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Food crisis could worsen, warns FAO

Cereals are displayed for sale in central market of Kabul, Afghan, June 2008. Due to high food prices majority of the people cannot afford regular daily meals. Manoocher Deghati/IRIN
The food price crisis of 2008 will continue into 2009 and might get worse, says the UN Food and Agriculture Organisation (FAO). The 2008 food crisis has already pushed 40 million people into hunger, bringing the number of undernourished in the world closer to a billion.

FAO economists made the gloomy prognosis at the release of their ninth progress report, State of Food Insecurity in the World 2008, since the 1996 World Food Summit on world hunger.

The authors warned that the situation in the Democratic Republic Congo (DRC), which recorded most of the increase in the number of hungry people because of widespread and persistent conflict, could get worse. Between 2003 and 2005, the number of hungry in the DRC rose from 11 million to 43 million, and the proportion of undernourished rose from 29 percent to 76 percent.

Many countries are finding the Millennium Development Goal (MDG) of halving the number of undernourished people in the world by 2015 more difficult to reach.

"The first scenario, which is the more positive scenario, is that the food production levels [in 2009] will remain the same as they were this year [2008]," said Abdolreza Abbassian, a grains expert at FAO. 

A second scenario appears more likely as farmers are expected to plant less resulting from mixed signals "because of the [effect of the 2008] global financial crisis on the 2009 price projections for fuel and other inputs, as well as the expected price of any staple grain next year [2009].

"It is all rather unpredictable at this stage."

Food is not going to get cheaper soon; prices of major cereals have fallen by over 50 percent from their peaks earlier in 2008 but are still high compared with previous years, the FAO report noted. Despite a sharp decline in recent months, the FAO Food Price Index was still 28 percent higher in October 2008 than in October 2006.

                EU's bailout

The European parliament has approved a US$1.2 billion facility to boost food production in at least 35 developing countries affected by the food crisis.


According to Gay Mitchell, an Irish Member of the European Parliament (MEP) the funds will come from three sources: the flexibility instrument, the emergency aid reserve, and the redeployment of funds in the external relations heading. At least $975 million of the approved amount is "fresh money".


The vote on the facility was delayed. The funds, which were to have been made available over a three year period from 2008, will now be disbursed from 2009 onward.


To ensure that the aid is effective, MEPs decided it should target no more than 35 priority developing countries, Mitchell was quoted as saying in the European Parliament's website. "They should be selected based on their dependence on food imports, on the level of food price inflation compared to general inflation, agricultural production capacity or political instability caused by the crisis, as in Haiti, Bangladesh or Egypt."



The prices of agricultural inputs have more than doubled since 2006, so poor farmers could not increase production. Richer farmers, particularly those in developed countries, could afford the higher input costs and expand plantings. As a result, cereal production in developed countries was likely to rise by at least 10 percent in 2008, while the increase in developing countries might be less than 1 percent.

Where the hunger has grown

Studies have shown that particularly critical levels of undernutrition occur when undernourishment exceeds 10 percent in the total population. "This will not only lead to more frequent outbreaks of diseases, but affects the capacity of people to work and earn a living," said Mark Smulders, an agricultural economist at the FAO.

Africa is home to 16 of the 17 countries - DRC, Eritrea, Burundi, Sierra Leone, Ethiopia, Angola, Zimbabwe, Zambia, Central African Republic, Rwanda, Chad, Liberia, Mozambique, Togo, Madagascar and Tanzania - where the prevalence of hunger already exceeds 35 percent of the population, making them particularly vulnerable to higher food prices.

Most of the world's undernourished people - 907 million - live in developing countries, according to the 2007 data in the report; of these, 65 percent live in only seven countries: India, China, DRC, Bangladesh, Indonesia, Pakistan and Ethiopia.

Yet the news is not all bad. Overall, sub-Saharan Africa has made some progress in reducing the proportion of people suffering from chronic hunger, from 34 (1995-97) to 30 percent (2003-05).

Ghana, Congo, Nigeria, Mozambique and Malawi have achieved the steepest drop in the proportion of undernourished people. Ghana is the only country that has reached both the hunger reduction target set at the World Food Summit and the MDG on hunger. Growth in agricultural production was key to this success, the report noted.

Latin America and the Caribbean area were most successful in reducing hunger before the surge in food prices. High food prices increased the number of hungry people in the sub-region to 51 million in 2007.

Countries in the Near East and North Africa have generally experienced the lowest levels of undernourishment worldwide, but conflicts in Afghanistan and Iraq, combined with high food prices, pushed the numbers up from 15 million in 1990-92 to 37 million in 2007.

Tackling hunger

During the June 2008 FAO Food Summit in Rome, a two-track response to the crisis was put forward: boost production by investing in the agricultural sector and rural development; ensure immediate access to food for the poor and vulnerable in both rural and urban areas by providing social safety nets and protection measures.

The investment track called for a lot of donor aid. "During the FAO Rome Food Summit in June, several billions of dollars were pledged by world leaders towards agricultural development – little of that had materialised," said Abbassian.

"In fact, in the last few weeks, the world has witnessed trillions of dollars being lost in financial markets, forcing governments to spend even more trillions on propping them up. Overcoming the financial crisis is critical, but continuing the fight against hunger by realising those pledged billions is no less important."

The European parliament recently approved a US$1.2 billion facility over a three-year period from 2009 for rapid response to soaring prices in developing countries, which was a step in the right direction, said the FAO economists.

The report suggests other measures to boost nutrition levels: governments should support small-scale food industries to produce infant weaning foods of good nutritional quality; promote breastfeeding; provide education messages on adequate nutrition; and conduct growth monitoring.

"Evidence that emerged from Bangladesh in the 1990s suggests that macroeconomic food policies that keep the price of food staples low, can, in combination with other food and nutrition interventions, help reduce the percentage of underweight children," the FAO report said.

Governments should also underline investment in small-scale farms. About two-thirds of the world's three billion rural people live off the income generated by farmers managing some 500 million small farms of less than two hectares each.

Impact of traditional market turmoil

The recent turmoil in traditional asset markets has had an impact on food prices, according to the FAO, as new types of investors became involved in derivatives markets based on agricultural commodities in the hope of achieving better returns than those available from traditional assets.

Global trading activity in futures and options combined has more than doubled in the last five years. In the first nine months of 2007 it grew by 30 percent over the previous year, and some analysts have said the increased speculation was a significant factor in soaring food prices.
"However, it is not clear whether speculation is driving prices higher, or whether this behaviour is the result of prices that are rising in any case," said the FAO report. "Either way, large inflows of funds could partly account for the persistence of high food prices and their increased volatility."

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