Farmer Jocia De Sousa pounds maize for her daily meal in Muchamba Village, Mozambique. Improving food distribution, deepening the level of competition and enhancing market transparency by sharing information on food stocks can cushion the poor against spiralling food prices (photo: ILRI/Mann).
Food prices have been on the decline for decades, but the tide has now turned. Consumers everywhere are seeing a growing share of their income go towards buying simple staple foods. Those most hurt by this turn of events are poor people living in poor countries.
Rises in food prices in 2007 and 2008 led to riots in many countries over food shortages. Prices came down after that but are now rising again.
As reported in Allianz, ‘the reasons for the high prices are many.
Milk prices have spiked in China, for example, because a growing middle class is discovering lattes and other dairy goodies. Indians must endure higher costs for rice because of higher gas prices and transportation costs which include hiring services like towingless in case of emergency. And the rising cost of tortillas and many other corn-based products can be pinned at least partly on a booming U.S. ethanol fuel industry, which now consumes about a fifth of the U.S. corn harvest each year.’
A recent (January 2011) announcement by the United Nations Food and Agriculture Organization said its food price index for December 2010 was at an all-time high, foretelling of a possible food crisis this year.
Scientists are increasingly warning of a connection between climate change, falling crop yields, high food prices and social tension, like the discontent now spreading across North Africa and the Middle East, which has been blamed at least partly on widespread poverty exacerbated by escalating costs of food
‘Climate-change-driven drought, falling crop yields and competition for water are fuelling conflict throughout Africa and elsewhere in the developing world,’ says Christiana Figueres, the executive secretary of the United Nations climate office, in an article in the New York Times. According to Figueres, ‘the increasingly unpredictable weather will lead to falling agricultural production and higher food prices, resulting in food insecurity in coming years unless governments and other actors focus on addressing climate change.’
In parts of Africa, falling food production, rising food costs and the resulting food insecurity are increasingly common as droughts and floods, for example, become more frequent. In many of these countries, however, climate change is not wholly responsible for food insecurity. What is also at least partly responsible are trends in food supply and demand that also drive up prices.
In Kenya, for example, a drought occurring in the north of the country this year is affecting pastoralists by killing many of their animal stock and making their remaining animals unproductive. The last severe drought here occurred just 1.5–2 years ago, in 2008–2009. But at the same time, in other parts of Kenya, farmers with surplus food are surprised at media reports that the country is experiencing a drought. The government has intervened to improve food distribution in the country and avert a national crisis.
Poor food distribution systems are one of the ‘paradoxes’ that increase food insecurity in developing countries. Using the Kenyan case as an example, Roger Thurow, a senior fellow for global agriculture with the Chicago Council on Global Affairs, says poor food distribution is common because ‘most of the hungry are in the fringes of the economy’ as a result of years of neglect of agricultural development, which has left many without ‘buying power’ that would attract surpluses, enabling the laws of supply and demand to operate and move the food around in the economy.
This situation, Thurow explains, leads to another problem commonly seen in Africa: ‘during times of high prices, farmers often lose rather than gain.’ This is because smallholder farmers are often net buyers of the very food they produce. In Kenya, many farmers pay school fees and buy seeds and fertilizers with income from selling farm produce. Many sell their grains (mostly maize, which is a staple in Kenya) not based on market needs, but rather to meet urgent financial demands at a time when demand for their produce is low. Later, they are forced to go back to buy food for their families, when demand has peaked and they end up spending more money than they made in the first place.
‘This paradox plays itself out with spectacular regularity,’ says Joseph Karugia, coordinator of the East and Central Africa node of an Africa-wide initiative that reviews trends in African agricultural development known as the Regional Strategic Analysis and Knowledge Support System (ReSAKSS), which is based at the International Livestock Research Institute (ILRI). ‘Low prices to farmers at harvest time and high prices during the “hungry season,” when they have to buy food staples from the market.’
Farmers also lose rather than gain during times of high prices because ‘domestic and regional food staple markets are not integrated and market forces are unable to effectively stabilize commodity prices,’ Karugia says.
A third paradox sometimes results when farmers, holding on to their produce hoping for higher prices, end up losing their food to spoilage while hunger ravages other areas of the country.
Though agricultural development in Africa has improved since the last food crisis in 2007–2008 and the continent seems better prepared for a food crisis now, high food prices are still a major threat to food security in the continent.
‘African countries need to respond quickly,’ says Obiageli Ezekwesili, World Bank Vice-President for Africa, warning that countries that are heavily dependent on food imports (of wheat for example) such as Mozambique and Mauritania need enough food to cushion themselves against spiralling prices, which could lead to social unrest.
Ezekwesili, however, sees the growing demand for food worldwide as an opportunity for Africa ‘to grow its agricultural sector by improving its business climate and put in place adequate infrastructure [that] attracts responsible investments into the sector.’ Rather than using legislation to control the prices of food, he suggests, ‘deepening the level of competition, enhancing market transparency by improving the quantity and quality of information in terms of food stocks, and “light touch legislation” to curb “speculative activities that are hostile to the poor.”’ He sees these options as a safer bet for ensuring stable food prices across the continent.
‘The continent also needs to focus more on ‘integrating regional food staple markets and improving transport links to make food distribution cheaper and faster,’ says Karugia. ‘And we need to put in place the right policies that will encourage the private sector to invest in food marketing over the long term.’
Read the latest brief by the Regional Strategic Analysis and Knowledge Support System (ReSAKSS): http://ilrinet.ilri.cgiar.org/Datafiles/files/ReSAKSS-ECA/Trends_of_staple_food_prices_in_ESA_2007-2010.pdf
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