Ministry of Agriculture of Guyana

STATEMENT TO THE NATIONAL ASSEMBLY

ON

THE GLOBAL FOOD PRICE SURGE AND RESPONSE BY THE GOVERNMENT OF GUYANA

BY THE MINISTER OF AGRICULTURE AND CHAIRMAN OF THE INTER-MINISTERIAL COMMITTEE ON FOOD PRICES,

HON. ROBERT M. PERSAUD, MBA, MP

“When the level of the water hole drops, the animals look at each other differently.” (Old African Proverb).

We live in a time when the global food coffers are at alarmingly low levels and the world consumption of food is growing at rates which can outstrip the rates of increase of production. And, the animals are beginning to look at each other differently – the attention and conversation of the world have now tuned to issues of food production, food security, and food prices, and the concomitant impacts on life and welfare of the world’s citizens.

Local supplies in some countries are being protected at the cost of export earnings, and if the current situation continues unabated, there will be major changes in the distribution and trade surrounding food commodities which will have a lasting impact on the macroeconomic stability of the world. Of course, the impacts on local economies, large and small, are significant with the potential of causing major upheavals in hard-won gains in social order and stability. In fact, about another one billion persons may slide into poverty before the crisis abates.

Of course, for countries like Guyana, with one of the lowest population densities in the Western Hemisphere (approximately 4 people per square km), an abundance of arable land and fresh water resources, a hard-working population knowledgeable in Agricultural Practices, and an equatorial climate, this situation also has the potential for wealth creation through food production. However, as we in Guyana take aggressive steps to realise our potential as the breadbasket of the Caribbean and in the midst of a national drive to Grow More Food, it is important that we also understand the factors affecting global food prices, and the chronological nexus between them that have resulted in the current crisis.

We also need to understand that our status as a net exporter of food (the only country in the Caribbean basin which can claim this) does not necessarily cushion us against the impacts of the price of food, as the prices of the world’s commodities are a function of global supply and demand. And of course, we are particularly vulnerable to the inexorable rise in the cost of fuel and other inputs needed for food production… so what is necessary, and this is why we have seen His Excellency, President Bharrat Jagdeo yesterday unveiling a number of additionally pivotally important economic interventions to cushion the impact on Guyanese especially the most vulnerable groups.

Across the world, the crisis has been unfolding at an alarming speed. Food prices have been increasing on a daily basis and by the end of April 2008, in less than a year the price of wheat had risen by 130%, soya by 87% and rice by 74%.

There have since been some minor improvements in prices, with wheat falling by 40% since its peak in February. Although rice prices were expected to ease as producing countries respond by boosting rice production, we are currently witnessing the devastation of Myanmar’s rice crop (65% destroyed) by Cyclone Nargis. This is expected to have a significant impact on the price of rice, which is now most probably not going to record the improvement in prices predicted.

As Joachim von Braun, the head of the International Food Policy Research Institute in Washington, has said ‘world agriculture has entered a new, unsustainable and politically risky period’ shown by the food riots that have erupted in countries all along the equator. This is in itself something which we must look at, however.

The productive capability of countries clustered around the equator is climactically advantageous, and the region, rather than being the early indicators of social upheaval when food prices are affected, can begin to look at these situations as opportunities. Guyana, although relatively better off, due to the aggressive steps taken by Government to cushion prices by zero-rating more food items and significantly reducing taxes on fuel whilst significantly increasing disposable income, is poised to take advantage of the opportunities.

However, a concerted, patriotic effort is needed across the entire spectrum of our society to begin to grapple with the changes we must make. Our future can be a bright one, even as the world faces a dawn on whose horizon looms the issues of climate change and the increasingly erratic weather phenomena associated with it, unaffordable and increasingly unavailable fuel, and increasing demand for food as consumer patterns change in emerging economies and competition for food acreage from biofuels.

The nexus of climatic impacts, geo-political strategies, energy inflation and fertilizer inflation, and shifting consumer patterns have formed an interrelated population of factors which all contribute to increasing food prices, whether they are emerging and their effects only now being felt, or they have been around for a significant length of time. What is clear is that the combination of global factors is now fueling the current high prices across all continents and here at home.

Record oil prices have increased the cost of agricultural production by boosting the cost of fertilizer and pesticides, mechanized cultivation and transport of inputs to production and processing centres and outputs to markets. We have seen fuel go from below$30 a barrel to over $122 a barrel, in less than two years.

Increased demand for food and change in eating habits. Rapid economic growth in many developing countries, especially India and China and excessive consumption patterns by some developed societies, has increased consumers' purchasing power, generated rising demand for food, and shifted food demand away from traditional staples toward higher-value foods like meat and milk. On average, it takes 7 to 8 units of grain to produce one unit of beef, so that as significant portions of the Indian and Chinese populations are now consuming more meat, this has resulted in tremendous increases in demand for grains. The acreage ratio to grow primary consumption grains vs. feedstock for livestock has resulted in less grains being available for direct food.

