The global food crisis: an overview
by Susanne Jaspars and Steve Wiggins, ODI May 2009

The increase in food prices in 2007 and 2008 has been widely documented, and has been the subject of many macro-economic simulations and, more recently, field studies by a number of different agencies. It attracted the attention of the international community to global problems of food insecurity, and highlighted the inadequacies of the international system of response. This article gives a brief overview of the causes and impact of the sharp rise in food prices, the international response and some of the key lessons learnt.

The causes and impact of the global food crisis

The food price spike of 2007–2008 can be seen as a sharp and short-lived increase in prices superimposed on a medium-term trend of rising prices that began as early as 2001 – see Figure 1.

The sustained increases in the prices of grains on world markets since 2001 have been partly caused by the falling value of the US dollar against other trading currencies, increased demand resulting from strong economic growth and, perhaps of most significance, a slowdown in the growth of cereals production since the mid-1980s. For almost two decades, production has grown at a slower rate than population growth. Stocks have declined since 2000, from around 30% of annual use to as little as 15% in 2007.

Reduced stocks meant that there was little resilience in the face of the mainly short-term triggers that arose from 2005 onwards. These included consecutive harvest failures in the important wheat-exporting countries of Australia, Russia and Ukraine, so that world cereal production fell in 2006 and 2007. The rising price of oil had two important impacts on agricultural production: increasing the price of nitrogenous fertiliser, pushing up production costs; and stimulating the production in the US of ethanol, a biofuel, from maize, which would scarcely be worthwhile at lower costs of oil and gasoline.

As the rise in the prices of grains accelerated, some countries reacted by banning or limiting their exports of grain, or importing additional supplies over and above usual imports. These responses pushed prices even higher on the world market, especially for rice. Prices of grains on futures markets rose even more as investors sought returns on commodities in preference to stocks and shares. Even if the futures prices had little effect on spot markets, they contributed to general alarm.

Increasing food prices make it more difficult for poor people to meet their food needs. According to the Food and Agriculture Organisation (FAO), the number of undernourished people in the world increased by 75 million in 2007, to reach 923m. The biggest increases were in Asia, the Pacific and Sub-Saharan Africa. Much of this growth is attributed to increased food prices, compounding trends of rising numbers of people suffering from chronic food insecurity.

The impact of the price rises has varied between countries, depending in part on the sensitivity of local markets to global price movements and the degree to which countries are dependent on food imports. As Hanna Mattinen’s article explains, Liberia – a country heavily dependent on imported food – has suffered badly, while in the Central African Republic, where the economy is based on agriculture and domestic production meets a greater proportion of food needs, impacts have been more limited. In many cases, already vulnerable countries or population groups, such as those affected by conflict or repeated natural disasters, women-headed households and the urban poor, were expected to be hardest-hit. Most of the 30 countries and territories identified by the World Food Programme (WFP) as at risk are already of humanitarian concern, including Afghanistan, the Democratic Republic of Congo (DRC), Ethiopia, Haiti, Kenya, Liberia, Niger, the Palestinian territories, Somalia and Zimbabwe. Many are already on FAO’s list of countries in crisis requiring external assistance. Even meeting existing needs became difficult as global food costs rose. WFP had to raise an additional $750m to cover existing programmes, and the agency’s total budget increased from $3 billion to $6bn in a matter of months in 2008.

Many studies were done to simulate the impact of increased food prices, with urban, displaced, pastoralists and smallholder farmers expected to be worst-affected. Recent field studies have confirmed these assumptions, and also show that people affected by the prices increases responded by reducing the quantity and diversity of their diet. We have also seen reduced expenditure on healthcare, education and other basic goods. In their article, Cindy Holleman and Grainne Moloney explain how Somalis reacted to increases in the price of imported rice, the main staple food in northern and central Somalia, by reducing non-food purchases and buying less of some food items, turning to cheaper foods (locally produced sorghum) and eating lower-quality cereals. Children have been taken out of school and purchases of medicine have declined. Riots and civil disturbances took place in urban areas in many low- and middle-income countries in 2008, including Bangladesh, Côte d’Ivoire, Haiti, Indonesia and Mauritania.

