Current status

// Current status of food prices and food security

Although the world produces enough food for everyone, price hikes and the economic crisis contribute to a rise in hunger and food insecurity. Still, about one billion people are estimated to be undernourished.

Food prices are rising, being at their highest since the 2008 crisis, with the global average price of food 25 percent higher in December 2010 than in December 2009, according to the Intergovernmental Group on Grains.

// Contributing factors

  • Bad weather conditions in some major food producing countries - severe draught in China’s breadbasket, extremely bad weather in parts of Canada, dry weather conditions in parts of the USA and Argentina, torrential rains in Australia and last year’s draughts and fires in Russia and Ukraine
  • Rising oil and fuel prices, which were past the USD 95 mark in late January 2011, having an impact on food production and distribution
  • Global financial crisis, prompting a number of governments to pump money into their economies and lower interest rates, which – together with a very weak US dollar – provides a macro-environment conducive to higher commodity prices
  • Diversion of food crops into biofuel production
  • Speculation, highlighted by the doubling of the world wheat price in two weeks of August 2010, on the back of poor forecasts for the Ukraine and Russia

// Food security critical in some states

The World Bank recently red-flagged the governments of Egypt, Jordan and Lebanon, which rely heavily on wheat imports while consumers are insulated by price subsidies and the government bears the brunt of high costs.

Yemen imported 82 percent of its requirement and was “particularly vulnerable”. The country “has physical wheat reserve stocks equivalent to less than a month of its average monthly wheat consumption and has limited fiscal space,” the Bank said.

Morocco and Tunisia are expected to produce less grain and were also vulnerable. Morocco is projected to double its spending on food and fuel subsidies.

// Another food price crisis in the making?

Some agricultural traders and analysts warn that the latest revision to US and global stocks means there is no further room for weather problems. Dan Basse, president of AgResource, a Chicago-based forecaster, adds: “There’s just no room for error any more. With any kind of weather problem in the upcoming growing season we will make new all-time highs in corn and soy, and to a lesser degree wheat futures.”

Challenges

// Urgent reform of global governance for agriculture

The existing global governance available for agriculture and food systems is in disarray and unable to effectively respond to the changed context and new challenges.

// Better aid

Aid architecture and aid modalities are evolving fast. In ARD many aid effectiveness lessons have been learned while implementing the Paris Declaration and Accra Action Agenda. Examples include the importance of ownership, country systems, coherence, incentives, and mutual accountability. Reforms have to accelerate taking into account best practices and lessons learned.

// Better policies and strategies

An enormous body of knowledge in ARD can be found for example at IFPRI, ODI, IDS-ELDIS or in the World Development Report 2008. However, many unresolved issues remain, such as which “model of agriculture” should be pursued, what roles should state and private sector and smallholders play, 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 such as gender equality and climate change.

In addition, progress must be made in identifying policy areas and strategies that will provide the greatest leverage and potential for addressing the food price crisis. Efforts must also be made to initiate subsequent policy dialogue and change - 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 USD 30 billion are required each year at the global level 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 ODA provided to agriculture has declined hugely - falling from 20 percent to four percent in 2005, i.e. approx. USD 4.0 billion. This mirrors the lack of focus on ARD manifest 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 percent of their national budget for ARD in pursuit of agricultural growth of at least six percent.


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