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JOHANNESBURG, 8 July 2008 (IRIN) - A rough guide to why food prices keep going up

What is the crisis?

For the first time since 1973, the world has been hit by a combination of record high food and fuel prices. The price of oilseeds and grains, such as wheat and maize, has doubled since January 2006, with over 60 percent of the hike taking place since January 2008, according to the World Bank. Rice more than tripled between January and May 2008.

Prices have begun to fall as the 2008 crop is being harvested, but recent floods in US states producing maize and soya-beans, and poor weather conditions in Australia have slowed the decline.

Since 2001, oil has rocketed from US$20 a barrel to an unprecedented $140. The World Bank says oil prices are now higher than any time in the last century, not only pushing up the price of food in poor countries importing staple grains and fuel, but also eroding their capacity to buy food.

Why have prices shot up suddenly?

The short answer is that global cereal stocks have not kept pace with growing demand, and neither has the oil supply. Stocks of cereals have been declining worldwide since 2000, while demand has been increasing at two to three percent per year.

In the last two years, cereal stocks have fallen to levels last seen in the 1970s for two main reasons: firstly, major wheat-producing countries such as Australia suffered droughts in 2006 and 2007; secondly, the hike in fuel prices saw the US and many European countries offer subsidies to their farmers to grow grain for biofuel. The switch from growing food to growing fuel pushed up prices by 30 to 70 percent, depending on which study you read.

Some analysts have blamed high food prices on the burgeoning economies of China, India and some countries in sub-Saharan Africa, where more people can now afford to include meat and other animal products in their diet, which in turn has driven up the demand for grains used as feed.

However, the United Nations Food and Agriculture Organisation (FAO) says recent high commodity prices do not seem to have originated in these emerging markets: neither China nor India are big cereal importers in the 2007/08 season. In fact, China is exporting maize and India's wheat imports are relatively small.

Various food analysts say the production of grains has dropped because of rising chemical fertiliser prices, which have doubled and even tripled in some parts of the world, making it unaffordable to most farmers in developing countries.

Other analysts have attributed low cereal stocks to the cumulative effect of changes in the agricultural policies of developed countries, particularly in Europe, where farm subsidies have been shrinking, and a drop in investment in agricultural research to develop high-yield varieties since the 1990s.

But the price spikes recorded in 2008, particularly in rice, have been linked to export restrictions imposed by rice-producing countries, including India, China, Vietnam, Cambodia and Egypt, which together supplied around 40 percent of global rice exports in 2007, according to the International Monetary Fund.

Didn't anyone see the crisis coming?

Since 2006 the FAO has warned of a possible food price crisis in its periodic updates on global cereal stocks.

What has been the fallout of the crisis?

The impact of increasingly expensive food has been wide-ranging,deepening poverty levels and pushing even more people into poverty. According to a recent World Bank study, at least another 105 million across the world will become poor.

Simulations in this study suggest that in Africa alone nearly another 30 million people will fall into poverty: in Sierra Leone the food crisis has raised poverty by three percentage points, to 69 percent; in Djibouti, rising food prices over the past three years are estimated to have increased extreme poverty from 40 percent to 54 percent.

Various UN agencies have warned that unaffordable food could drive up the number of undernourished people in the world – already at 800 million - while poor people have begun skipping meals or switching to cheaper and lower quality cereals, affecting their health.

A recent FAO assessment in Somalia found that 2.6 million people - approximately 35 percent of the population, of which more than half are children - had been affected by a nutrition crisis caused by drought and prolonged conflict. The number of people needing humanitarian assistance in Somalia could reach an estimated 3.5 million - half the total population - by the end of 2008.

According to the World Bank, even stable, high-growth countries are not immune to the damaging effects of escalating food prices on child nutrition. In India, for instance, 47 percent of children are stunted – double the rate in sub-Saharan Africa, where 24 percent experience delayed development - and nearly five times that of China, where just over nine percent of children are stunted.

The UN Children's Fund (UNICEF) says 1.5 to 1.8 million more children in India are at risk of malnourishment as households cut back on meals or switch to less nutritious foods to cope with rising prices.

Expensive food and fuel have also had political fallout: since 2007, high prices have sparked violent protests in at least 17 countries, mostly in Africa; earlier in 2008, the government of Haiti fell after week-long protests.

The Organisation for Economic Cooperation and Development (OECD), which is committed to promoting democracy and assisting developing countries, noted that each 10 percent increase in the prices of cereals adds nearly $4.5 billion to the import bills of poorer countries.

An FAO study recently noted that at least seven countries - Gambia, Liberia, Mauritania, Niger, Zimbabwe, Jordan and Moldova - which have all chalked up high levels of debt - could be forced to spend as much as two percent of their gross domestic product on importing food. Most of these countries are already struggling with chronic hunger, so soaring food costs hold the threat of political instability.

