The food price crisis and the global food security challenge
Smallholders are key
In early 2008 food prices peaked, and they have been falling ever since. This is easing some of the immediate impacts of the food price crisis. However, more than 920 million people are still suffering as a result of hunger and food insecurity — the majority of them women and children in rural areas. 
Response strategies for tackling the effects of the food price crisis and poverty need to centre on smallholder-based agriculture and rural development. This is because evidence shows1 that for most developing countries, smallholder-based agricultural growth, and thus higher productivity, is the most effective approach to overcoming rural poverty.
It is necessary to accelerate smallholder-based agricultural growth in the medium term. However, the immediate needs stemming from the food price crisis also have to be addressed, preferably through strengthened social safety nets or other social protection measures.
Importantly, any response strategy needs to be country-owned and highly context- and location-specific.
What is happening now?
a) Processes
Developing countries have responded to the food price situation in different ways (for more information, see the specific FAO web page). The international community has also responded through various fora, including:
A number of proposals have been put forward, the most advanced of which is the High Level Task Force’s Comprehensive Framework for Action (CFA). In addition, the Global Partnership on Agriculture and Food has been broadly endorsed by, for example, the G8 and in the Accra Agenda for Action (AAA).
b) Resources and programmes
Developing countries have responded to the challenges they face with a multitude of policy and direct support measures (click here for details). The responses of other institutions are highlighted below.
- Multilaterals:
During the June 2008 FAO High Level Conference (HLC) on Food Security, the FAO presented its USD 1.7 billion Initiative on Soaring Food Prices (ISFP). The World Bank has made an additional USD 1.2 billion available through its Global Food Crisis Response Program (GFRP) while IFAD has made USD 200 million available.
In the case of the regional development banks, the ADB made USD 0.5 billion available for immediate budgetary support and increases lending to agriculture and NR by USD 1.0 billion for 2009. The AfDB added USD 1.0 billion to its agricultural portfolio while the IDB allocated USD 1.5 billion to the “Jeddah Declaration on Assistance for Least Developed Member Countries Affected by the Global Food Crisis” scheme. In response to the food crisis, the IADB also made available a USD 500 million credit line.
The WFP received USD 960 million as a result of its USD 755 million appeal to offset its increased costs for food and fuel.
- Bilateral donors:
Most bilateral donors have pledged additional resources or re-programmed available resources to address immediate and mid-term needs stemming from the food price crisis. At the FAO High Level Conference, pledges were made by various countries, including France, USD 1.5 billion (over five years); Germany, USD 750 million; Japan, USD 150 million; Kuwait, USD 100 million; the Netherlands, USD 75 million; New Zealand, USD 7.5 million; Spain, USD 773 million; United Kingdom, USD 590 million; and Venezuela, USD 100 million.
What else has to happen?
- Urgent reform of global governance for agriculture: The existing global governance available for agriculture and food systems is in disarray, and is unable to effectively respond to the fact that contexts have changed and new challenges have arisen.
- Better aid: Aid architecture and aid modalities are evolving fast, and many aid effectiveness lessons have been learned in relation to agriculture and rural development as a result of implementing the Paris Declaration on Aid Effectiveness (PD) and the Accra Agenda for Action (AAA). Examples of such include the importance of ownership, country systems, coherence, incentives, and mutual accountability. Reforms have to accelerate while taking into account the lessons learned and best practices.
- Better policies and strategies: There is a significant body of knowledge in agriculture and rural development (ARD) (e.g. WDR 2008, IFPRI, ODI, IDS-ELDIS). However many unresolved issues still remain, such as which “model of agriculture” should be pursued, what roles should be played by the state and by the private sector, including smallholders, and how to address the continued challenge presented by the political economy of policies. Despite this, however, ARD offers ample opportunities make progress in the sustainable fight against hunger and poverty while at the same time addressing challenges like gender equality and climate change.
In addition, progress must be made in identifying policy areas and strategies that will provide the greatest leverage and the most potential for addressing the food price crisis. Efforts must also be made to initiate subsequent policy dialogue and change (in relation to biofuels, trade restrictions, WTO Doha round, for example).
- More resources for ARD: In addition to better aid and policy reforms, more resources are required from both national budgets and external aid. In June 2008, the FAO estimated that, at the global level, USD 30 billion is required each year to adequately address poverty and hunger. The MDG Task Force for Africa estimated that an additional USD 8.8 billion is required for African agriculture, while the CFA identified a global public finance shortfall of USD 25 to 40 billion.
These figures contrast sharply with the fact that the share of overseas development assistance (ODA) provided to agriculture has declined hugely, falling from 20% to 4% in 2005 (approx. USD 4.0 billion). This mirrors the lack of focus obvious in many developing countries.
The Monterrey and Gleneagles commitments need to be honoured to allow for an increase of external resources while countries in Africa need to implement the Maputo Declaration, allocating at least 10% of the national budget for ARD in pursuit of agricultural growth of at least 6.2%.
Background
- Narration/analysis
Over the past century, humankind has experienced three distinctive food price hikes: one following World War II, one following the first oil crisis in the late 1970s, and the one we are living through right now. There is a general expectation that food prices will drop from the peak levels they reached during the first half of 2008. However, they are not expected to fall to the historically low levels seen in 2000-2005. And, overall price volatility is expected to increase.
