Next week, the UN is holding a major summit on food security in Rome – I’ll be there throughout (and blogging regularly on what goes on). Ahead of the kick-off, I’ve updated the Global Dashboard page on where to get briefed on food prices, and put out a scene-setter press release through Chatham House that sets out a few thoughts on what the summit needs to achieve.
This week’s already seen a couple of new items on food prices that are worth a look, starting with a new annual FAO / OECD outlook report – which this year looks all the way out to 2017. It finds that although prices will come down in the short term (which you already knew, since you read it here on Global Dashboard on March 18th), nominal prices over the medium term will remain “substantially above” levels over the last ten years. In other words, it’s not just a blip.
Also worth a look is World Bank President Bob Zoellick’s ten point plan for food prices, published in the FT this morning. His article confirms that he’s well ahead of the curve on understanding the need for an integrated approach to scarcity issues:he says collective action is needed on “the interconnected challenges of energy, food and water [which will be] drivers of the world economy and security”. (I’ll be publishing a paper on how the multilateral system needs to be reformed to cope better with scarcity issues just before the G8 in early July.)
What will actually happen at the summit is currently anyone’s guess. It’s fair to say that FAO haven’t been very proactive in briefing the media on likely outcomes or what they’re hoping for, which puts them in the rather hazardous position of allowing high expectations to emerge without really managing them. Another risk is that a major spat over biofuels could erupt: Ahmadinejad and Chavez will both be at the food summit, and would like nothing better to embarrass the US over its support for ethanol – and while US subsidies for corn-based ethanol are certainly problematic, it’s hard to see these particular interlocutors opening up much political space on Capitol Hill as legislators contemplate the Farm Bill.
But on the upside, great progress has been made on financing the immediate humanitarian needs (after Saudi Arabia stunned everyone by coming up with half a billion dollars last week – a coup for WFP head Josette Sheeran and for UN Emergency Relief Coordinator Sir John Holmes, who’s invested much time encouraging Gulf countries to contribute). This, together with the prospect of some short term relief on prices, gives policymakers a chance to look ahead towards the longer term challenges as well as short term crisis management.
It’s also hard to remember a time when the UN system and the international financial institutions have worked together as closely or as effectively as they seem to have been doing on the UN’s food task force – a great story, given how fragmented the international system usually is, but one that’s gone largely unreported. Even so, the real work in pulling together the longer term agenda is still in front of us…
For those readers wondering why I posted the new George Clooney “Waging Peace” video immediately below, it’s Peacekeeper’s Day. But although this is sixtieth year of UN peacekeeping, it’s rather hard to be of good cheer, as news has also come in of the first UN peacekeeper killed in Darfur:
The joint U.N.-African Union mission in Darfur says a Ugandan member of the force has been fatally shot. The police officer is the first member of the mission slain since the troops deployed five months ago.
John Kennedy Okecha was found dead in a vehicle operated by the UNAMID force in North Darfur on Wednesday, the mission said. He had been shot three times, in the neck, chest and stomach. UNAMID described the killing as “an act of cold blooded murder” and appealed to anyone with knowledge of the slaying to come forward.
The timing is probably coincidental, although you don’t need to be a conspiracy theorist to wonder if this wasn’t a deliberate message of contempt from… who can say? Killing just one peacekeeper can have a powerful deterrent effect, as in the slaying of an EU soldier on the Chad/Darfur border earlier this year. Today’s news led UN peacekeeping chief Jean-Marie Guehenno to dwell on the weaknesses of his forces – typical of his intellectual honesty, but a sign of the UN’s vulnerability:
“Do we have enough resources to protect ourselves and therefore to protect the people we have come to help? Frankly, as I’ve told you before, we don’t have them in Darfur,” he said. “We don’t have the firepower that would allow us to do what we’re expected to do. And that’s very dangerous. It’s dangerous for our people.”
Guehenno is approaching the end of his term in office, and will be missed. As I’ve recently noted, the international community should welcome his successor with a package of proposals on how to give the UN more muscle – but it’s hard to feel optimistic. Even with George on board. Happy Peacekeeper’s Day.
