FOOD PRICES

I bought a kilo of rice yesterday from Netto, one of the largest supermarket chains in Denmark. It cost kr.8,95 (a bit more than £1); and as I was idly waiting in the queue in order to pay for it, I started "doing the math".

VAT is charged at 25% on everything in Denmark, including food, so we are down to kr.7,16. Working backwards, there is Netto's profit, transport costs from the Netto warehouse, transport costs from the country of origin (Denmark doesn't produce any rice), probably in a container, sorting and packing costs, the plastic wrapping, the sticky label to seal the packet if you only use half of it, and the washing costs. That gets you down to the rice itself in some suitable place. But Netto's supplier probably doesn't buy its rice from single farmers, there will be middlemen in Thailand or Vietnam who deal with the farmers. Plus the transport cost of bringing the rice from paddy to packing factory.

So how much does the individual farmer in Thailand get for his rice? Kr.1 per kilo? Less? All in all, it doesn't seem a lot. I have seen rice being produced in Tanzania, it's very tough work, standing in waterlogged fields under a hot sun and transplanting the wretched things. Avoiding snakes. And then gathering up all of those fiddly grains. In particular, it doesn't seem a lot when compared with the other item I bought yesterday, a pack of disposable plastic razors, which was more expensive.

I think food is very cheap these days. My father-in-law was an onion farmer. One of the last conversations I had with him before he died about ten years ago was on the wholesale price of onions, which was then kr.1 per kilo. I had a similar conversation with his successor a month or so ago. The price is still around kr.1 pr kilo, even though everything else - land, fuel, labour, fertiliser, - has gone up in the meantime.

But surely cheap food is good for us; after all, everybody needs to eat? Well, yes and no. Most of the world still lives in rural areas, and if the returns to agriculture are zilch, then those people will remain there. Increasing those returns certainly seems to be a better way to improve the lot of poor countries than complex rural development schemes that are wasteful, bureaucratic and often pointless.

I used to run a venture capital fund in Tanzania, and was sometimes asked by World Bank consultants how they could improve the private sector. I used to say "double the price of tea". Tea plantations employ lots of labour, and smallholder farmers around the plantations can generate cash income on the side by selling to the central processing factory. Meanwhile, the price of tea in Europe is tiny (1 penny a teabag when I bought a big Tetley's pack for my wife in London last week). Doubling the price would have little or no effect on our willingness to have a cuppa, but would do wonders in the Usambaras. However, like most of my ideas for Africa, this one got nowhere.

Walter Blotscher