Rubin (Updated): More on Wheat, Afghanistan, Pakistan, and Global Security

Update: The British government is providing food aid to Afghanistan:

The [UK] government has promised an extra £3m in new funding to help meet growing food shortages in Afghanistan. . . .The International Development Secretary Douglas Alexander said the cash would provide a "safety net" that would will help avoid a humanitarian crisis. UN research suggests that poor Afghans are struggling to buy food because of rising wheat prices. In Kabul it is estimated that people spend up to 60% of their income on bread alone. The UK government says the shortages have been caused by rising global prices made worse by severe cold weather.

Original post:

I previously showed how the rising global wheat shortage and the resultant price increase is feeding conflict (as it were) in both Pakistan and Afghanistan.

The media are starting to catch on to the political implications of the commodity boom. It's not just oil: today's New York Times analyzes A Global Need for Grain That Farms Can’t Fill. Most of the article focuses on how rising prices for grains and other agricultural commodities are reviving the U.S. farm economy. (Of course the article misleadingly uses a few family farmers as examples rather than the multi-national agro-businesses that account for most of the production and market).

An earlier article in the Wall Street Journal (behind subscription firewall, excerpted here) attributed the shortage and price increase to "drought in Australia and poor weather in other grain-producing countries." The Times article attributes it mainly to increasing demand:

Many factors are contributing to the rise, but the biggest is runaway demand. In recent years, the world’s developing countries have been growing about 7 percent a year, an unusually rapid rate by historical standards.

But the Times article also highlights the global implications:

A tailor in Lagos, Nigeria, named Abel Ojuku said recently that he had been forced to cut back on the bread he and his family love.

“If you wanted to buy three loaves, now you buy one,” Mr. Ojuku said.

Everywhere, the cost of food is rising sharply. Whether the world is in for a long period of continued increases has become one of the most urgent issues in economics....

The increases that have already occurred are depriving poor people of food, setting off social unrest and even spurring riots in some countries. . . .

Around the world, wheat is becoming a precious commodity. In Pakistan, thousands of paramilitary troops have been deployed since January to guard trucks carrying wheat and flour. Malaysia, trying to keep its commodities at home, has made it a crime to export flour and other products without a license. Consumer groups in Italy staged a widely publicized (if also widely disregarded) one-day pasta strike last fall.

As I mentioned in the previous post, one of the most common themes in messages from Pakistan since the assassination of Benazir Bhutto has been the wheat flour (atta) shortage, which many people ascribed to the political instability in the country, though it is a global phenomenon. In response, Pakistan has stopped wheat exports to Afghanistan.

As I also reported, rising food prices in Afghanistan are creating a crisis that is so far silent but that could manifest itself in urban riots, increased recruitment to the insurgency, and increased planting of both opium poppy and cannabis to earn cash incomes to buy food at the higher prices.

(On other commodity markets: The latest UNODC assessment of Afghanistan's drug economy notes "the steady rise in cannabis cultivation, giving Afghanistan the dubious distinction of being one of the world’s biggest suppliers of cannabis" (as also reported, left, in the New York Times). With a completely deadpan delivery, the UNODC report praises cannabis growing provinces as "poppy free." Afghan governors who succeed in convincing farmers to grow cannabis, the price of which has jumped, instead of opium poppy, the price of which is falling because of Afghan over-production, are now considered to be counter-narcotics heroes. Anyone who reads this report should carefully parse where it refers to opium and poppy and where it refers to illegal narcotics. Substitution of one illegal drug for another is being sold as counter-narcotics.)

Meanwhile, the Afghan government, which lacks economic expertise and administrative capacity in rural areas (to say the least) has proposed some kind of support for wheat farming to compensate for the food shortages and take advantage of the rising prices, which appear to be a long-term trend. Currently Afghan farmers are poorly positioned to take advantage of the wheat price rises, as traders monopolize most of the profit, as they do with poppy and cannabis. The World Bank vetoed such a program for the usual reasons (distorting markets, etc.) many of which are valid -- in addition to the fact that the Afghan government could not administer a complex and wasteful program like US agricultural price supports, especially since Afghan cultivators have no political influence.

Nonetheless, the rise in price in wheat and other commodities (what is happening to horticultural commodities, flowers, essential oils, and so on?) presents an opportunity for investing in other cash crops and their marketing in Afghanistan. For all the rhetoric about how the drug economy is supporting insurgency and terrorism, where is the program to seize this market opportunity? And for all the talk of the importance of Afghanistan to global security, where is the program to assure Afghans of an affordable supply of basic food? This would do at least as much good as more NATO troops, and with less risk of collateral damage (market distortion versus killing civilians).

Please post policy proposals in the comments. Thanks.