An impending crisis is brewing on the global food front—over the past several months, world food prices have recorded a secular upward movement. The Food and Agricultural Organization (FAO) says the food price index, used by the organization since 1990, reached its highest level in February. World Bank numbers indicate that prices increased by 15% between October and January, an estimated 29% above year-ago levels, and only 3% below the mid-2008 peak. What is preventing prices from breaching the highs seen three years ago is the situation in the rice market, where prices were down almost 4% in February from a year ago.
These recent increases have been driven by the escalating prices of cereals and sugar. The former recorded their highest level since July 2008, as a result of steep increases in the prices of wheat and maize. Wheat prices are at particularly alarming levels: from the lows of mid-2010, benchmark prices had nearly doubled by January, riding on the back of uncertainties over perceived shortfalls in exports from Australia and the failure of the winter crop in China. Another factor that has added to the uncertainties is that countries such as Saudi Arabia have started reducing domestic production of wheat in an effort to conserve water resources, and have increased their reliance on imports.
The immediate burden of price increases in food has fallen mostly on the poor, who have not yet fully recovered from the recent economic downturn. The World Bank estimates that the spike in food prices in the second half of 2010 has caused a net increase in extreme poverty of around 44 million people in low- and middle-income countries.
Global efforts to address food insecurity, particularly among the world’s poor, have in recent years received considerable support from some of the more influential nations. The Millennium Development Goals form a large part of these efforts. Further, the G-8 countries in 2009 launched the L’Aquila Food Security Initiative (AFSI), which was endorsed by 40 heads of state and international organisations. The AFSI joint statement reads: “Our action will be characterized by a comprehensive approach to food security, effective coordination, support for country-owned processes and plans as well as by the use of multilateral institutions whenever appropriate.”
The statement also said: “The food security agenda should focus on agriculture and rural development by promoting sustainable production, productivity and rural economic growth.” It welcomed the mobilization of “$20 billion over three years through this coordinated, comprehensive strategy focused on sustainable agriculture development, while keeping a strong commitment to ensure adequate emergency food aid assistance.”
AFSI has now been subsumed in the G-Twenty (G-20) process. The Seoul summit of the grouping adopted a Multi-Year Action Plan on Development, which emphasizes the need for increased investment in and financial support for agricultural development by addressing the twin problems of food insecurity and volatility of agricultural commodity prices. Importantly, the French presidency of the G-20 has included this issue in its list of priorities. In doing so, France seeks to find collective solutions to reduce excessive commodity price volatility, particularly in agricultural commodities, which in its view undermines world growth and threatens food security for populations around the world.
The key feature of the G-20 initiative on food security and on arresting the price volatility of agricultural commodities is the focus on better prevention and management of food crises. Recent experience has shown, quite unambiguously, that tightening global supplies of agricultural products has been at the root of the problem. Supplies would get further constrained if, as climate scientists predict, global warming brings further miseries for agricultural producers. Urgent steps are, therefore, needed to ensure that effective solutions are found to address these constraints, and that the global community is able to produce adequate quantities of food. At the same time, the G-20 countries, together with international agencies, need to develop institutional mechanisms for creating and managing food reserves that can be used to prevent and deal with food crises.
But international initiatives to address global food insecurity can only evolve over time. In the immediate term, major economies, especially those in the developing world, must reorient their development strategies so that centrality is accorded to the agricultural sector. In fact, only such an approach can help arrest the steady decline of agriculture being witnessed in several developing countries, including India.
This decline of agriculture is unacceptable. Although the government of India has given indications of reversing this trend through its recent policy pronouncements, the flow of funds required to obliterate looming problems on the food front has not yet been forthcoming. In the 11th Plan period, less than 2% of the central government budget has been spent on agriculture. It would, therefore, appear that unless the government takes steps to shift development priorities in favour of agriculture, India will make little contribution towards solving the problems of global food insecurity.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi
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