Surely higher food prices benefit small-scale farmers?

Yes, logically they should. But very few subsistence farmers in Africa produce surplus food, and are mostly net buyers. Simulated studies by FAO found that rural households in countries where land was not equitably distributed - which is the case in most developing countries - would be worst affected.

The World Bank has also found that although farmers who produce surplus food might be better protected, even they might not benefit from the food price surge because the cost of inputs like fuel, fertiliser and transportation often rose faster than world market prices for food.

Agriculture experts say that unless governments subsidise inputs, poverty levels in rural households could deepen, and the prospects for beefing up global cereal stocks look bleak. The World Bank has called for subsidies aimed at poor and small-scale farmers for a limited period to boost yields, as part of a package that should include investment in extension, research and rural infrastructure.

When will food prices come down?

High prices may boost production in 2008, which in turn may push down prices, provided there are no natural disasters. But any major expansion of agricultural land in the short term is unlikely, says FAO, and any increase in plantings of one crop would need to occur at the expense of another. So, while the price of a certain food commodity might fall, the prices of others might increase.


Photo: Lynn Maung/IRIN
Billions of dollars needed for a second Green Revolution
Short-term price forecasts for food commodities are difficult because they are linked to other markets, such as energy. A recent FAO/OECD medium-term outlook for major agricultural commodities said prices were likely to remain high for the next decade.

Can the situation be turned around?

Many agriculture experts are pushing for a new "Green Revolution", which doubled cereal production between 1970 and 1995 in South Asia. Money and investment in developing high-yielding varieties of maize, wheat and rice, combined with access to pesticides, irrigation and fertiliser, could have a dramatic impact.

But this would require huge amounts of money: between $15 and $20 billion a year, according to UN Secretary-General Ban Ki-moon.

Aid agencies and other non-governmental organisations are lobbying the G8 and other leaders meeting in Japan this week to beef up investment in agriculture in developing countries.

jk/he

Themes: (IRIN) Food Security, (IRIN) Governance, (IRIN) Health & Nutrition

[ENDS]
Report can be found online at:
http://www.irinnews.org/Report.aspx?ReportId=79148

[This report does not necessarily reflect the views of the United Nations]

GLOBAL: Humanitarians cool on G8 summit response to food crisis

Cereals for sale in the central market of Kabul, Afghanistan. Due to high food prices, most people cannot afford regular daily meals
NEW YORK, 11 July 2008 (IRIN) - When the leaders of the US, UK, Canada, France, Germany, Italy, Japan, Russia, opened their meeting in Japan on 7 July, World Bank President Robert Zoellick urged them to “seize this opportunity” in the face of a crisis that threatened to push 100 million or more additional people into hunger beyond the 850 million already suffering.

He called for “resources, action, and results in real time” in three areas - meeting immediate needs with safety net support; giving small farmers, especially in Africa, access to seeds, fertilisers and other basic inputs; and easing export bans and restrictions that have contributed to higher prices.

“The G8 did not rise to the challenge laid down by President Zoellick and others,” Oxfam policy director Gawain Kripke told IRIN. The World Bank had no immediate comment.
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“As far as I can tell there’s no new money or substantive commitment … Zoellick was calling for action not words, so there seems to be quite a mismatch between his call and what the G8 did,” Kripke said.

“It’s not impressive, it’s not much of an advance on the state of play … they should have been more specific about where assistance should come from and how much it should be. There should have been a bit more introspection among the G8 about the role of G8 country polices in contributing to the crisis, namely agricultural policy, biofuels policy.”

Zoellick said in a statement: “We believe they recognise the danger [of the crisis]. No one has objected - and many support - our proposal to end export bans on WFP [UN World Food Programme] purchases.” Before the summit he had called on governments around the world to ensure access to local purchases for the WFP, and said it was “an outrage” that such purchases were not now exempt from export restrictions.



The Syrian finance minister has said withdrawing bread subsidies is a “red line”, but failing harvests and soaring international wheat prices may force a re-think
WFP Executive Director Josette Sheeran welcomed the leaders’ “resolve” to help protect the poorest and find long-term solutions to the crisis. But, she stressed in a statement: “We need to follow through with practical measures that can make a real difference in addressing urgent hunger needs throughout the world.”

The summit pledged to “ensure the compatibility of policies for the sustainable production and use of biofuels with food security and accelerate development and commercialisation of sustainable second-generation biofuels from non-food plant materials and inedible biomass”.

Missing details

But like much else in the statement there were no concrete details or figures, though the leaders did note that since January they had committed, for short-, medium- and long-term purposes, more than US$10 billion to support food aid, nutrition interventions, social protection activities and measures to increase agricultural output in affected countries.

