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Revisiting the Global
Food Price Crisis
At about this time last year, a massive wave of concern over
drastic increases in global food prices crested and then seemed to
recede, as storm clouds gathered on the wider economic horizon.
Does that mean the food crisis is over? Or has concern about food
security simply been swamped by greater fears over the consequences
of a prolonged global economic recession?
The answer to both questions is a resounding "no."
Food price inflation persists and will no doubt continue, until its
underlying causes - principally the inability of agricultural
productivity to keep pace with burgeoning demand, especially in
developing countries - have been adequately addressed. Moreover,
far from being neglected, food security and agriculture continue to
be subjects of heightened concern among governments and
international organizations in the midst of severe economic turmoil
and in the face of global climate change.
 The persistence of food price inflation
At the peak of the food crisis, the international prices of
wheat and maize reached levels three times those in 2005, while the
price of rice grew fivefold over the same period.
Though food price inflation affected all consumers, it created
especially great hardship for the poor, who spend 50 to 70 percent
of their income on food. According to the Food and Agriculture
Organization (FAO) of the United Nations, the number of
undernourished people in the world increased from some 848 million
in 1990 to 923 million by the end of 2007, to a large extent
because of food price inflation. The current figure is probably
closer to 1 billion.
As the global financial meltdown began to unfold in late 2008,
tightening credit and falling food expenditures put downward
pressure on grain consumption. Flagging demand, together with
record harvests of basic cereals, reduced prices by 30 to 40
percent toward the end of the year, essentially restoring them to
their mid-2007 levels.
Yet, food prices remained much higher then they were just a few
years ago, with some crops trading at double the average price for
1998-2008. And even though international food prices fell, they did
not drop as fast, if at all, in developing countries, especially
those of sub-Saharan Africa, according to the FAO food price index.
In Malawi, for example, the price of maize is still 100 percent
higher now than it was last year.
Compounding the crisis
Global recession is aggravating the food crisis in various ways
- principally by reducing the purchasing power of poor consumers
through the loss of jobs and remittances but also perhaps by
limiting agricultural investment and by precipitating the return of
large numbers of recent urban migrants to the countryside.
In view of such pressures, Robert Paarlberg, a professor of
political science at Wellesley College in the USA, told the
Financial Times last month that he is "more worried
about hunger in the current economic crisis" than he was
"at the peak of the surge in food prices last
summer."
The situation is especially critical, says the FAO, in about 35
countries, where the impact of high food prices is being compounded
by the economic crisis as well as by other problems, such as
drought and civil unrest.
In sum, the financial crisis, while providing some relief from high
food prices, is exerting "strong and long-lasting effects on
emerging economies and on the people most in need," writes
Joachim von Braun, director general of the International Food
Policy Institute (IFPRI), in a Nature magazine commentary.
As a consequence, he asserts, "the stage is set for the next
international food crisis."
The international response
Without doubt, the crisis that peaked in 2008 triggered a
vigorous response from the international community. In April, the
United Nations Secretary General established the High-Level Task
Force on the Global Food Security Crisis. And at its request, the
joint Comprehensive Framework for Action on the Global Food
Security Crisis was created, with the aim of catalyzing actions by
governments, international and regional organizations and civil
society.
Meanwhile, the World Bank, in coordination with the High-Level
Task Force, created the Global Food Crisis Response Program, which
is disbursing a total of US$2 billion in assistance to hard-hit
countries. Other major development organizations are contributing
importantly as well. The US Agency for International Development
(USAID), for example, immediately stepped up levels of emergency
food assistance and channeled significant funds to the CGIAR for
promotion of improved food production technologies that are ready
for widespread dissemination. Similarly, the International Fund for
Agricultural Development (IFAD) made available $200 million to
provide an immediate boost to agricultural production in developing
countries.
Recognizing that the crisis resulted in large part from years of
underinvestment in agriculture, world leaders - including World
Bank president Robert Zoellick and the G8 heads of state - have
called for renewed commitment to agriculture.
In the summer of 2008, the Bank announced that it would
significantly boost overall agricultural lending over the next
year, nearly doubling such loans to Africa and Latin America. It
also approved a tripling of investments in social protection
programs, which are critical for addressing the immediate impacts
of food price crises.
Overall, aid to agriculture showed a "slight uptick"
in 2007, according to a January 2009 report of the Ad Hoc Advisory
Group to the Madrid Conference on Food Security, and "the data
for 2008 are likely to establish an even stronger rise."
Toward a new world food system
The food price crisis of 2007-08 was not just a short-term
emergency, and underinvestment in agriculture was not just a
limited policy miscalculation. Both, according to IFPRI's von
Braun, must be taken as signs of "long-term failure in the
functioning of the world food system." Other "symptoms of
disarray" include "harmful biofuel policies" and
"looming water problems."
Von Braun goes on to describe what "a new agriculture, food
and nutrition governance architecture" might look like. One
central feature would be some kind of "umbrella
structure," which builds on and improves current institutions,
such as the UN and CGIAR systems, enabling them to act more
collectively and effectively. The new architecture would also
feature "an innovative government network" to coordinate
national responses, together with a more "inclusive
approach" that embraces "the private sector and civil
society, including large private foundations," as well as
national institutions.
Under those arrangements, stronger measures could be implemented
for dealing with grain market failures, such as "a minimum
physical grain reserve for humanitarian assistance" and
"a virtual reserve . . . backed up by a financial fund . . .
to calm markets." Investment in agriculture would be boosted
to accelerate the flow of research-based innovations, which are
essential for achieving sustainable growth in productivity and
adapting agriculture to climate change.
There are signs that such far-reaching proposals may be gaining
support. For example, at a meeting of the G8 agriculture ministers,
held last month in Italy, "the delegations underlined the need
to place agriculture and food security at the core of the political
agenda." And in their final declaration, they expressed
commitment to ongoing reform of the international food security
system.
Meanwhile, support is building for a proposed world summit on
the food crisis to be organized by FAO in November. "The
summit should lead to greater coherence in the global governance of
world food security," says FAO director Jacques Diouf, and
offer "lasting political, financial and technical
solutions."
Ongoing institutional reform in the CGIAR must be viewed in this
context of a changing global architecture for food. The
"best-bet" options shaped and evaluated in recent months
by CGIAR scientists should offer useful guidance for accelerated
investment in agriculture. And the reform measures approved
unanimously by CGIAR membership should strengthen the role of
international research as a mainstay of the world food
system.
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