The Homemade Food Crisis

 

By Christine Chemnitz and Mute Schimpf

That more than 854 million people in the world suffer hunger today is not due to a lack of food, but simply because so many people in the world cannot afford to buy enough of it. Given that the poor spend up to 80 percent of their income on food and that prices rose more than 57% in the past year alone (between March 2007 and March 2008), we can expect that the number of hungry people will continue to rise due to recent price trends.

 

How could this happen?

 

A series of different factors is responsible for the rise in food prices. One of the central causes for the current food crisis in the South is liberalisation of the agricultural sector, which has accompanied its integration into international trade.

 

While agricultural sectors in the South have been largely liberalised under the IMF’s structural adjustment programmes and the WTO negotiations for the Doha Round, they continue to compete with the very well protected and strongly subsidised agricultural products of the industrial countries. As recently as the nineties, the EU invested more than 10 billion euros in export subsidies per year. At the same time, the yield per hectare grew in almost all regions of the earth – except in most African countries – and the land used for agriculture expanded. The result was, prices in the international market for agricultural products fell for decades.

 

Today, 105 of the 148 developing countries are net importers of food, and since the beginning of 2000 the trend of constantly falling agricultural prices has reversed. Expenditures for the previously so inexpensive imports are rising rapidly and are now a burden on financially weak economies. The FAO assumes that the costs of grain imports for the poorest countries  rose by more than 56% in 2007/2008, and this followed an increase of 37% in 2006/2007. FAO data show that the prices for agricultural products rose on average less than 1.5 percent between 2000 and 2005. Then, in 2006, they rose 9%, followed by an average 37%  from December 2006 to December 2007 and, from March 2007 to March 2008, again on average 57%. The price for wheat alone rose more than 130% between March 2007 and March 2008.

 

There are many causes of the rapid price rise on both the demand and the production side. The main reasons for this development are a changed demand structure of food consumption, rising general consumption, demand for agricultural fuels, speculation in financial markets, weather-related crop failures, falling food inventories and rising oil prices.

 

How prices will change in the next few years is uncertain. This depends on how the supply structure develops. How much will the land used for agriculture expand? What new production technologies will increase yields? How much water is available for production? What impact will the climate in the various regions have on production? In addition, the demand for agricultural fuels and meat on the consumer side will clearly be important for the further development of prices.

What is the impact of rising agricultural prices?

High prices will have a fatal impact on the life situations of all net consumers who spend a large part of their income on food, regardless of whether they live in cities or the countryside. Even today, more than 854 million people, especially the urban poor and landless, are suffering under rising prices.
At the same time, the high prices are creating opportunities for economic development in rural areas, at least for those countries and producers that can expand production and react to the changed prices. Better producer prices and more jobs in the countryside could create new economic development opportunities in the rural areas of the South, which have been virtually ignored for so long. But this can only occur if the political conditions change: granting of land rights, access to water, functioning rural advisory systems and research in locally adapted and sustainable production technologies – to name just a few of the political action fields that would lead to fairer rural development.

 

A study by the World Bank and IMF shows that the greatest losers from the high agricultural prices will be most of the countries in northern and south-eastern Africa. But all other countries of Africa, Southeast Asia and Central America will lose as well. In addition, high food prices will worsen inequalities within the countries even more.

 

What short-, medium- and long-term political answers are needed to combat the food crisis?

The political demands and reactions that result from high agricultural prices are diverse. While some actors, such as the World Bank, claim that further liberalisation, technologisation and intensification of agriculture will provide the solution in the fight against hunger, others, such as UNESCO’s IAASTD (International Assessment of Agricultural Science and Technology for Development), call for a focus on small-structured and ecologically sustainable agriculture.

 

One thing is clear: The purely economic view of the agricultural sector will meet neither the social nor the ecological challenges of the future, and if we are to take advantage of the high agricultural prices for rural development, the main goal must be to use them to promote an ecological and fair agriculture. This requires an agricultural policy that recognises the multifunctional significance of farming and so equally rewards its ecological and social contributions. Pure deregulation and a further export orientation, as demanded by the World Bank, will weaken the position of the rural population even more.

 

The EcoFair Trade Dialogue, which was called to life three years ago by the Heinrich-Böll Foundation and Misereor, had the goal of developing a political concept to counter that of today’s free trade. Based on the assumption that national production of food for nutritional security should have priority over production for export, it demands more political flexibility to protect national food production. It calls for making the production chains more democratic, thus ensuring that the producers of agricultural products receive fair prices, unlike the case today, where a large share of the economic rents remains with a few actors in the value chain (e.g. supermarkets or exporters).

 

The World Bank, too, must learn from the failure of its current agricultural policy: The 800 million US dollars that Robert Zoellick wants to provide for investments in the agricultural sector in Africa must be devoted to locally adapted and sustainable solutions that benefit the small farmers directly. It makes no sense to invest the money in research for highly technological solutions that are not locally adapted and that small-scale producers cannot pay for. In the short term, emergency measures are clearly needed for populations suffering from hunger. The World Bank has promised 500 million US dollars in immediate aid, and the EU and the USA will provide emergency funds as well. But this is only a short-term treatment of the symptoms and does nothing to change the problem’s causes.

 

In the long term, we can hope that the core statements of the just-released IAASTD Global Assessment, in which more than 400 scholars participated, will be taken seriously. It says there must be a radical and fundamental change in agricultural production to meet the needs of poor and hungry population segments. The technological advances of the last decades have resulted in immense increases in yields, but have done nothing to bring more fairness and an improved nutritional situation to the world. For that reason, the authors of the Assessment demand that more value should again be placed on protection of natural resources and sustainable forms of land use, regional marketing structures and traditional knowledge.