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Avoiding another food price bubble

Food prices increased markedly in early 2008 driving millions of vulnerable people into high risk food insecurity
(Abdullah Shaheen/IRIN)

In another 12 years, 16 million more children could be malnourished at a time when even fewer people will be able to afford staple cereals like maize, rice and wheat, which would cost between 13 percent and 27 percent more. This is the bleak scenario of a world in recessionary mode, with declining investment in food production, painted by a food policy think-tank.

The US-based International Food Policy Research Institute (IFPRI) released its analysis of the double impact of the food price and financial crises on agriculture and the poor in the Mozambican capital, Maputo, at the annual general meeting of the Consultative Group on International Agricultural Research (CGIAR), which works to achieve sustainable food security and reduce poverty in developing countries through scientific research.

Not only financial markets but also agricultural commodity markets must be part of reformed regulatory systems, so as to move out of the crisis and prevent future turmoil, said the analysis. "Reduced volatility is essential for avoiding extreme price bubbles and ensuring that the world can respond to emergencies generated by price crises."

IFPRI has suggested the creation of a "virtual reserve" to avoid the next price bubble. "The virtual reserve could be implemented by the Group of Eight [developed economies] Plus Five [leading emerging economies] and some other large grain-exporting countries.

"The organisational design could include a permanent high-level technical commission that would intervene in futures markets, and a global intelligence unit that would signal when prices headed yet again toward a bubble."

The food policy think-tank also suggested the creation of a small physical reserve, possibly managed by the UN World Food Programme, to facilitate smooth emergency responses.

In the past few months, the prices of major cereals have fallen by 30 percent to 40 percent as a result of the global economic slowdown and favourable weather conditions, but they remain high compared with three years ago, said IFPRI. "This short-term price relief is insufficient, however, to ensure that the poor have access to adequate amounts of nutritious food." 

Micronutrient deficiencies

Food price hikes have also raised micronutrient deficiencies, with negative consequences such as impaired cognitive development, lower resistance to disease, and increased risks during childbirth for both mothers and children, according to IFPRI.

Most developing countries are trying to cope with the food price crisis that began in 2007 with the onset of the global economic slowdown, which has hammered the already reduced spending power of the poor.

Rising food prices would bring steep declines in the mineral and vitamin intakes of the poor, said Howarth Bouis, director of HarvestPlus, a global alliance of institutions and scientists. "Modest decreases in current intakes of minerals and vitamins will drive [existing high] prevalence rates [of micronutrient deficiencies] significantly higher, with severe consequences for the nutritional status of the poor and public health," he said in a recent paper.

In Bangladesh, for example, a 50 percent increase in food prices would raise the prevalence of iron deficiency among women and children by 25 percent, Bouis commented. Because good nutrition is crucial to children's physical and cognitive development, and their productivity and earning power as adults, the adverse consequences of this price shock would continue after the shock had ended.

''Even before the world food crisis, the poorest of the poor were struggling to survive. Poor people spend 50 to 70 percent of their income on food, and have little capacity to adapt as prices rise and wages for unskilled labour fail to adjust accordingly''

"Even before the world food crisis, the poorest of the poor were struggling to survive, said Joachim von Braun, director general of IFPRI. "Poor people spend 50 to 70 percent of their income on food, and have little capacity to adapt as prices rise and wages for unskilled labour fail to adjust accordingly. The financial crunch lowers the real wages of poor workers, and leads to rising unemployment."

Promised investment to boost food production could dwindle. "It is a major concern for us right now," von Braun said. On a more optimistic note he suggested that highlighting the recent food price riots in at least 60 countries might be an incentive to get development aid agencies to invest in agriculture in developing countries.

Sub-Saharan Africa's share of the world's malnourished children would increase from one fifth in 2005 to one fourth in 2020 if investment in food production declined, said the analysis. Only a handful of African countries have been able to stick by their pledge, made five years ago, to allocate 10 percent of their budgets to agriculture by 2008 if they are to halve hunger by 2015. "They need help from donor countries," said von Braun.

In the meantime there was a need to expand the social protection and child nutrition programmes, IFPRI said. The design of specific national strategies should be country-driven and country-owned, with country-specific prioritisation and sequencing. Yet there was a lack of credible, up-to-date data on the impacts of food and nutrition insecurity and the effects of policy responses.

Agricultural investment

Few affected countries have the facilities to monitor nutrition levels, but several in Africa, such as Malawi, Ghana and Ethiopia, have made tremendous progress in reducing malnutrition levels, said von Braun. On the other hand, countries such as Zimbabwe and Congo have regressed.

Investment in agricultural research to help develop high-yielding crop varieties could have tremendous benefits. A recent study by IFPRI showed that if investments in public agricultural research doubled from US$5 billion to $10 billion from 2008 to 2013, agricultural output would increase significantly and millions of people would rise above poverty.

If these investments were targeted at the poor regions of the world, like Sub-Saharan Africa and South Asia, growth in overall agricultural output would increase by 1.1 percentage points a year, and lift about 282 million people out of poverty by 2020.


This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information:

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