Oct 17, 2008

World - Wakes up to food challenge

David Loyn
International development correspondent, BBC News

On World Food Day in 2007, the early warning signs that something serious was about to happen to food prices were already apparent.

Crop forecasts from big producers at opposite ends of the world last October - Canada and Australia - were disastrous. Both countries were in the grip of drought.

A steady rise in food prices began, spurred by oil price rises that were the most rapid since the early 1970s, knocking on to higher transport costs and fertiliser prices for food producers.

The unprecedented spike in food price rises in January was led by steadily increasing demand, particularly from hundreds of millions of newly rich in the rapidly growing economies of Asia, who wanted to eat better food than their parents had been able to afford.
As the food price shock took hold, there were riots worldwide - the government fell in Haiti - and a prompt return to protectionist policies as 40 countries imposed special measures to try to protect both their farmers, and those who could no longer afford to eat.

The worst hit were the urban poor in Africa, with no land to grow food for themselves, and for whom food takes a high proportion of their income.

In total, 36 countries sent out appeals for food aid.

Biofuel dilemma

The price spike was more pronounced because the usual response of a functioning market, to increase supply, had a limited effect, because food was now competing with biofuels.

Most of the increase in US maize production, for example, went into biofuels rather than onto the table as food.
And along with another huge food producer, India, the US is to continue using government subsidies to encourage farmers to grow biofuels.

Many other places in the world have had second thoughts as the benefits of most biofuel crops in reducing climate change are not as clear as they once seemed.

In 2008 world food prices fell from the spikes of January and February.

World bodies responded swiftly, in particular the World Bank, which provided emergency funding to enable some of the poorest countries to cushion the shock. And farmers worldwide responded to the new conditions by planting as much food as they could.

The EU changed rules that had penalised over-production, allowing land that had lain fallow to be brought back under the plough.

Forecasts for the two big wheat producers where the problem began are higher than last year - around 20 million tonnes for Australia, against 13 million tonnes last year.

Prices vulnerable

But the market has not fallen back to the level it was before the crisis began. After a long era of low food prices, higher prices are here to stay.

Demand from the big Asian economies remains high, and although the price of oil has fallen significantly, for a number of technical reasons the effect of that has not translated into lower food prices yet.


There are 923m undernourished people in the world
The FAO estimates 75m of the world hungry are a direct result of high food prices

And while demand grows faster than supply, it will be hard to replenish food stocks, which are currently at a far lower level than they have been for almost half a century.

That matters because stocks can be drawn on in hard times - so low stocks mean that food prices are far more vulnerable to shocks at the very time that the whole world system rides the turbulent waves crashing against the money markets.

In a sombre new warning, the World Bank says that the poorest people worldwide have been pushed to the brink of survival, and the collapse of global financial confidence has made matters worst.

The World Bank's president, Robert Zoellick, says that "the financial crisis will only make it more difficult for developing countries to protect their most vulnerable people from the impact of rising food and fuel costs".

So the future remains unpredictable. But the higher prices have provided a new opportunity for food production to take a higher share of funding. A sector that has not had proper investment for many years is now seeing more imaginative and innovative attempts to come up with solutions.

Radical solutions do not have to be expensive. There is far more emphasis on finding the answer in traditional methods and organic farming to ensure that agriculture remains sustainable.

In 2008, the world first woke up to the challenges of feeding a population that will grow from 6 billion to 9 billion by 2050.

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