Tackling the food price crisis: five steps

The word 'crisis' is much abused. But the current food price crisis constitutes a genuine emergency. Urgency in tackling it is essential.

 

The very poor in the developing world may spend up to 80% of their income on food. The recent spike in food prices has had an immediate impact on their welfare and has already cost lives through civil unrest. Many more lives are now at risk from hunger.

The UN Secretary General, Ban Ki-moon, has set up a special task force led by Sir John Holmes, Under-Secretary General, UN Office for the Coordination of Humanitarian Affairs. It is possible to propose five key steps for the Task Force.

Its first job will be to calm nerves and try to take the speculative momentum out of the food price bubble. Even though stocks are low and supplies have been hit by drought, the world has enough food. The Food and Agriculture Organisation estimates a cereal harvest of more than 2 billion tons during the coming year. That is certainly enough to feed the world. Getting it to those who need it is another matter. But reassurance on supply could discourage hoarding, head off further restrictions to trade, and calm markets.

The second priority is to make sure that immediate humanitarian needs are met. The World Food Programme estimates the additional cost of food and transport at more than $755 million this year alone. The UK, the US, Canada and the EU are among those who have committed to fill this gap and the task force should report on progress.

The third priority is to establish a process to support the recovery of the developing countries that have been directly affected. Some countries have responded to higher food prices by paying higher wages, salaries and pensions in the public sector. Others have expanded employment programmes or targeted cash transfers, such as payments to families who send their children to school. The World Bank and the International Monetary Fund have as much of a role to play helping governments face financial and economic challenges as the food agencies have in feeding the hungry.

The fourth priority is to encourage a collective world response to this crisis. Export bans are an understandable response by countries that see precious food stocks being sucked out of their stores and out of the cooking pots of their citizens, into the shops and food baskets of richer consumers in richer countries. However, an escalation of 'beggar-my-neighbour' policies will exacerbate political tension and contribute to greater hunger. Good information about production, stocks and trade will help to keep food moving around the world. More radical steps, such as a one-year moratorium on the use of maize for biofuel, could cut prices by more than 20% at a stroke. But all the external players need to back country plans and not charge in with their own projects, their own brands and their own flags.

Finally, the UN agencies need to look beyond the immediate crisis and lay out plans for the long-term investment in agriculture. The Green Revolution transformed food production from the 1960s onwards, but the world became complacent.  The rate of growth of yields fell. In an era of apparent surpluses and falling food prices, it was easy to neglect investments in research, irrigation, infrastructure and market institutions. No longer.

The UN needs to live up to its name and be united; sublimating inter-agency tensions and presenting a single package to the major powers that provide most of the funding. Gordon Brown has emphasised the need for collective action, in his letter to the Japanese chair of the G8 and at his Food Summit in Downing Street last week. Jacques Diouf of the FAO has called a Food Summit in June. Presidents Lula of Brazil and Sarkozy of France are the latest to announce they will participate. This will certainly be on the G8 agenda in July.

There are parallels between the management of this crisis and the management of the credit crunch. There is the same power of speculation, the paucity of information, the disagreement about causes, the apparent impotence of individual governments, and the strong need for a coordinated response. But there is more to this crisis. Lives are at risk.

 

Authors

Senior Research Associate
Simon was Director of the Overseas Development Institute from 1997-2009. He is an economist who [...]