Policy Brief: Urgent Action Needed to Prevent Recurring Food Crisis

Three years after the 2007–08 food crisis, the prices of basic food items are again rising rapidly, fueling new concerns about the food security of poor people. The international prices of maize and wheat have almost doubled between June 2010 and mid-March 2011, and the global prices of dairy products have also risen. High food inflation is affecting many developing countries, including those home to large numbers of poor people. For example, food inflation rose to 10 percent in China and 18 percent in India between December 2009 and December 2010, mostly driven by higher prices of meat, fish, eggs, dairy, vegetables, and fruits.

A New Food Crisis on the Horizon?
Elements of the 2007–08 global food crisis can be seen in the current global food price situation. In particular, expanding biofuel production, rising oil prices, US dollar depreciation, export restrictions, and panic purchases are again pushing food prices higher, although not yet to the same extent as three events—including the 2010 Russian wildfires and the Australian drought prior to the 2007–08 crisis—have also driven the recent food price spikes, both in 2007–08 and now. These events resulted in production shortfalls in major producing countries, while also inducing trade diversion and panic purchases in other markets. Climate change will likely increase the frequency of extreme weather events and put upward pressure on food prices.

Although many parallels exist, certain aspects of today’s world food situation differ from the situation in 2007–08. Overall grain production and stock levels, particularly in developing countries, are higher compared with the levels of three years ago. The international price of rice, the main staple in Asia, has not increased as much as it did three years ago—although considerable price increases have affected some domestic markets, including South Asia. In contrast to these more positive signs, the economies of China and India are now overheated and experiencing high overall inflation caused by factors such as excess liquidity, whereas three years ago domestic food markets in these countries were much calmer. Rising oil prices in recent months, the expansion of biofuel production, particularly maize ethanol, and other factors mentioned above suggest the significant risk of even higher global food prices.

Continue to read the brief (with Shenggen Fan and Derek Heady).

(Photo credit: CIFOR via Creative Commons)