has been increasing by between 5% and 10% per year, with oil, copper, wheat and rice growing by 2% a year.
In weight terms, trading in resources jumped nearly 50% from a decade ago due to the expansion in trading of oil, iron and steel, coal, oilseeds and cereals all feedstocks for China, the factory of the world, it said.
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High and fluctuating prices are spurring new waves of resource nationalism and making unilateral and bilateral responses more attractive, it said, giving the example of export controls on food in producer countries, which were intended to prevent sharp domestic price inflation in 2008 and 2011 but ended up magnifying price spikes.
It noted that a number of key raw materials suppliers such as China, Indonesia, Brazil and India have either resorted to export controls or were considering them.
However, even short-term export restrictions may backfire if they precipitate similar actions in other producing countries, driving up prices and creating a collapse in confidence that spreads from one resource to another, the report warned.