Production of bio-fuels. With oil prices at an all-time high and the U.S. government subsidizing farmers to grow crops for energy, U.S. farmers have massively shifted their cultivation toward biofuel feed stocks, especially maize, often at the expense of soybean and wheat cultivation. About 30% of U.S. maize production will go into ethanol in 2008 rather than into world food and feed markets. Even though this perverse policy is not even motivated by sensible energy balances; it has wreaked havoc by affecting the world supply of carbohydrate staples – the increased demand for maize for ethanol, in addition to supplanting food acreage, has also resulted in increased demand for wheat and rice, as consumer patterns shifted to these other carbohydrate sources.

Climate Change and speculative capital have also played a significant role in the rise of food prices. Severe drought in Australia, one of the world's largest wheat producers, has decimated global wheat production, and the New Zealand Dairy Industry has also been severely affected by adverse weather conditions. The latest disaster in Myanmar is only now making its impact felt. There are many similar cases.

2. International views

The consolidation of world food supply through well-defined distribution channels and markets ensures that rising prices for food is a truly global problem and the international community is rightly worried about the situation. The United Nations has set up a task force to combat the world food crisis, describing the dramatic escalation in prices as ‘an unprecedented challenge of global proportions’. Robert Zoellick, World Bank President says that food inflation could push at least millions of people into poverty, wiping out all the gains the poorest billion have made during almost a decade of economic growth. Ban Ki-moon, the UN secretary-general has said the world is facing ‘the spectre of widespread hunger, malnutrition and social unrest on an unprecedented scale’. The British Prime Minister Gordon Brown has said soaring food prices pose as great a threat to world prosperity as the global credit crunch and warns that the food crisis will likely reverse progress in the developing world and plunge millions into extreme poverty

3. Government’s position since 2007

The Government of Guyana recognized as far back as early 2007 that many of the serious challenges that the world economy is facing and started to implement initiatives to combat rising cost of living and food prices.

In December 2007, at the urging of the President of our Republic, Guyana hosted the 12^th Special meeting of the Heads of Government of the Caribbean Community which focused on the issue of rising food prices. It was decided here that the Jagdeo Initiative on Agriculture would be placed in the forefront since it is crucial to the Region.

Prior to this in August 2007, the government had noted there is a huge challenge facing the region’s agriculture but one that can be addressed with strategic planning and aggressive persuasion of the ‘Jagdeo Initiative’ which can help to realise the ‘new agriculture.’  I said then, that “we as a region can look within and see this as an opportunity and a window to revitalize agriculture. We must see the escalating food price as an opportunity for us to urgently and aggressively continue to address the binding constraints that were identified under the Jagdeo Initiative,” which still stands today.

Other measures introduced as early as 2007 to cushion the impact include:

When VAT was introduced it was not applied on all basic food items

Across-the-board salary increases of 9 percent with effect from 1 January 2007 for all Government employees, and a further 5 percent with effect from 1 January 2008 for teachers and members of the disciplined services;

A 25 percent increase in the income tax threshold from ($28,000 to $35,000 monthly) with effect from 1 January 2008

A 63 percent increase in old age pensions (from $3,675 to $6,000 monthly) and an 82 percent increase in public assistance to vulnerable individuals (from $2,470 to $4,500 monthly).

We did not wait until the issue developed into crisis proportions to act. We were alert. We recognize that the surge in prices globally can hurt our people if we remained complacent.

4. Inter-ministerial committee reports on food prices

Cabinet, in its on-going review of the global food situation and its effects locally appointed an Inter-Ministry Committee on Food chaired by the Minister of Agriculture earlier this year to address the critical issues of volatility of prices, food availability and related matters. After all, Food is one of those most basic necessities which takes precedence over many other human requirements, and our Government, and this National Assembly, I daresay, will not shirk its responsibility to ensure that our people are guaranteed access to affordable and nutritious food. The committee was tasked with:

Identifying a critical basket of food required to satisfy basic food needs

Evaluating food supply and demand trends.

Reviewing ongoing measures and expanding where possible, interventions by Government to mitigate against the continued rise in food prices.

Making additional food policy recommendations to improve supply especially to vulnerable groups and communities.

The committee has met 14 times just over the past month and has spent much time analyzing the global situation and its local impacts, and developing measures to help to combat the effects in Guyana. The overall strategy has been to increase agricultural productivity and production in response to the increase in demand internationally and identifying short, medium and long term interventions to increase production and productivity of the various agricultural sub-sectors along with decreasing the cost of food production.

5. Countrywide consultations on global food prices

The Government recognized the need to consult with and involve communities affected by increasing food prices, not only to understand their situation but also to update them on the global food situation and on the measures being undertaken by Government to address the problem. Consultations were also felt to be important in order to listen to suggestions and recommendations from the communities in order to address their concerns which will in turn inform the development of further Government interventions. As such, a Ministerial fan-out was undertaken over a period of a few weeks to visit communities across the country and the following are some of the broad suggestions coming out of these consultations:

o        direct measures to combat increasing cost of living such as increased income

o        improvement in land distribution and infrastructure development

o        increased private investment in rural areas

o    increased investment in agriculture and the introduction of farmers’   market days.