The global response to the crisis

Several high-level meetings have been convened in an effort to develop an international response to the food price crisis. As David Nabarro and Marianne Muller describe in their article, in April 2008 the UN established the High Level Task Force (HTLF) on the global food security crisis. This led to the Comprehensive Framework for Action (CFA) to promote a unified response. The following June, representatives from 180 countries met in Rome, and at the G-8 summit in Japan in July leaders confirmed the need for support for smallholder farmers. They also called for the removal of export restrictions, the sustainable use of biofuels and steps to address the influence of speculative capital. In January 2009, governments, civil society, the private sector and donors met in Madrid, where they reaffirmed their commitment to addressing global food insecurity.

A general consensus has emerged within the international community about the need for a ‘twin-track approach’ to meet immediate food needs and promote longer-term resilience. This was first proposed by FAO, for food security responses to protracted crises. In the CFA, key components of the twin-track approach include:

  • Meeting the immediate needs of vulnerable populations: emergency food assistance, nutrition, safety nets, the provision of agricultural inputs and services, adjustments in trade and tax policy and steps to manage the macro-economic implications of price rises, for example holding down inflation and addressing balance of payments issues.
  • Building longer-term resilience: increase food production, especially by small farmers, manage food stocks more effectively, and adopt less ambitious targets for biofuels production. Social protection should be expanded and targeted at the most food-insecure and vulnerable people.

In reality, emergency food assistance and short-term agricultural support (seeds and fertiliser) formed the main response to the crisis. WFP raised the additional $750m it needed to meet its existing emergency caseload, plus an additional $450m for newly food-insecure people (a total of $1.2bn). Other key actors in the response have been UNICEF, the FAO, the World Bank and the International Monetary Fund. Donor support has, however, fallen far short of the $25–40bn a year called for at the Rome conference in June 2008. Pledges made at Rome came to $13bn, and an additional $10bn was promised at the G-8 summit, but only a small amount has so far been disbursed.

At country level, many governments tried to manage price increases through a combination of policies affecting trade (reducing tariffs on imported grains and limiting or taxing grain exports), consumption (food subsidies, safety nets, tax reductions) and production (input subsidies and producer price support). India and Ethiopia released public stocks and offered subsidies on staple foods, but very few vulnerable countries had sufficient food reserves to draw on. Existing safety nets and social protection programmes have been adapted or expanded (the effects of price rises on the Productive Safety Net Programme (PSNP) Ethiopia are discussed in Matt Hobson’s article). In general, developing countries have responded by shifting from a reliance on the market for food to a focus on self-sufficiency.

The present – and predictions for the future

It now appears that the price spike in 2008 was the result of an unusual combination of short-term factors. Global food prices decreased dramatically in the latter half of 2008, as producers in OECD countries responded strongly to the higher prices. Even sharper falls have occurred in oil and minerals prices, and in the price of fertilizer. Prices are expected to continue to decrease in 2009 as a result of the global economic downturn, though the recession will itself affect the food security of people in some low-income or vulnerable countries, reducing investment, increasing unemployment, restricting the availability of credit and putting pressure on aid and remittances. It also makes it even less likely that the amounts governments have pledged to address the food crisis will materialise.

Food prices nonetheless remain above the long-term trend, and have not decreased everywhere. In many of the most vulnerable countries prices are still well above normal, and in some – including Ethiopia, Haiti, Kenya, Somalia, Sudan and Zimbabwe – prices have actually continued to increase. Poor harvests due to lack of seeds and fertilizer in 2008 mean that the effects of the food crisis will persist well into this year.

In the medium term, international prices of cereals are expected to stay 20–30% higher than levels seen in 2001/02 largely owing to expected higher oil prices, which will push up production costs and make biofuel production attractive. Prices may also become more volatile if a more variable climate translates into more frequent harvest failures, in the absence of greater stocks and their better management.

