Severe Droughts drive Food Prices Higher by FAO, IFAD, WFP & agencies 9:03pm 29th Aug, 2012   4 September 2012    The following is a joint statement on international food prices from the three Rome-based UN Agencies, the Food and Agriculture Organization of the United Nations (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP):    Tackling the root causes of high food prices and hunger by José Graziano da Silva, Kanayo F. Nwanze and Ertharin Cousin.    The current situation in world food markets, characterized by sharp increases in maize, wheat and soybean prices, has raised fears of a repeat of the 2007-2008 world food crisis. But swift, coordinated international action can stop that from happening. We need to act urgently to make sure that these price shocks do not turn into a catastrophe hurting tens of millions over the coming months.    Two interconnected problems must be tackled: the immediate issue of some high food prices, which can impact heavily on food import-dependent countries and on the poorest people; and the long-term issue of how we produce, trade and consume food in an age of increasing population, demand and climate change.    We have learned that not all are affected in the same way - the urban and rural poor and people in food import-dependent countries are most vulnerable to international commodity price increases, when these are transmitted to local markets, because they spend the largest proportions of their incomes on food.    We have also learned that smallholder farmers, many of whom are also poor and food insecure, can be enabled to benefit from higher food prices and become part of the solution by reducing price spikes and improving overall food security.    We have thus adopted a twin-track approach which supports long-term investments in agriculture, notably smallholder agriculture, while ensuring that safety-nets are in place to help poor food consumers and producers avoid hunger, asset losses and poverty traps in the short run.    Many countries have social protection systems including safety nets - such as assistance for smallholder farmers, nutritional support to mothers and children, and school meals - to ensure that their poorest citizens have enough to eat; yet, these need to be expanded significantly in poorer countries.    Safety nets that are affordable, predictable and transparent are an absolute must if we are to safeguard against recurring price shocks and crises.    Small-scale food producers also need to be better equipped to raise their productivity, increase their access to markets and reduce their exposure to risk. And, of course, people need decent jobs and incomes so that they can afford the food they need and escape from poverty.    In responding to high food prices, the things we must avoid doing are just as important as the things we should do. In particular, countries must avoid panic buying and refrain from imposing export restrictions which, while temporarily helping some consumers at home, are generally inefficient and make life difficult for everyone else.    Above all, however, we must understand that high food prices are a symptom, and not the disease. So while the international community must take early action to prevent excessive price increases, it should also move to act on the root causes behind such surges.    There have been three international food price spikes in the last five years. Weather has been among the drivers of each. Droughts in some part of the world have impaired global grain production virtually every other year since 2007.    Elsewhere, major floods have also caused severe damage to crops. Increased diversion of food stock for non-food purposes and increased financial speculation are among the various drivers of increased price levels and volatility.    Until we find the way to shock-proof and climate-proof our food system, the danger will remain. In the short term, this has costs, not only for those directly impacted, but also for the international community at large.    For instance, the World Food Programme (WFP) estimates that every 10 per cent increase in the price of its food basket means it has to find an extra $200 million a year for food assistance.    We are vulnerable because even in a good year, global grain production is barely sufficient to meet growing demands for food, feed and fuel - this, in a world where there are 80 million extra mouths to be fed every year. We are at risk because only a handful of nations are large producers of staple food commodities, and when they are affected, so is everyone else.    The challenge - and the opportunity - is both to reduce and to spread that risk. And the most obvious way is to promote sustainable food production in poor, food-importing countries, where there is often huge potential to improve production.    That would make more food available in local markets and provide jobs and income, especially in rural areas where 70 per cent of the world"s poor live. We should also address the fact that, globally, one third of food produced is wasted or lost to spoilage, damage and other causes.    The Food and Agriculture Organization of the UN (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme are helping poor people to eat today while building their resilience and capacity to feed themselves tomorrow. But more needs to be done.    We need to invest much more in agriculture and social protection, including programmes that help poor people to access food that has become unaffordable in their local markets. Lastly, we also need to review and adjust where applicable policies currently in place that encourage alternative uses of grains.    