UK Food Security: A Fork In The Road

Taking responsibility

One of the primary objectives of any government is to feed its people. But geopolitical events over recent months highlight the fact that many governments in countries who are dependent on food imports have lost sight of their responsibilities.

Food security, particularly for a net importer like the UK, is a serious but often overlooked issue. There is an expectation that the rest of the world will continue to export food to the UK.

But the reality is many food exporting countries are putting controls on their exports and rationing demand. In other words, the world is entering a new era of protectionism.

Michael Raw highlights, for example, that Indonesia is controlling the export of its palm oil and Argentina is putting controls on the export of soya. In addition, wheat prices recently hit record highs in response to the Russia/Ukraine conflict. This is happening against a backdrop in which Russia/Ukraine contribute a quarter of all the world’s wheat.

”The exports from the Black Sea have just come to a dead stop. So Turkey, Egypt and the North African countries have lost their supply, and they’re now searching the world to replace that”, says Raw.

The UK is less self-sufficient than many other countries and is therefore more vulnerable to the effects of protectionism than is, for example, a net exporting and more self-sufficient nation like the Netherlands.

Inelastic demand

The UK is reliant on imported food in the context of inelastic demand which would suggest that the country is particularly vulnerable to any drastic changes in supply.

Raw explains the mechanism:

”Inelastic demand means the demand curve is virtually straight up and down. You are not going to eat a different quantity of food next week to what you ate last week. So the quantity of food demanded does not really change. But if the supply changes, the effect on price is quite dramatic.”

Raw gives some concrete examples of how this mechanism works in practice:

”If you over-supply a market for a particular product by say three percent”, says Raw, ”you won’t get just a three percent fall in price but a 12 percent fall. If you over-supply that market by five percent, you will get a 20 percent fall in price. If you over-supply that market by 10 percent, you’ll get a 50 percent fall in price.”

Crystallizing the notion that a supply chain collapse in the UK is a realistic prospect is highlighted by Raw’s contention that the reverse is also true:

”If we under-supply a market by five percent, you’re going to get a 20 percent leap in price. If we under-supply by 10 percent, the price is going to double. This is the effect of inelastic demand”, says Raw.

There is an historical precedent for this. Raw highlights, for example, that food shortages which led to widespread rationing at the end of the Second World War was a direct consequence of inelastic demand.

Laissez-faire

The concern today is whether the current UK government will maintain a laissez-faire approach with regards to agricultural policy consistent with neoliberal ideology.

There are legitimate reasons to believe that unlike during the latter post-war period, the current government will ignore all requests to subsidize UK farmers. Raw points out that the UK has neither a Ministry of Agriculture, marketing boards nor deficiency payment schemes in place.

The role of these public bodies after the war was to not only provide a guarantee to farmers, but also to ensure the over-supply of markets. Thus, the government strategy at that time was to hedge against food shortages and to ensure prices remained relatively stable. This meant more scope for discretionary spending in other areas of the economy which allowed for greater growth.

But the problem today is that neoliberalism does not offer any protection against the consequences of inelastic demand. Without a hedge in place and government intervention to ensure food security, coupled with the fact that the UK is a net importer of food, means that food prices are likely to ratchet-up very quickly.

Raw emphasizes that there is nothing inevitable about this eventuality but rather argues it comes down to political will. He says that although farmers have been shouting about food security for many years, their voices have fallen on deaf ears by a succession of Secretaries of Agriculture.

The analyst adds that we are heading for a crunch point which could result not only in rising prices but also in empty supermarket shelves and long queues.

Ratcheting-up of fertilizer costs

Raw says that rising food prices reflect the rapid ratcheting-up of fertilizer costs:

”Two years ago, a tonne of ordinary fertilizer bought in the autumn cost £180 a tonne. The price today is £650 a tonne, heading for over 700. Quotes for next spring and for next year’s harvest are a thousand pounds a tonne.”

These rises have already fed through to milk production which is analogous to wider agricultural trends whether it be beef, wheat or barley.

Raw explains how the demarcation line between the mouth of the River Tees around Middlesbrough and the mouth of the River Exe at Exmouth is indicative of current farming trends in the UK. To the north-west of the Exe is mostly livestock production. To the south-east of that line is largely arable production.

The arable producing area of the country is faced with a fertilizer problem. Farmers rely on fertilizer to grow crops to feed their cattle. The rising cost of the fertilizer including potash – a third of which comes from Russia/Ukraine – is proving to be problematic for many of these farmers, not least because it probably means a mass shortage of that product for the foreseeable future.

Without access to the raw materials to maintain crops, farmers who plan for their crops five years ahead are looking at the availability of fertilizer, how affordable it is and whether they are able to adjust their cropping accordingly.

Knock-on effects

Raw has expressed serious concerns about how the rise in the fertilizer price will have negative knock-on effects for the livestock areas in the north and west of the country. Raw says that the price of ammonium nitrate fertilizer which boosts the supply of grass that feeds the animals is now prohibitive for many farmers.

Inevitably, this will hit the supermarket consumer in the pocket. Raw says the first thing to happen will be that food will disappear from the shelves. Secondly, he says that there will be long queues outside supermarkets.

Having highlighted the prohibitive cost of converting animal feed into beef, the analyst doesn’t discount the possibility that rationing could become a feature in the UK in the not too distant future.

The problem is the UK government doesn’t have the foresight to recognize that the introduction of subsidies will help address this imminent crisis. Rather than utilizing land for the production of food, the government appear to be more concerned about continuing down the rewilding path.

The fact that the UK Minister of Agriculture has been replaced by a Department of Agriculture under the guise of DEFRA, is indicative of the political indifference the UK political establishment has towards the agricultural sector.

Successive UK governments from the early 1950s onward appear to have forgotten that the environment also encompasses human beings. Having effectively been left out to dry by politicians, UK farmers – through the NFU – continue to impress upon the government their responsibility to ensure food security in the UK.

Raw stresses the need for the state to start supporting agricultural production again as it did in the post-war period by creating incentives to over-supply the market. The alternative is that hungry people will take to the streets.

Raw says that the government needs to heed to the demands of the farmers by enabling them to produce food for the British people. But the analyst is also cognizant of the fact that this will only happen if the people mobilize in sufficient enough numbers to force the governments hand when the crisis hits.