PS: it’s worth adding that the African Union lost nearly 50 personnel in Darfur up to the end of last year. Many of them pretty much unreported.
UPDATE: I discussed this with a UN person shortly after finishing the original post, and they pointed out something that hasn’t been highlighted in the media coverage I’ve seen so far. Nothing was stolen from the murdered peacekeeper. So the chances that this was banditry are pretty low. It looks political.
Thta’s the question lots of market analysts are starting to ask, according to Sarah O’Connor:
French fishermen and British lorry drivers set up blockades in protest at fuel costs, American Airlines grounded scores of older aircraft, and – most significantly – countries across south-east Asia said they would cut their fuel subsidies because they couldn’t afford to keep them.
Francisco Blanch at Merrill Lynch says these are signs that a “demand destruction point” is looming – where oil becomes so expensive that demand for it falls away. The market has already hit that point in Europe and the United States, but demand is still growing in emerging market economies where subsidies insulate consumers from the pain of high prices.
Nauman Barakat at Macquarie agrees with Mr Blanch that things might be changing. “The word on everyone’s lips is demand destruction which is very apparent in the US and may become a feature in the red-hot economies of Asia as those countries reduce fuel subsidies,” he says.
The break point is already here. Oil is in the process of losing its almost total domination in ground transport. It is not going to fade away soon – such is the scale of its use and convenience, it will retain a dominant position for many years. But it will share the transport market with other sources as never before, reinforced by a new drive for fuel efficiency.
So now there are two schools of thought in the market: one that reckons prices are about to peak, and another that thinks that actually the peak will be in production – as we saw in the FT last week:
Veteran traders said they had never seen such a jump [in the price of forward contracts for oil – long term futures contracts have risen 60 per cent since January] and said investors were increasingly betting on the idea that production would soonpeak because of geopolitical and geological constraints. Neil McMahon, of Sanford Bernstein, said: “Peak oil views – regardless of whether right or wrong – are seeping into the market and supporting high prices.”
But actually, just as in the case of food, a short term fall in prices isn’t irreconcilable with an outlook that tends towards a long term increase. Greater volatility – including short term price bubbles, just like the one we’ve been seeing on food – may just be part and parcel of the deal from now on.
After all, higher prices in the short term will indeed tend to ease demand – and also to encourage investment in new production, both of which will reduce pressure on prices. But if the long term geological fundamentals are downwards, then scarcity will tend to yank prices right back up again. The feedback loops between these four factors – geology, price, demand and investment – may make for a rollercoaster ride over the next few years…
Walk along Oxford Street in London, mosey down King Street in Manchester or slink around the Victoria Quarter in Leeds and you are sure to see people wearing the keffiyeh (or shemagh, as it is better known in the UK after British soliders who wore them in WWII – albeit not as a fashion accessory).
The shemagh has become a fashion hit overnight, with most high street retailers selling them and men and women, boys and girls wearing them around their necks in an array of colours.
But it seems that our taste for shemaghs is not shared by our American cousins. Dunkin Donuts’ spokeswoman Rachel Ray recently wore a shemagh in an ad campaign. And boy, will she live to regret it. The blogosphere went beserk, led by the irratating Michelle Malkin, a Fox News Channel contributor. According to Malkin:
Many folks out there remain completely oblivious to the apparel’s violent symbolism and anti-Israel overtones. Left-wing bloggers responded with complete scorn, deliberate mischaracterizations of the debate, and then outrage when Dunkin’ Donuts commendably showed sensitivity to the concerns and pulled the ad.
Commendable sensitivity – or just realising in an instant that it might affect sales? Nor is it just Dunkin Donuts who’ve found themselves in trouble. Urban Outfitters stocked them in the US until a pro-Israel faction accused the retailers of marketing terrorism even as Palestinians argued that turning the keffiyeh into a fashion accessory for hipster wannabes trivialized their cause.
