Wednesday, February 20, 2008

Poverty: Food price crisis

As global food prices continue to soar to new highs despite a record world harvest last season, governments in poor countries have begun exploring export bans, subsidies and price controls, among other measures to help the poor cope.
High food prices have been triggered by a host of factors, including dwindling stocks and a continuing strong demand for cereals, according to the latest Crop Prospects and Food Situation report by the Food and Agriculture Organisation (FAO). News of a possible global recession and adverse weather in parts of Africa and Asia has also affected prices.

International wheat prices in January 2008 were 83 percent higher than a year earlier. "Wheat prices are up because it is being used as [animal] feed instead of maize, stocks of which are running low partly as a result of the increase in demand for making biofuel," said Liliana Balbi, senior economist at the FAO's Commodities and Trade Division. "In fact, maize, wheat and broken rice prices are all around the same level, which is unprecedented."

Realising the urgency of the situation, the three food agencies of the UN - the FAO, the World Food Programme (WFP) and the International Fund for Agriculture development (IFAD) - are organising a High-Level Conference on World Food Security and the Challenges of Climate Change and Bioenergy from 3 to 5 June 2008 in Rome. Alexander Müller, Assistant Director-General of the FAO, announced that his organisation would host the event.

According to the FAO, climate change and the demand for agricultural commodities for biofuels production required complex trade-offs and economic, social and environmental policy decisions that would have important repercussions on world agricultural production, access to food and the incomes of rural populations.

"We are facing a crisis triggered by several factors: more intense weather events as result of climate change, the global economic crisis, fuel prices and the pressures brought on by biofuel. This calls for a concerted effort from the UN agencies," said Kanayo Nwanze, Vice-President of IFAD.

"New parameters have been created, which need to be considered urgently at the global level, to help us adopt new strategies and guarantee food security," said Henri Josserand of the FAO's Global Information and Early Warning system. WFP spokesman Robin Lodge agreed, saying, "The sharp increase in food prices makes the formulation of a work strategy on food important to us."

In the meantime, governments are formulating their own strategies to help their vulnerable populations cope with high prices.

Africa and the Middle East

In January the World Bank warned governments against banning exports, and suggested safety nets and temporary reductions in import tariffs to provide relief for the poor.

Turkey has cut import duties on wheat from 130 percent to 8 percent, and on maize from 130 to 35 percent. The 100 percent import duty on barley has been removed altogether.

The Jordanian government continues to subsidise wheat, but since October 2007 has partially lifted its barley subsidy. It has also stepped up wheat purchases in world markets and announced plans to increase reserve stocks to six months of consumption.

In the Horn of Africa, the Ethiopian government is stockpiling grain, has banned exports of the main cereals and suspended the WFP's local purchases for emergency interventions. A temporary 10 percent surtax on luxury imports has also been imposed to help fund wheat subsidies for the poor, the FAO report noted.

In North Africa, Morocco has cut wheat import tariffs to the lowest level ever. Hit by severe drought, the country is expected to double its imports in 2007/08 and is also considering privatising soft wheat imports and providing state subsidies to importers purchasing above a benchmark price. In Egypt, the government has significantly raised food subsidies.

In West Africa, the governments of Benin and Senegal have imposed price controls and waived tariffs. Despite a forecast of above average harvests in all countries in the region, with the exception of Cape Verde and Senegal, prices shot up after late and poor seasonal rain in northern Nigeria brought a drop in food production. "Due to the size of Nigeria's economy and agricultural sector," this pushed up regional prices, the FAO report noted.

In Southern Africa, the Zambian government has reinstated a ban on any new export contracts, while in Zimbabwe the government controls imports of maize, wheat and sorghum, which are sold at subsidised prices.

East and South East Asia

Pakistan, which was exporting large volumes of wheat, mostly wheat flour, to Afghanistan at the start of the 2007/08 season, has now banned private wheat exports to Afghanistan and imposed a 35 percent duty on wheat and wheat product exports; it is also purchasing wheat on world markets.

Malaysia will soon be introducing plans to increase production of wheat flour to meet domestic demand, while Indonesia has removed a five percent duty on wheat imports and suspended a 10 percent duty on imported soybeans.

The Mongolian government removed value-added tax from imported wheat and flour on 1 January 2008.

The FAO has started holding a series of expert meetings on the world food security situation in the run-up to the June conference. "We hope to be able to come up with strategies to help governments cope with the situation," said Josserand.

Disclaimer:This material comes to you via IRIN, the humanitarian news and analysis service of the UN Office for the Coordination of Humanitarian Affairs. The opinions expressed do not necessarily reflect those of the United Nations or its Member States.

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