Is The World Prepared for the Next Food Crisis?

By Frederic Mousseau

OAKLAND, Sep 15 2010 - Two years after the peak of 2007-2008, international food prices are on the rise again. With poor crops in Eastern Europe, international wheat prices have jumped more than 50 percent this summer -a harsh reminder that international food markets remain highly volatile, subject to a variety of factors, like unfavourable climate conditions, decisions over food stocks or exports by governments or private actors, fluctuations of oil prices (determining the level of food being used as fuel) or financial speculation.

Food riots that took a toll on a number of developing countries in 2008, now appear to be repeating, with thirteen people killed in Mozambique in the wake of rising bread prices in early September. One must thus ask whether the world is better prepared today to deal with high international food prices and to prevent their adverse impact on the poor.

According to a review of the responses to the 2007-2008 crisis, conducted jointly by the Oakland Institute and the U.K. Hunger Alliance, the answer is both yes and no.

We have learnt a lot from what happened three years ago. Starting with identification of the factors that influence global food markets, it is now recognized that volatility is here to stay. We also know a great deal about the effectiveness of different responses put forward to respond to high food prices.

Research shows for instance that the 2008 global food crisis was less “global” than generally thought. A number of countries were successful in preventing price transmission to domestic markets. For example, the price of rice actually decreased in Indonesia in 2008 while it was escalating in neighbouring countries. Public interventions to prevent this transmission were a mix of trade facilitation policies and trade restrictions or regulations (such as export bans, use of public stocks, price control, and anti-speculation measures).

With uneven success, a number of governments have tried to protect their poor citizens through large-scale safety net systems. Countries such as Bangladesh, India, Brazil, or Indonesia have found important synergies between social protection for the poor and support provided to food production -generally tied to the management of public stocks. Cash transfers, generally considered as an effective alternative to imported food aid, have been increasingly used as safety nets. However, high food prices undermined the value of the transfers and ultimately the effectiveness and relevance of the instrument. Thus some national programmes could not be adequately adjusted to high prices, which resulted in a dramatic drop in beneficiariesÂ’ purchasing power. This was the case for the Ethiopian safety net, the largest in Africa, where the value of cash transfers only increased by 33 percent, far from matching the 300 percent increase in the price of the food basket. This mismatch required the set up of a massive humanitarian operation in parallel.