Lessons for food security programming in emergencies

Given that we should expect continued instability in commodity markets, it is important that the international community learns the lessons from the food crisis of 2008. In fact, the 2008 crisis told us little that we did not already know about the nature of vulnerability, the appropriate responses to it and the need for reform of the international food security system. Rather, it has given the international community momentum to actually do something about these problems – momentum that should not be lost.

First, the food crisis has reinforced the need to think beyond food aid in addressing food insecurity. Food aid was once again the dominant response to food crisis, with less attention given to addressing problems of access to food and nutrition. The Sphere Food Security Standards emphasise the importance of good analysis to inform response, and stress that a range of options needs to be considered to address food insecurity, including income support (cash transfers, vouchers, public works) and agricultural and market support. The crisis should provide an incentive to look again at the appropriateness of food aid in tackling food insecurity, in particular longer-term programmes such as food-based safety nets. This must be done now, as lower global food prices are likely to restore global food surpluses, in turn determining the use and allocation of food aid.

References and further reading

Philip C. Abbott, Christopher Hurt and Wallace E. Tyner, What’s Driving Food Prices?, Report for the Farm Foundation, July 2008

Ronald Trostle, Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices, WRS-0801, Report from the Economic Research Service, US Department of Agriculture, Washington DC, May 2008.

Speech by John Powell at a conference organised by the Danish Ministry of Foreign Affairs on the ‘Global Food Situation: Challenges for Humanitarian Assistance’, November 2008.

ACF, Feeding Hunger and Insecurity. The Global Food Price Crisis: A Summary of Action Against Hunger Research in Ethiopia, Sierra Leone, Central African Republic and Liberia, 2008; and Hanna Mattinen in this issue.

ALNAP, The Global Food Price Crisis.

FAO, Country Responses to the Food Security Crisis: Nature and Preliminary Implications of the Policies Pursued, December 2008.

Steve Wiggins, Sharada Keats and Marcella Vigneri, Impact of the Global Financial and Economic Situation on Agricultural Markets and Food Security, ODI, forthcoming. WFP, Recent Food Price Developments in Most Vulnerable Countries, Issue No. 2, December 2008.

Ed Clay, WFP: Thinking Beyond the Current Funding Crisis, written evidence submitted to the UK House of Commons International Development Committee, May 2008.

 

Second, we need to combine responses that meet immediate needs with measures to address the structural issues that cause food insecurity. The food crisis has led to a renewed emphasis on smallholder agriculture and social protection. It has also highlighted that agricultural support involves not just providing inputs, but also supporting appropriate policies and strengthening institutions, for example to improve access to credit, markets and land titles. This is equally applicable to any food crisis, including the protracted conflict-related crises that represent the most severe food emergencies. Initial indications are that, for many donors, combining simultaneous assistance to meet immediate needs with steps to promote resilience (or address structural causes) is still a considerable challenge.

Third, the food crisis has highlighted the plight of the world’s growing urban populations, and their vulnerability to economic change. Given that urban populations have been amongst the worst-affected by the food crisis, it is curious that recommendations for long-term support for urban populations seem to be limited to social protection and support for urban agriculture, rather than laying the foundations for a more sustainable urban economy through market and trade-based livelihoods. Humanitarians, geared up as they are for rural crises, are ill-equipped to deal with emergencies in urban settings. This is a major gap, and one which the humanitarian community must address.

Finally, the international community struggled to address the problem with the existing food security architecture. The UN had to create a high-level task force, despite having at least three agencies concerned with food, and several others concerned with dimensions of food security and nutrition. This indicates the need for reform if food insecurity is to be addressed adequately in future.

Susanne Jaspars is a Research Fellow in the Humanitarian Policy Group at ODI. Her mail address is s.jaspars@odi.org.uk. Steve Wiggins is a Research Fellow with ODI’s Rural Policy and Governance Group. His email address is s.wiggins@odi.org.uk.

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