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How to curb rising food prices

posted Oct 17, 2011, 11:42 PM by Puneet Goyal   [ updated Oct 17, 2011, 11:44 PM ]
By Fareed Zakaria, CNN

All over the world, from China to India to the Middle East, people are worried about the price of food. Poor countries paid 20% more for basic food products in 2010 than they did the previous year. Some say the Arab Spring was triggered by food inflation as rising costs were causing public discontent. Even here in the United States, your daily peanut butter and jelly sandwich is going to cost a lot more - peanut prices have doubled this year.

The U.N.'s Food and Agriculture Organization, or the FAO, measures the international prices of a basket of food staples - wheat, rice, sugar, meat - and its data show that prices reached an all-time high this year. There's good news and bad news here. First the bad news: Things are going to get worse. The FAO published a report this week called Food Insecurity in the World. It warns that "high and volatile food prices are widely expected to continue in the future."

The are many reasons. New entrants to the middle classes want more food and more meat. This month the world is expected to welcome a baby who will bring our population to seven billion. That number will rise to 9 billion by 2050 - and we'll need to produce 70% more food than we are right now just to meet the increased demand. Meanwhile the world has seen a surge in extreme weather - from Australia's droughts to Russia's wildfires - which has an impact on food production. And these weather patterns are expected to continue.

So what can we do? Well, the best way to get prices down is through increased productivity. If we can transform food production, making more food at lower costs, that will keep prices down. The FAO's report has a number of policy suggestions - among them, improving market information systems and investing in agro-research. By the way, that means getting over phobias about genetically modified foods.

But here's the good news I promised. I came across another report this week that had real examples of how to implement these solutions. One answer might lie in the mobile phone. The consulting group Accenture conducted a study commissioned by Vodafone. It found that the use of mobile phones among farmers could increase agricultural income by 138 billion dollars across 26 of Vodafone's markets in 2020.

While 70% of people in the developing world now have mobile phones, only one in four have bank accounts. Mobile banking could improve those numbers for farmers - increasing access to financial services, to the marketplace and streamlining what is currently an inefficient supply chain. If farmers know what prices for their goods are in real time, they can bargain better and take out the middlemen who jack up prices and hoard food.

More than 1 billion people around the world are employed in agriculture. Of those, 60% are small-scale workers. These farmers are often isolated, have limited transport or access to basic financial services. A mobile phone could go a long way toward changing their predicament - and increasing their output.

It's just the beginning. We talk a lot about the need to spur innovation on this show: in technology and in advanced manufacturing. This is just as true in agriculture. Grain yields increased by 126% from 1950 to 1980, but only 47% since then. Information technology is just one part of the solution, but it's a powerful tool. And you don't need the new iPhone with all that voice recognition. Any old mobile phone will do.