They called for the removal of export restrictions, and pledged to reverse the overall decline of aid and investment in the agricultural sector, and to achieve significant increases in support of developing country initiatives, particularly in Africa. But, as with other pledges, there were no details.

“There is no concrete proposal for lasting solutions to the global food price crisis,” said the G8 NGO Platform Network, which groups 1,500 humanitarian and development NGOs in the eight countries.

“The impact of biofuel policies in developed countries on this crisis was not acknowledged. In addition, the G8 made only a vague commitment to ‘reverse the overall decline of aid and investment in the agricultural sector’,” it added in a statement.

“Unfortunately, the 2008 Hokkaido Summit produced no significant breakthroughs and failed to meet the expectations of firmer and more comprehensive commitments to end extreme poverty and protect the environment.”



Rioters took to the streets in Burkina Faso's second city, Bobo-Dioulasso, in February 2008 protesting against rising food and fuel prices
But it did applaud the $10 billion contribution, which does not appear to contain any new money, and the pledge to build up local agriculture by promoting local purchase of food aid.

Action Against Hunger called for immediate action. “We are hoping for more than promises or long-term plans that are doomed to fail. We aren’t as optimistic about the prospects for immediate solutions stemming from the recent G8 meetings,” security adviser Ilke Pietzsch told IRIN.

Distortions

However, International Food Policy Research Institute (IFPRI) research fellow Marc Cohen said the summit had made some progress towards meeting Zoellick’s challenge.

“They did put this high on their agenda, probably the highest it’s been since they started having the summits in the 1970s, to talk about hunger and food insecurity,” he told IRIN. “So I think that’s positive. And the endorsement of the UN framework for addressing this was important, to get the richest countries behind that.”

But he noted that they had not really said anything about revisiting mandates in the US and European Union, which set aside quotas for biofuel production from food crops.

They also failed to pledge to reduce their own trade-distorting subsidies and barriers even as they called on others not to take measures such as export embargoes. “That’s a major missing piece here,” he said. “Our [US] own trade policies are part of the problem.”

The leaders tasked an Experts Group to monitor the implementation of their commitments. Zoellick welcomed this as useful in helping to ensure accountability.
But in the view of some, the group would not be overworked. “There are very few commitments so it’s not going to be hard to monitor them,” said Oxfam’s Kripke.

ma/am/mw

Themes: (IRIN) Aid Policy, (IRIN) Economy, (IRIN) Food Security, (IRIN) Health & Nutrition

[ENDS]
Report can be found online at:
http://www.irinnews.org/Report.aspx?ReportId=79205

[This report does not necessarily reflect the views of the United Nations]
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Memo from Dakar

June 18, 2008
Memo From Dakar
Shadows Grow Across One of Africa’s Bright Lights
By LYDIA POLGREEN

DAKAR, Senegal — From the air, this sprawling city looks like a metropolis on the move, a buzzing quadrilateral jutting into the Atlantic. Cars speed along a supple, newly reconstructed four-lane highway that hugs the rugged coastline. Cranes dot the seaside, building luxury hotels and conference centers, as investors from Dubai revamp the city’s port, hoping to transform it into a high-tech regional hub.

But on the ground the picture shifts. Jobless young men line the new highways, trying to scratch out a living by selling phone cards, cashews and Chinese-made calculators to passers-by. The port is full of imported food that is increasingly out of reach for most Senegalese.

Dakar will soon have a glut of five-star hotel rooms, but rising rents have pushed the city’s poor and even middle-class residents into filthy, flood-prone slums. Shortages of fuel mean daily blackouts.

It is hard to escape a sense of malaise that has settled over Senegal, one of Africa’s most stable and admired countries, a miasma of political, economic and social problems as unmistakable as the fine dust that blows in from the Sahara every winter, blotting out the sun with an ashy haze.

This month the sense of crisis reached a head, when a coalition of political and civic groups began a national conference to reassess the country’s direction. The government, seeing it as a provocation, refused to participate.

All of which raises the question: If hardship and tension are vexing Senegal — a former French colony that has never known a coup d’état or military rule, and for 48 years has been one of the most stable, peaceful and enduring democracies in a region so long beset by tyranny and strife — what could that mean for its more troubled neighbors?

This question has become all the more pressing with the implosion of Kenya, once East Africa’s oasis, into ethnically driven electoral violence earlier this year, and South Africa’s recent descent into anti-immigrant rage.

Senegal’s chattering class is increasingly worried that the country’s long run of relatively good luck could also run out.

“After years of sunshine, we have so many clouds gathering over us in Senegal,” said Abdoulaye Bathily, secretary general of Senegal’s Movement for the Labor Party, one of the parties that joined with President Abdoulaye Wade’s coalition in 2000 but have since broken with him. “We are lost, adrift. And if we can’t make it, what country can?”

