Food price crisis and global food security challenge

Volatile food markets, soaring grain prices, new food price crisis – these were headlines in August.

For a short time international wheat prices soared by 50 percent, following devastating crops in Russia and an export ban on wheat as well as bad harvest outlooks in Kazakhstan and Ukraine, major suppliers of wheat to world markets.

September wheat futures showed the steepest rise since 2008 - adding to the worry of former IFPRI director-general Joachim von Braun that this could be indicative of an early stage of new global food price crisis.

FAO states that while the situation is disquieting, such fears were unwarranted at this point in time. World inventories were replenished after two good crop years and stocks remained ample. In their view, it would take two consecutive bad years for the world to see a repeat of the 2008 food and fuel crisis.

Volatility is high in the short term, but inconclusive as to the long run for major food crops. Production shortfalls and surpluses, low and high stock levels, oil price fluctuations, the growing role of financial investors in commodity markets, and the global economic recession have unsettled the agricultural commodity markets.

Food price rises will remain a long-term structural issue. Increased investment into commodities and speculation contributes to price volatility. Prices go up fast and come down slowly. Food and financial markets have become intertwined.

There are indications that the setting of prices at the main international commodity exchanges is shifting to commodities such as food. The extent to which global price fluctuations influence domestic markets varies heavily from country to country - depending on their integration in world markets, their infrastructure and their trade and agriculture policies.

Food prices in most developing countries are down from the high level in 2008, but remain to be higher than they were in 2007. Although the world produces enough to feed its population, price hikes and the economic crisis contribute to a rise in hunger and food insecurity. About one billion people are estimated to be undernourished.

Developing countries have responded to the food price situation in different ways. The FAO presents the situation on its web page in more detail, including through the External Document to view Crop prospects and food situation report.

The international development community has raised the situation in various fora or during international conferences, including:

the 2009 G8 Summit held in L’Aquila, Italy with the L’Aquila Joint Statement on Global Food Security, L’Aquila Food Security Initiative (AFSI), L'Aquila, Italy, July 2009
the OECD/Platform Policy Dialogue on High Food Prices Outlook and Donor Mid-term Response, Paris, February 2009
the High Level Meeting on Food Security for All, Madrid, January 2009
the FAO Committee on World Food Security , Rome, October 2008
the UN General Assembly, 63 Session and the associated meetings on Africa’s development needs and the MDG High-Level Event, New York, September 2008
the G8 Summit 2008, Toyako, Japan, July 2008
the FAO High Level Conference on Food Security, Rome, June 2008
the Human Rights Council on the negative impact of soaring food prices on the right to food, Geneva, May 2008
the World Bank/ IMF Spring Meeting, Washington, April 2008

A number of proposals have been put forward such as the PDF to read Comprehensive Framework for Action (CFA) of the UN High Level Task Force on the Global Food Security Crisis. In addition, a Global Partnership on Agriculture and Food Security (GPAFS) has been broadly endorsed by, for example, the G8 and in the Accra Agenda for Action (AAA).

The response of the international development community includes:

Multilateral donors
- Spain announced an additional €200 million per year for five years
- EU "Facility for rapid response to soaring prices in developing countries". On 21 November 2008, representatives of the European Parliament and the Council of Ministers agreed on the € 1 billion food facility, availing additional agricultural aid for developing countries over the period 2008-10.
- FAO presented a USD 1.7 billion Initiative on Soaring Food Prices (ISFP) during its High Level Conference on Food Security in June 2008.
- The World Bank has made an additional USD 1.2 billion available through its Global Food Crisis Response Program (GFRP).
- IFAD has made USD 200 million available in its Response to rising food and energy prices.
- ADB announced USD 0.5 billion for immediate budgetary support to tackle rising food costs and increases lending to agriculture by USD 1.0 billion for 2009.
- AfDB added USD 1.0 billion to its agriculture portfolio which totals USD 4.8 billion now.
- IADB allocated USD 1.5 billion to the “ Jeddah Declaration on Assistance for Least Developed Member Countries Affected by the Global Food Crisis scheme. IADB also made available a USD 0.5 billion 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 June 2008 FAO High Level Conference on Food Security, 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.
At the January 2009 Food Security for All Meeting, Spain pledged an addtional € 200 million per year for the five years to come.

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) – as, for example, in World Development Report 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, ARD offers ample opportunities to make progress in the 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 (as, for example, in relation to biofuels, trade restrictions or the WTO Doha round).
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 official 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 Consensus on Financing for Development and the commitments made at the 2005 Gleneagles G8 Summit and pledged in the Gleneagles Communiqué 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%.