Soaring food prices have a number of transitory, structural and policy related causes. Supply-side factors include: (i) weather related production shortfalls; (ii) lack of investment in agriculture; (iii) low agricultural commodity stock levels and (iv) rising agricultural input costs. Demand-side factors include: (i) policy induced demand for biofuels; (ii) population growth and (iii) changing diets. Other factors (such as increased activity on the part of the agricultural commodities market/futures system and short-term policy measures like export bans) have worsened the situation.
There has been a massive and direct impact on people, particularly the poor, and this has resulted in riots and unrest in a number of countries. The FAO estimates that the food price crisis has added 75 million people to the estimated 850 million who are undernourished and hungry worldwide. Overall, the World Bank estimates that there are 1.4 billion people living in extreme poverty, wiping out many of the gains made in the last few decades in the fight against hunger and poverty.
Macro-economic impacts include balance of payment problems, inflation and the reduced availability of public financial resources for poverty eradication and the achievement of the other MDGs.
To make comments, remarks and suggestions on soaring food prices, please use the comment function below.
- Further information and background papers
- ADB (2008) Food Prices and Inflation in Developing Asia: Is Poverty Reduction Coming to an End?, April 2008
- ADB (2008) Soaring Food Prices, May 2008
- BMZ (2008) Increasing Food Prices and their Impact on Development Policy, April 2008
- Chatham House (2008) Briefing Paper, Rising Food Prices, April 2008
- FAO (2007) The State of Food and Agriculture 2007 – Paying Farmers for Environmental Services
- FAO (2008) The State of Food and Agriculture 2008 - Biofuels: prospects, risks and opportunities
- FAO (2008) Bioenergy, Food Security and Sustainability – Towards an International Framework, April 2008
- FAO (2008) Food Outlook, Global Market Analysis, June 2008
- FAO (2008) Soaring Food Prices: Facts, Perspectives, Impacts and Actions Required, April 2008
- FAO/IFAD/WFP (2008) High Food Prices: Impact and Recommendations, Paper prepared by FAO, IFAD and WFP for the meeting of the Chief Executives Board for Coordination on 28-29 April 2008, April 2008
- G8 (2008) Statement on Food Security
- GDPRD (2005) The Role of Agriculture and Rural Development in Achieving the MDGs: a Joint Donor Narrative
- HLTF (2008) Comprehensive Framework for Action
- IAASTD (2008) Executive Summary of the Synthesis Report
- IAASTD (2008a) Global Summary for Decision Makers
- IFPRI (2007) The Role of Agriculture in Development, Research Report 153
- IFPRI (2008) High Food Prices: The What, Who and How of Proposed Policy Actions, May 2008
- IFPRI (2008) Investing in African Agriculture to Halve Poverty by 2015, Discussion Paper 751
- IFPRI (2008) Rising Food Prices: What Should be Done, April 2008
- IMF (2008) Food and Fuel Prices—Recent Developments, Macroeconomic Impact, and Policy Responses, June 2008
- Institute for Agriculture and Trade Policy (2008) A Time of High Prices: An Opportunity for the Rural Poor, April 2008
- ODI (2008) Briefing Paper, Rising Food Prices: A Global Crisis, April 2008
- OECD (2008) Higher Food Prices – A Blessing in Disguise For Africa, Policy Insights No.66, May 2008
- OECD (2008) Rising Food Prices: Causes and Consequences, May 2008
- OECD/FAO (2007) OECD-FAO Agricultural Outlook 2008-2017
- Oxford Analytica (2008) Food Crisis Represents Long-term Shift, April 2008
- The International Bank for Reconstruction and Development/The World Bank (2008) Global Monitoring Report 2008 – MDGs and the Environment: Agenda for Inclusive and Sustainable Development, 2008
- UN-ECOSOC (2007) The Millennium Development Goals Report 2007
- UN-ECOSOC (2008) Note for Special Meeting of the Economic and Social Council on Global Food Crisis, May 2008
- UNDP (2007) Human Development Report 07/08 – Fighting Climate Change: Human Solidarity in a Divided World
- USDA (2008) Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices
- USDA (2008) Production, Supply and Distribution, US Department of Agriculture, 2008 http://www.fas.usda.gov/psdonline
- World Bank (2007) Aid Architecture: An Overview of the Main Trends in Official Development Assistance Flows
- World Bank (2007) World Development Report 2008 – Agriculture for Development
- World Bank (2008) A Note on Rising Food Prices, The World Bank Development Prospects Group, Policy Research Working Paper 4682
- World Bank (2008) G8 Hokkaido-Toyako Summit, Double Jeopardy: Responding to High Food and Fuel Prices, July 2008
- World Bank (2008) Implications of Higher Global Food Prices for Poverty in Low-Income Countries, April 2008
- World Bank (2008) Rising Food Prices: Policy Options and World Bank Response, April 2008
- World Bank/IFPRI (2006) Agriculture and Achieving the Millennium Development Goals
1 World Bank (2007): World Development Report 2008 |