The political class is in seemingly permanent crisis. The grand coalition of opposition parties that brought Mr. Wade to office in 2000 after 40 years of Socialist rule has collapsed.

Most of the major parties sat out the 2007 legislative elections, so the National Assembly is made up almost exclusively of Mr. Wade’s allies.

A series of squabbles within the governing party, along with the widespread speculation that Mr. Wade is grooming his son, Karim, as his successor, have also soured Senegal’s longstanding reputation as a beacon of democracy in a region once plagued by authoritarianism.

Mr. Wade, an indefatigable octogenarian who was re-elected last year for a five-year term, has in many ways staked his legacy on the rebirth of Dakar from a quaint colonial city to a major regional center, a kind of mini-Dubai for West Africa. It is the bequest of an aging leader to a new generation of Senegalese, the men and women he calls the Generation of Concrete.

Mr. Wade put his son, a former banking executive in London, in charge of organizing the Islamic Summit, a meeting of heads of state of Muslim countries held here in March. The vast makeover of the city was supposed to be complete beforehand, but while most of the roads were finished, the hotels were not. The government rented private homes and cruise ships to house delegates and members of the news media.

Much of the work was paid for by Islamic donors, not the public, but little accounting has been given for the reconstruction projects.

When the speaker of the National Assembly tried to question the president’s son about spending for the summit meeting, the speaker’s party leadership position was abolished and the assembly introduced a bill to cut his term to a single year.

He later reconciled with the president, but such scandals have exacted a toll on the country’s reputation. Once a darling of international donors, who have spent millions to help Senegal build schools and clinics, pay off its debts and plan infrastructure projects, the country has found itself criticized by representatives of the International Monetary Fund and the World Bank over public spending and policies that have worsened the effects of rising food prices.

A study commissioned by the United States Agency for International Development last year concluded that “a lack of transparency in public affairs and financial transactions, as well as chronic corruption, plague Senegal today.”

Africa as a whole has been enjoying high economic growth rates, but in 2006 Senegal’s economy grew by just over 2 percent. It has rebounded and is expected to reach 5.4 percent this year, but persistent unemployment and high food and fuel prices have blunted the benefits of growth for most people.

Above all, Senegal’s people seem to have lost their seemingly endless optimism. A Gallup survey completed here last year found that only 29 percent of respondents said they had a job, down from 35 percent the previous year

Most telling, 56 percent of those surveyed said they would leave Senegal permanently if they could. In recent years, tens of thousands of Senegalese have boarded rickety wooden fishing boats to try to sneak into Europe. Many thousands are believed to have died in these perilous crossings.

This frustration has largely been turned against Mr. Wade, a longtime opposition figure who endured imprisonment and political isolation for decades before bringing his quirky blend of neo-liberal and Afro-optimist ideas to the presidential palace.

To his many fans, Mr. Wade is an updated version of the founding fathers who governed Africa in the years immediately after independence. His age is a closely guarded secret, but he is believed to be 82, which would make him almost old enough to have been a contemporary of Africa’s early political giants, like Kwame Nkrumah of Ghana and Julius Nyerere of Tanzania.

El Hadji Amadou Sall, Mr. Wade’s spokesman and a senior adviser, says that the government is already spending most of its budget on sectors that directly affect the poor, like health and schools, but that these are less visible than five-star hotels. Mr. Wade has also announced ambitious plans to boost food production.

Some Senegalese are pleased. Paco Demba Dia, a 39-year-old traditional wrestler, said seeing new roads and buildings gives him a sense of pride.

“In all those years, the Socialists never did anything like this for us,” he said.

But to his critics, Mr. Wade has sullied Senegal’s reputation and has consolidated power within his own family.

The discontent is keenest among young people, and their chosen mouthpieces: rap artists who have become the griots, or musical storytellers, of their generation, providing a soundtrack to their frustrations.

“We’ve been waiting 40 years for real change in this country,” said Didier Awadi, a rapper whose rhymes in the Wolof language demanding change helped steer young people to vote the Socialist Party out of office in 2000. “But we are still waiting.”

On one of the many billboards across the city welcoming the attendees of the Islamic Summit meeting, someone scrawled paint over Mr. Wade’s face, writing: “We are hungry.”

Indeed, many Senegalese wonder whether the money to rebuild the capital was well spent. Amadou Ndiaye, a hawker who sells cheap Chinese-made shoes on the sidewalk, said that little of the new construction will benefit him. He has no car, and the new roads don’t go anywhere near his slum home.

“We can’t eat roads,” Mr. Ndiaye said. “We can’t afford to sleep in five-star hotels. So for whom is all this? Not for the ordinary Senegalese man.”



Copyright 2008 The New York Times Company