Positive action has already been taken on these suggestions by the public

.

6. On-going Government Response to Cushion Rising Global Food Prices

Also, allow me to list some of the on-going measures being implemented by the Government to cushion these price hikes including those announced yesterday by His Excellency, the President:

Government will be providing $200M to ensure to cushion the increased price for flour and bread

An immediate payment of a 5 percent across-the-board increase in wages and salaries for public servants with effect from 1 January 2008. This increase follows a similar 5 percent increase that has already been paid with effect from 1 January 2008 to teachers and members of the disciplined services

A temporary cost of living adjustment (TCLA) of $4000 per month to be paid to Government employees earning a basic salary of $50,000 and below.

Government has prevented a rise in electricity and water rates by supporting GPL and GWI with billions of dollar to off-set increased fuel and other costs

Reduction to zero excise tax on diesel to reduce cost of production especially for the productive sector

Approval of more than 200 land leases for food production projects in the past month alone

Reduction of excise on gasoline to reduce impact of increased on world market

No taxation on kerosene and cooking gas

Strict monitoring of exports of rice to ensure adequate supply for local market and “Rice Price Buster” since January to cushion the effects of the increased cost for rice

Today, GMC has launched the flour price relief trucks across the country to make affordable flour in limited quantities available to vulnerable communities

Launch of “Grow More Food” campaign aimed at encouraging farmers, producers of fisheries and livestock, investors and potential investors to increase food production to meet local and international demands

Distribution of 600,000 packets of seeks and 150,000 units of planting material as part of grow More Food campaign

Achousi ants-control chemicals and baits and other support for hinterland communities

Non-restriction on the importation of flour in an effort to stabilize prices and attract quality flour in the domestic market

Guyana participates actively in regional (CARICOM) efforts to cushion rising cost of food and in-puts on international market acceleration of the implementation of measures under the Jagdeo Initaitive

Export quotas for broken rice and a ban rice bran exports to ensure adequate supply for animal feed stock locally

Continued engagement and interaction with all groups and sectors of society to build national support for interventions and inviting additional suggestions

7. `Grow More Food’ campaign

Further, the Government is pursuing a number of medium and long term measures to combat the effects of food price rises.

One of these is the ‘Grow More Food’ campaign is aimed at encouraging farmers, producers of fisheries and livestock, investors and potential investors to increase food production to meet local and international demands. The campaign consists of a five-step plan:

•            Speedy Implementation of US$ 21.9M Agricultural Export Diversification and the US$ 6 M Rural Enterprise and Agriculture Development projects

•            Increased investment in D&I with an average annual budget allocation of US $5M

•            Enhanced extension and marketing service to farmers and traders

•            Increased availability of seed and planting materials and breeding animal

•            Approval of all outstanding viable food production investment projects

A number of representative groups including the private sector, the trades union and religious groups have commended this campaign and will work to support this and other interventions.

8. Conclusion and way forward

Even though rising food prices are pushing up the cost of living, we must remember that they also provide our farmers with a unique opportunity to increase their income and transform the agriculture landscape. For example, this is the first time that rice farmers have received such high prices for their crop. The price of non-traditional agriculture crops is also increasing providing further opportunities for farmers to increase their income and for country to increase export earnings. We must take full advantage of these new opportunities and see the global challenge as an opportunity for our farmers to increase their incomes and improve their livelihoods.

It is important to note that the food price situation is a global crisis driven by global factors. These factors such as rising oil prices, increasing demand for food, climate change etc. as I have discussed before are not within the control of any one government and are certainly not within the control of the Government of Guyana.

The Government can only control how we react to the situation and plan proactively as we maintain a vigilant scrutiny of the changing conditions in the world, in order to help to cushion the impacts of rising food prices.

The Government would like to appeal to all political parties and members of the National Assembly, to communities to, to workers, to the private sector, to the religious, to our young people, to farmers, to consumers, to the Guyanese people as a whole, for your support in responding to this challenge.

We feel strongly that there must be a collective and national response to this situation and it is for this reason the Government had tabled a motion on the rising food prices which is on the Order Paper for debate today. However, in the interest of national participation, I will at the appropriate time be seeking the House’s leave to defer the motion for debate for a time when the main opposition is in the National Assembly. This is where we, the elected representatives of the people, are mandated to address all matters of national concerns.

We must refrain from panicking and politicising this global concern. Luckily, Guyana remains food secure both in terms of locally produced and imported food.  This we, as a nation, must ensure remains.

Now is a time for us to work together to combat this challenge as it unfolds, and ensure that our population does not suffer unnecessarily from global rising food prices and cost of living.

Mr. Speaker, what is required is strength and solidarity as a nation.

Thank You!

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