The excellent Oakland Institute in California has produced this useful briefing which sheds a little more light on what's really going on.

*****************************

April 14, 2008

Food Price Crisis: A Wake Up Call for New Policies to Eradicate Hunger

In recent weeks, several UN agencies have issued warnings against impending food riots because of the acute hike in prices of rice, corn, wheat, and other staples. Morocco, Guinea, Egypt, Mexico, Haiti, Yemen, Mauritania, Senegal, Indonesia, and Uzbekistan have already been rocked by mass protests. The World Food Program (WFP), which feeds 73 million people in almost 80 countries, has called upon donor governments to close the $500 million funding gap by May 1, 2008 or it may not be able to make its food aid commitments. Worst affected by resulting hunger are the poor, surviving on less then $2 a day, in developing countries.

World food prices rose by 39 percent between February 2007 - 2008. The real price of rice rose to a 19-year high in March - an increase of 50 per cent in two weeks alone - while the real price of wheat has hit a 28-year high, triggering an international crisis. Various causes for this crisis are being cited in policy circles, including increased demand from China, India and other emerging economies, rising fuel and fertilizer costs, climate change. World Economic Outlook (WEO) just released by the IMF, holds bio-fuels responsible for almost half the increase in the consumption of major food crops in 2006-07.

Governments are resorting to desperate measures to address growing social unrest before it destabilizes countries. Pakistan reintroduced ration cards for the first time in two decades; Russia has frozen prices of milk, bread, eggs, and cooking oil; Indonesia has increased public food subsidies; while China, India, Egypt, Vietnam and Cambodia have imposed export controls on key agricultural commodities.

It is however essential to understand the underpinnings of this food crisis before rushing to adopt policy solutions. Over the last few decades liberalization of agriculture, dismantling of state run institutions like marketing boards, and specialization of developing countries in exportable cash crops such as coffee, cocoa, cotton, and even flowers, encouraged by international financial institutions backed by rich countries like the U.S., has driven the poorest countries into a downward spiral, directly threatening food security and economic sustainability.

Removal of tariff barriers has allowed a handful of Northern countries to capture Third World markets by dumping heavily subsidized commodities while undermining local food production. This has resulted in developing countries turning from net exporters to large importers of food with food trade surplus of USD 1 billion in the 1970s transforming into USD 11 billion deficit in 2001. Dismantling of marketing boards that protected both producers and consumers against sharp rises or drops in prices, has further worsened the situation.

In the face of the current crisis UN agencies are calling for governments to step up their investments in agriculture and advocating for market efficiency. However these steps will be ineffective if not combined with much needed structural changes that ensure people's right to food.

First, it is essential to have safety nets and public distribution systems put in place to prevent widespread hunger. The poorest countries lacking resources should call for and be provided emergency aid to set up such systems. Donor countries should provide more aid immediately to support government efforts in poor countries and respond to appeals from the UN agencies.

Second, emergency interventions are required to boost rural development and promote agrarian reforms including land redistribution. Development policies should promote consumption and production of local crops raised by small, sustainable farms rather than encouraging poor nations to specialize in cash crops for western markets. Also national policies involving the management of stocks and pricing, which limit the volatility of food prices are vital for protection against such food crisis.

The creation of these policies however depends on several prerequisites based on the principle of food sovereignty which would allow countries to protect their agriculture and markets. No industrialized country has been capable of developing its agriculture without protective barriers. The current crisis should be the wake up call for governments in developing countries to ensure similar protection for their poorest farmers and consumers and build a new farm economy which should be the centerpiece of the country's development model.

###

The Oakland Institute is a policy think tank whose mission is to increase public participation and promote fair debate on critical social, economic, environmental and foreign policy issues.

The Oakland Institute
P.O. Box 18978
Oakland, CA 94619
www.oaklandinstitute.org