For example, adjusting biofuel mandates when global markets come under pressure and food supplies are endangered has been recommended by a group of international organizations including FAO, IFAD, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the UN Conference on Trade and Development, WFP, the World Bank and the World Trade Organization. That recommendation, made to the 2011 G20 summit in Paris, still stands today.    In moving to prevent a possible deterioration of the situation, we need to remain vigilant and prepare for the worst in the short run, while working on sustainable solutions for the long haul. Not to do so would inevitably mean that the world"s poorest and most vulnerable pay the highest price. Getting this right will help us respond to the "Zero Hunger" challenge set by UN Secretary-General Ban Ki-moon of eradicating hunger from the globe.    *The authors are respectively the Director-General of the Food and Agriculture Organization of the United Nations, the President of the International Fund for Agricultural Development and the Executive Director of the UN World Food Programme.    http://www.un-foodsecurity.org/newsroom    29 Aug, 2012    Global food prices soared by 10 percent in July from a month ago, with maize and soybean reaching all-time peaks due to an unprecedented summer of droughts and high temperatures in both the United States and Eastern Europe, according to the World Bank Group’s latest Food Price Watch report.    From June to July, maize and wheat rose by 25 percent each, soybeans by 17 percent, and only rice went down, by 4 percent.    Overall, the World Bank’s Food Price Index, which tracks the price of internationally traded food commodities, was 6 percent higher than in July of last year, and 1 percent over the previous peak of February 2011.    “Food prices rose again sharply threatening the health and well-being of millions of people,” said World Bank Group President Jim Yong Kim. “Africa and the Middle East are particularly vulnerable, but so are people in other countries where the prices of grains have gone up abruptly.”    Overall, food prices between April and July continued the volatile trend observed during the previous 12 months. Prices increased in April, came down in May and June, and sharply increased in July.    Sharp domestic price increases have continued in this quarter, especially in Africa. Sub-Saharan Africa, in particular, experienced the highest price increases in maize, including 113 percent in some markets in Mozambique.    Meanwhile, the Sahel and eastern Africa regions experienced steep price increases of sorghum: 220 percent in South Sudan, and 180 percent in Sudan, for instance.    According to Food Price Watch, weather is the critical factor behind the abrupt global price increases in July. The drought in the U.S. has resulted in vast damages to the summer crops of maize and soybeans, for which the country is the world’s largest exporter. Meanwhile, the dry summer in the Russian Federation, Ukraine, and Kazakhstan has contributed to projected wheat production losses.    The abrupt food price increases turned favorable price prospects for the year upside down. World Bank experts do not currently foresee a full scale repeat of 2008; however, negative factors -- such as exporters pursuing national interest policies, a severe El Nino, disappointing Southern hemisphere crops, or strong increases in energy prices -- could cause significant further grain prices hikes such as those experienced four years ago.    Droughts have severe economic, poverty and nutritional effects. In Malawi, for instance, it is projected that future severe droughts observed once in 25 years could increase poverty by 17 percent, hitting especially hard rural poor communities. And in India, dismal losses from droughts occurred between 1970 and 2002 to have reduced 60-80 percent of households’ normal yearly incomes in the affected communities.    “We cannot allow these historic price hikes to turn into a lifetime of perils as families take their children out of school and eat less nutritious food to compensate for the high prices,” said Kim.    “Countries must strengthen their targeted programs to ease the pressure on the most vulnerable population.”    “The World Bank has stepped up its support to agriculture, and will endeavor to help countries respond to the food price hikes,” continued Kim.    The World Bank’s is also coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with non-governmental organizations, as well as supporting the Partnership for Agricultural Market Information System (AMIS) to improve food market transparency and is endeavoring to help government responses to global food price spikes.    Should the current situation escalate, the World Bank Group will seek to assist client countries protect the most vulnerable against shocks. Measures can include increased agriculture and agriculture-related investment, policy advice, fast-track financing, support for safety nets, the multi-donor Global Agriculture and Food Security Program, and risk management products.    Programs to help mitigate food price hikes include safety nets to ensure poor families can afford basic staples, sustained investments in agriculture, the introduction of drought-resistant crop varieties and keeping international trade open to the export and import of food.    According to Food Price Watch, prices are expected to remain high and volatile in the long-run as a consequence of increasing supply uncertainties, higher demand from a growing population, and the low responsiveness of the food system. Visit the related web page
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