Volatile food prices and food insecurity by Share the Worlds Resouces 4:29pm 2nd Jan, 2011   With over a billion people going hungry each day despite a huge surplus of food production, a reorientation towards a more sustainable agriculture is urgently required.    For a large number of developing countries, agriculture remains the single most important sector. Climate change has the potential to damage irreversibly the natural resource base on which agriculture depends, with grave consequences for food security in developing countries.    However, agriculture is the sector that has the potential to transcend from being a problem to becoming an essential part of the solution to climate change provided there is a more holistic vision of food security, climate-change adaptation and mitigation as well as agriculture’s pro-poor development contribution.    What is required is a rapid and significant shift from conventional, industrial, monoculture-based and high-external-input dependent production towards mosaics of sustainable production systems that also considerably improve the productivity of small-scale farmers. The required transformation is however much more fundamental than simply tweaking the existing industrial agricultural systems.    Dec 2010    Bank and Hedge Fund Speculation causes Food Prices to Soar, writes Tim Jones.    Speculation on agricultural commodities by banks and hedge funds is a major cause for spikes in food prices. Strong national and global civil society campaigns are needed to ensure governments take coordinated action to rein in this dangerous activity.    In just one month in July 2010, the price of wheat increased by 60%. The huge increase in the price has already led to people across the world paying more for the staple food. The sudden change in the price of wheat has had knock-on effects on other crops. The global maize price increased by 40% between the start of July and the end of August.    At the end of August, demonstrations against rising food and fuel prices were held in Maputo, capital of Mozambique. "I can hardly feed myself. I will join the protest because I"m outraged by this high cost of living," said Nelfa Temoteo, who lives in Maputo"s crowded Malhazine suburb.    Protesters particularly complained of a sharp increase in the price of bread made from wheat. Mozambique tends to import between 200,000 and 400,000 tonnes of wheat a year. Drought and the consequent fall in Russia"s wheat crop were blamed for the spike in prices.    The reason for the large and rapid increase in wheat price lay in banks trading in exchanges in Chicago, US. Away from the wildfires of Russia, hot money flooded into the wheat markets in July 2010, betting on an increase in prices.    Dan Basse of AgResource Co. in Chicago said historically low US interest rates were helping to fuel massive speculation in wheat contracts as financial institutions "look for investable markets" amid concerns that Western economies might suffer a double-dip recession in the coming months.    The ugly face of banks and hedge funds speculating on the price of food had raised its head once again.    Nov 2010    The 2007-08 Food Crisis: Have the Lessons Been Learnt?    While the 2007-08 food crisis revealed inherent instabilities in the global food system, the world is no better prepared today now that prices are on the rise again.    Until policymakers prioritise small-scale, sustainable agriculture, the poorest will remain vulnerable, says Frederic Mousseau.    Two years after the peak of 2007-2008, international food prices were on the rise again in September 2010. With poor crops in Russia, some other countries of the former Soviet Union and Eastern Europe, international wheat prices have jumped more than 50% 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) and financial speculation.    Food riots, which took a toll on some 30 developing countries in 2008, now appear to be recurring, with 13 people killed in Mozambique in the wake of high bread prices in early September.    One must thus ask whether the world is better prepared today to deal with high international food prices. According to a review of the responses to the 2007-2008 crisis, conducted jointly by the Oakland Institute and the UK Hunger Alliance, the answer is both yes and no.    On the positive side, we have learnt from what happened three years ago. Starting with the identification of the factors that influence global food markets, it is now recognised 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. This should help decision makers in governments and international institutions put in place better mechanisms and policies to prevent the adverse impact of high food prices on the poor.    But will they effectively use the lessons learnt from the crisis? Nothing is less sure, given the change of paradigm that is required to revise some of the ill-driven policies that have led to the current situation of global vulnerability to the fluctuations of global markets.    First of all, research shows 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.    The success of measures taken to limit domestic inflation depended primarily on governments ability to control domestic availability and regulate markets, often based on pre-existing public systems.    Export restrictions, especially on rice, were certainly responsible for increased inflation in global food markets and adversely impacted food-importing countries that could not buy anymore from traditional suppliers.    Nevertheless, they appear to have constituted a fast and effective way to protect consumers by mitigating the effect of global markets on domestic prices.    These findings have not prompted donors to put an end to the aid conditionality that requires further liberalisation of the food and agriculture sector.    Yet international aid institutions should recognise what works and support investments and programmes adapted to local contexts, needs, and capacities rather than defined by a one-size-fits-all approach.    Governments must be allowed and encouraged to define and implement food and agricultural policies that protect consumers and prioritise small-scale, sustainable agriculture.    Another important finding of the research showed that the bulk of the response to the rise in domestic prices was borne by people themselves. Remittances sent from migrants to their country of origin helped their family members back home to better cope with the increased food costs.    Different forms of help, such as borrowing and credit, were among the most used mechanisms to cope with high food prices.    People"s own responses have remained mostly unnoticed by policy makers and practitioners, who tend to focus on international assistance. Yet, there are ways to intervene, for instance, by decreasing transaction costs on money transfers or by adopting fiscal measures that would either facilitate transfers or collect additional development resources from the companies involved in the business.    With uneven success, a number of governments have tried to protect their poor citizens through safety net systems.    Countries such as Bangladesh, India, Brazil and 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 to consumers, 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 beneficiaries 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%, far from matching the 300% increase in the price of the food basket. This mismatch required the set-up of a massive humanitarian operation in parallel.    Similarly, in Bangladesh, spending on safety nets increased by 25% against a 48% increase in rice prices.    Provision of food subsidies was relevant in countries with high levels of poverty and for commodities that constituted a higher share of households expenses. Despite questions over their cost-effectiveness, they appeared sometimes more feasible than targeted transfers, especially when they allowed some level of targeting at a relatively low transaction cost.    The review thus shows that social protection must go beyond cash and food transfers, and ensure a comprehensive range of interventions, including measures that may distort markets but are protective of consumers and supportive of producers. It also demonstrates that welfare programmes can hardly be effective if price volatility is not put under control. Visit the related web page
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