An action plan for the current world food situation

New forces are dramatically changing how food is produced, marketed, and consumed, prompting a surge in food prices and ushering in potentially devastating effects for the world's poorest people.

Why is this happening? Part of the answer is that in recent years, energy and agricultural prices have become increasingly intertwined. High energy prices have made agricultural production more expensive by raising the cost of inputs, such as fertilisers and irrigation. As the price of oil reaches record levels, attention has turned to alternative sources of energy, namely biofuels. Recent analysis by the International Food Policy Research Institute (IFPRI) found that biofuel production was responsible for 30 per cent of the cereal price increase between 2000 and 2007.

Another critical factor is the fact that many parts of the developing world have experienced high economic growth and this has boosted consumers’ purchasing power. Developing Asia, especially China and India, continues to see sustained growth - real GDP in the region increased by 9 per cent a year between 2004 and 2006. Sub-Saharan Africa also experienced rapid economic growth of about 6 per cent during the same period. Even developing countries with high rates of hunger have reported strong growth rates. This growth has prompted consumers to move away from traditional staple crops, such as grains and cereals, towards "high-value" foods like vegetables, fruits, dairy, and meat. Growing demand for meat, in particular, has in turn driven demand for grain to feed livestock.

Efforts to keep pace with surges in demand have been impaired. Unexpected food production shortfalls due to drought in Australia, for example, and low global cereal stocks - currently at their lowest levels since the early 1980s - are two other reasons. Between 2000 and 2006, global cereal supply increased by a mere 8 per cent.  Overall productivity growth in agriculture along past trends is simply too low to cope with the increases in demand.

The impact of high food prices

Both rich and poor countries are experiencing record high food prices, but the effects are radically different across countries and income levels. Countries that are net food exporters will benefit from improved terms of trade, while net food importers will struggle to meet domestic food demand. Given that almost all countries in Africa are net importers of cereals, countries in this region will be among the hardest hit by rising prices.

Surging and volatile food prices will have the most impact on those who can least cope, the world's poorest people. The majority of the world's poor are net buyers of food, typically spending 50 to 70 per cent of their budget on food. When food prices increase, poor peoples’ purchasing power diminishes and they tend to limit their food consumption and shift to even less-balanced and nutritious diets.

Going forward

A co-ordinated global response is urgently needed to effectively address the humanitarian crisis and enhance the productivity of agriculture for the future. This response should include an emergency package to stem the tide of the humanitarian crisis and a resilience package to strengthen the capacity of poor people and developing countries to meet their own needs.

Both sets of actions should be implemented as soon as possible.

The "emergency package"

Enhance food assistance. Donor governments need to provide increased support for poor people's food and nutrition security. The focus should be on the most vulnerable, including children.

Empower small-scale farmers. Providing improved seeds, fertiliser, credit, and other resources for small-scale farmers in developing countries would quickly improve production, increase incomes, and lower prices.

Improve biofuels policies. Governments should revoke biofuel subsidies and excessive blending quotas (such as the requirement to use a certain percentage of ethanol in gasoline). Political leaders should consider a range of additional measures, including freezing biofuel production at current levels, reducing production, or - if markets remain very tight - enacting a moratorium on the use of cereals and oil seeds for biofuels. At the same time, there needs to be support for development of bio-energy technologies that do not compete with basic food.

Stop export bans. The export bans among developing countries have created a new trade policy theatre. The problem of export bans cannot be addressed country by country; it should be addressed by a forum of global players.  At the very least, export trade for humanitarian purposes should be reopened now even before a forum is convened.

The "resilience package"

Invest in people. For longer term impact, developing countries need to invest in social protection measures, such as cash transfer programs, pension systems and employment programs. Preventative health and nutrition programs targeted to vulnerable groups (e.g. mothers, young children, and people living with HIV-AIDS) should be scaled up to ensure universal coverage. In addition, school feeding programs can play an important role in increasing school enrollment and in retaining children in school and enhancing their academic achievement. These programs would reduce the vulnerability of poor people and enhance their long-term productive capacity.

Reduce market volatility. Improving grain stocks and enacting regulatory measures to curb excessive speculation in agricultural commodities would help to stabilise markets in times of crisis.

Complete Doha round. World leaders need to complete the Doha Development Round, so that there is a global system that promotes agricultural trade on a fair and equitable basis.

Support agriculture. Long term relief from rising food prices can only be possible with increased agricultural production. Industrialised nations should revitalise their support for research, innovation, and extension to transform small farm agriculture. African heads of state need to deliver on their commitment to allocate 10 percent of their national budgets to agriculture. These investments not only have high returns in terms of agricultural growth, but also have a major impact in reducing poverty.

The Food Summit held in Rome in early June gave a sense of urgency for some of these actions, especially for the need of accelerated production. The global community must now put into action effective approaches that will stem the tide of rising food prices and reduce the threat of hunger and poverty.

The International Food Policy Research Institute (IFPRI) seeks sustainable solutions for ending hunger and poverty. IFPRI is one of 15 centres supported by the Consultative Group on International Agricultural Research, an alliance of 64 governments, private foundations, and international and regional organizations. www.ifpri.org

More information about IFPRI research on rising food prices can be found at:  http://www.ifpri.org/themes/foodprices/foodprices.asp