Global Food Security Remains Under Threat, Despite Drop in Commodity Prices

A worker in a mine in Western Australia carries a piece of iron ore (Reuters)
A worker in a mine in Western Australia carries a piece of iron ore (Reuters)
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Global Food Security Remains Under Threat, Despite Drop in Commodity Prices

A worker in a mine in Western Australia carries a piece of iron ore (Reuters)
A worker in a mine in Western Australia carries a piece of iron ore (Reuters)

Global commodity prices are expected to decline this year at the fastest clip since the onset of the COVID-19 pandemic, clouding the growth prospects of almost two-thirds of developing economies that depend on commodity exports, according to the World Bank's latest Commodity Markets Outlook report.

However, according to the bank's report, a copy of which was obtained by Asharq Al-Awsat, lower prices are expected to bring little relief to the nearly 350 million people worldwide who face food insecurity.

Although food prices are expected to decline eight percent in 2023, they will be at the second-highest level since 1975.

Moreover, until February of this year, the annual food price inflation rate was 20 percent globally, the highest level over the past two decades.

The World Bank's Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said that the surge in food and energy prices after Russia's invasion of Ukraine has passed mainly due to slowing economic growth, a moderate winter, and reallocations in the commodity trade.

"But this is of little comfort to consumers in many countries. In real terms, food prices will remain at one of the highest levels of the past five decades. Governments should avoid trade restrictions and protect their poorest citizens using targeted income-support programs rather than price controls," he indicated.

According to the World Bank, commodity prices are expected to decline by 21 percent in 2023 compared to last year. Energy prices are also likely to drop by 26 percent this year.

The price of Brent crude is expected to average $84 per barrel this year, down 16 percent from the average in 2022. Natural gas prices in Europe and the United States are expected to halve between 2022 and 2023, while coal prices will drop 42 percent in 2023.

Fertilizer prices are also expected to decline by 37 percent in 2023, their most significant annual decline since 1974. However, fertilizer prices are still close to their last high, experienced during the 2008-2009 food crisis.

For his part, Deputy Chief Economist and Director of the Economic Prospects Group at the World Bank, Ayhan Kose, explained that the decline in commodity prices over the past year has helped reduce global headline inflation.

"However, central bankers need to remain vigilant as a wide range of factors, including weaker-than-expected oil supply, a more commodity-intensive recovery in China, an intensification of geopolitical tensions, or unfavorable weather conditions, could push prices higher and reignite inflationary pressures."

Despite the significant declines expected this year, prices for all major commodity groups will remain well above their average in 2015-2019.

European natural gas prices will hover around three times their average in 2015-2019. Energy and coal prices will remain higher than the average before the pandemic.

Lead Economist in the World Bank's Prospects Group, Valerie Mercer-Blackman, stated that metal prices, which increased slightly early in the year, are expected to fall by 8 percent relative to last year, primarily because of weak global demand and improved supplies.

"In the longer term, however, the energy transition could significantly lift the demand for some metals, notably lithium, copper, and nickel," she said.

The report includes a "Special Focus" section that evaluates the performance of a wide range of approaches to forecast prices of seven industrial commodities (oil and six industrial metals).

A key finding of the study is that futures prices, which are widely used in price predictions, often lead to significant errors.

Econometric models based on multiple independent variables tend to outperform other approaches and futures prices.

The analysis suggests that augmenting model-based forecasting approaches by incorporating the dynamics of commodity prices over time and controlling for other economic factors enhances forecast accuracy.



China Carefully Assembling a Deep-sea Mining Strategy

So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
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China Carefully Assembling a Deep-sea Mining Strategy

So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP

In a world hungry for crucial resources, China may not be poised to start deep-sea mining but it is planting seeds for such operations in a meticulously planned economic and geopolitical strategy.

The world's oceans, both international waters and those under national jurisdiction, are rich in minerals and metals, like cobalt, nickel and copper.

These are important for building electric car batteries, for instance, and other technologies as countries try to transition away from fossil fuels.

China "is an energy-thirsty country. It will look for resources everywhere," including the deep sea, said Julia Xue of Shanghai Jiao Tong University.

But she said China is not particularly anxious over the issue, although recent developments -- one company is itching to be the first to start mining the sea bed -- may put more pressure on Beijing.

A Canadian firm, The Metals Company, has filed an application with the United States to begin undersea mining in international waters.

Using its American subsidiary, it acted after President Donald Trump, bypassing international negotiations, signed an executive order in April to speed up the permit-issuing process for such mining in US and international waters.

Trump cited an obscure 1980 US law that says American citizens can explore for and recover deep sea minerals in areas beyond the country's jurisdiction.

Environmental groups are outraged by Trump's order, arguing that a wild hunt for the potato-sized, metal-containing nodules could harm fragile undersea ecosystems.

The Canadian company initially said it would submit its request to the International Seabed Authority (ISA), a body which has jurisdiction over the ocean floor in international waters.

The Metals Company says it ignored this authority because of its slow pace in talks on adopting a mining code that establishes rules for exploiting seabed resources. The United States is not an ISA member.

A long-time observer of those talks who spoke on condition of anonymity said China is not particularly worried about who starts mining first.

"For them it's more about dominance, staying competitive in the game, and giving the impression that you can't mess with us," the observer said.

With that goal in mind "they're definitely developing the technology and putting the strategic agreements in place," Alex Gilbert, a researcher at the Payne Institute for Public Policy at Colorado School of Mines, told AFP.

For instance, China has reached an agreement with the Cook Islands to explore for minerals in that Pacific country's waters.

Another tiny Pacific nation, Kiribati, also says it is exploring a deep-sea mining partnership with China.

This approach is "more geopolitical than economic," said Emmanuel Hache of the French Institute for International and Strategic Affairs, noting Beijing is using undersea mining as a lure to cement greater diplomatic support as it exerts power.

China holds five contracts handed out by the ISA to look for resources in the Pacific and Indian Ocean sea beds and these contracts cover all types of undersea mineral resources. China's is the largest number of the 22 contracts the organization has granted.

Years behind

"From a research perspective, we have been continuously getting closer. And from a technical perspective, we have been continuously improving," said Chen Xuguang, a researcher at Ocean University of China.

In 2024 a Chinese prototype deep-sea mining vehicle called Pioneer II, developed by Shanghai Jiao Tong University, set a national record by operating at a depth of more than 4,000 meters (13,100 feet).

State-owned Beijing Pioneer Hi-Tech Development Corporation told AFP that later this year it plans a seabed nodule collection test.

Still, China is not as advanced technologically as The Metals Company, experts say.

"I would characterize China as being two to four years behind them in terms of their technology," said Gilbert in Colorado.

Hache, the French expert, put the gap at five years.

But China has an advantage over firms like the Canadian one in recovering and processing nodules: its companies are supported by the state and China has infrastructure for processing metals.

The observer of the international seabed talks said China does not need seabed mining for metal supply, "but maybe geopolitically, in the context of maintaining their control over the commodities market."

China wants to keep its options open, this person said.

And while it supports an international mining code, China does not need one now and "they're not going to put pressure until they've decided strategically that they're ready," said Gilbert.