The 2008 Food Price Crisis: Rethinking Food Security Policies

Introduction

The already grave situation of global hunger was further worsened by the 83 per cent increase in global food prices between 2005 and 2008. While maize prices almost tripled, wheat prices increased 127 per cent, and rice prices increased 170 per cent between January 2005 and June 2008. According to preliminary estimates of the Food and Agriculture Organization of the United Nations (FAO), higher prices pushed an additional 40 million people into hunger in 2008, raising the overall number of undernourished people in the world to 963 million, compared to 923 million in 2007 (FAO, 2008a). FAO has warned that the ongoing financial and economic crisis could continue to augment the number of people living in hunger and poverty. Soaring food prices have most impacted developing countries, especially the low income food deficit countries (LIFDCs) (Maros and Martin, 2008).1 Many have seen their import bills increase with higher cereal prices as well as soaring freight charges. The food import bills of developing countries grew by 56 per cent over 2007/2008 following a 37 per cent increase in 2006/2007. This has also had a negative impact on the balance of payments of the low income food deficit countries (LIFDCs) in general, particularly those in Africa, where the aggregate cereal import bill is projected to increase by 74 per cent (FAO, 2008b), impacting poverty trends and slowing progress towards the Millennium Development Goals (MDGs). Those most affected by the food price increases in developing countries are the low-income groups within the population - the urban and rural poor who depend on the market to access food products. These groups spend a great proportion of their incomes - up to four-fifths - on food (Hertel et al., 2004). Notably, food represents about 60-80 per cent of consumer spending in poor countries in comparison to 10-20 per cent in rich countries (UNCTAD, 2008). Thus, the food price increases have further undermined the ability of such poor households to meet essential food needs as their budget constraints were very tight even before prices rose (UNCTAD, 2008)The latest global trends show food prices finally stabilizing and declining after months of sharp increases. The crisis is, however, far from over. While the prices of major cereals have fallen from their peaks earlier in 2008, they still remain high compared to previous years, making it difficult for many people in developing countries to afford adequate diets (New York Times, 2008a). Forecasts by the FAO, Organisation for Economic Cooperation and Development (OECD) and the United States Department of Agriculture (USDA) project that the recent increases in food prices were not a temporary phenomenon, and suggest that prices for most food crops are likely to remain well above 2004 levels through 2015 (World Bank, 2008a). The FAO Food Price Index was still 28 per cent higher in October 2008 compared to October 2006 (FAO, 2008a)download