Today's high prices of food around the world are the result of the continued failure of large, populous economies such as India and China to reach food self-sufficiency or even near self-sufficiency. In India, successive governments since 1991 have ignored the real economy that is agriculture and pushed it to the background. The country is now paying a heavy price for this, says G. CHANDRASHEKHAR. Addressing the latest meeting of Development Committee of World Bank and IMF in Washington on April 13, the Finance Minister, Mr P. Chidambaram, lamented that high crude oil and galloping food prices were imposing a crushing burden on developing countries. According to the Finance Minister, the price of crude (currently at around $110 a barrel) does not reflect either the cost of production or risks inherent in the market, and not even the interplay of demand and supply. Diversion of food crops for bio-fuels resulted in food inflation that hit the poor nations the hardest, he asserted. While Mr Chidambaram's concern over high prices may be justified, going by media reports, it may be safe to infer that he was perhaps not fully and properly briefed about the factors that led to developments in the global fuel and food markets. Crude fundamentals What's the correct position as far as the world crude market is concerned? Without doubt, the market fundamentals are tight. The demand side is robust. Admittedly, there is a slowdown among economies in the OECD, which may pare the growth in demand, but this is being largely neutralised by growth in major Asian economies such as China and India, both of which continue voraciously to guzzle mineral oils. After all, given the status of manufacturing technology and transportation needs, crude is needed to fuel economic growth; and Asian economies are indeed growing rather well. There are no visible signs of any demand compression in the US, either. Those who forecast a sharp downward correction in crude prices resulting from recessionary conditions in the US are hiding their face. In addition, crude oil stocks in the US are close to their seasonal average, and the fall has been larger than expected. Also, a smaller than normal build-up in global inventory is anticipated. Importantly, there is strong expectation of a recovery in the US economy towards the latter part of the year, which is sure to boost consumption and, in turn, prices. On the other hand, the supply side is beset with problems. OPEC is rather cautious in its output policy. The decision to enhance output by five lakh barrels a day (effective November 2007) stays, but is inadequate to meet growing demand. Instability in Iraq exposes prices to the upside. Non-OPEC supply growth is sluggish. Going by early data for 2008, output is sure to contract in 2008. No wonder, prices have set new highs at the front end of the curve; and far forward values too are high still. Those who seriously track commodity markets realise that the market looks not only at current demand-supply fundamentals, but also