Price volatility and food crises
Jacques Diouf
|
Jacques
Diouf |
Must history always repeat itself? We are indeed on the verge of what
could turn out to be another major food crisis. The FAO Food Price Index
at the end of 2010 returned to its highest level. Drought in Russia and
the export restrictions adopted by the Government, together with lower
crop harvests than expected, first in the United States and Europe, then
in Australia and Argentina, have triggered a process of soaring
agricultural commodity prices on international markets.
Crisis management
Admittedly, the present situation is different from that of
2007-2008, although recent climatic events may significantly reduce
agricultural production next season. The hike in prices concerns sugar
and oilseeds in particular, more than grains which account for 46
percent of calorie intake globally. Cereal stocks amounted to 428
million tonnes in 2007-08 but stand currently at 525 million tonnes.
However, they are being seriously drawn down in order to meet demand. On
another front, oil prices are at around 90 dollars a barrel, instead of
140 dollars.
No doubt higher prices and volatility will continue in the next years
if we fail to tackle the structural causes of imbalances in the
international agricultural system. We continue to react to circumstances
and thus to engage in crisis management. The underlying problems were
identified in 1996 and 2002 at the FAO World Food Summits. On both
occasions, the attention of the highest authorities of the world was
drawn to the failure to deliver on commitments. If current trends
persisted, the goals set by the world leaders of reducing by half the
number of hungry people on the planet by 2015 would only be achieved in
2150.
There has been no decisive change in policy since 1996, despite the
warnings by the Global Information and Early Warning System of FAO and
those issued through the media. Yet, today there are still close to one
billion people who are hungry. We must therefore forcefully remind
everyone the conditions needed for an adequate supply of food for a
population that is constantly growing and that, in the next forty years,
will require a 70 percent increase in agricultural production worldwide
and a 100 percent increase in the developing countries.
Private investments
First is the issue of investment: the share of agriculture in
Official Development Assistance (ODA) dropped from 19 percent in 1980 to
three percent in 2006 and now stands at around five percent - it should
amount to 44 billion dollars per year and return to its initial level
that helped to avert famine in Asia and Latin America in the 1970s; the
budgetary expenditure of low-income food-deficit countries on
agriculture represent about five percent, when this should be at least
10 percent; finally, domestic and foreign private investments of around
140 billion dollars per year should amount to 200 billion dollars. These
figures are to be compared to global military expenditure of 1,500
billion dollars per year.
|
More lands
going under the plough. File photo |
Then there is the issue of international trade in agricultural
commodities which is neither free nor fair. The OECD countries protect
their agriculture with a total support estimate of 365 billion dollars
per year and the subsidies and tariff protection in favour of bio-fuels
divert some 120 million tonnes of cereals from human consumption to the
transport sector.
Further, unilateral sanitary and phytosanitary measures and technical
barriers to trade are hampering exports, particularly from the
developing countries.
Finally, there is the subject of speculation that is exacerbated by
the measures of liberalization of agricultural futures markets in a
context of economic and financial crisis. These new conditions have
served to convert hedging instruments into speculative financial
products replacing other less profitable forms of investment.
Financial markets
The solution to the problem of hunger and food insecurity in the
world therefore requires an effective co-ordination of decisions on
investment, international agricultural trade and financial markets. In
an uncertain climatic context marked by floods and droughts, we need to
be in a position to finance small water control works, local storage
facilities and rural roads, as well as fishing ports and
slaughterhouses, etc. Only then will it be possible to secure food
production and enhance the productivity and competitiveness of small
farmers, thus lowering consumer prices and increasing the income of
rural populations who make up 70 percent of the world's poor.
We must also reach a consensus on the very lengthy negotiations of
the World Trade Organization (WTO) and put an end to the market
distortions and restrictive trade practices that are aggravating the
imbalances between supply and demand. Finally, there is a pressing need
for new measures of transparency and regulation to deal with speculation
on agricultural commodity futures markets.
Implementation of such policies at the global level requires the
respect of the commitments made by the developed countries, notably at
the G8 Summits of Gleneagles and L'Aquila, as well as at the G20 Summit
in Pittsburgh.
Developing countries, for their part, must increase their national
budget allocations to agriculture. And private foreign direct investment
needs to be made in conditions that will ensure in particular, thanks to
an international code of conduct, an equitable sharing of benefits among
the different stakeholders,.
Decent income
Crisis management is essential and a good thing, but prevention is
better. Without long-term structural decisions and the necessary
political will and financial resources for their implementation, food
insecurity will persist with a succession of crises affecting most
seriously the poorest populations. This will generate political
instability in countries and threaten world peace and security.
The speeches and promises made at major international meetings, if
not acted upon responsibly, would only fuel a growing sense of
frustration and revolt. The time has come to adopt and implement
policies that will enable all farmers of the world, in developing and
developed countries alike, to earn a decent income through mechanisms
that do not create market distortions. These men, women and youths must
be allowed to exercise their profession under conditions of dignity so
we can feed a planet that will grow from 6.9 billion inhabitants at
present to 9.1 billion in 2050.
The writer is the Director-General of the Food and Agriculture
Organization of the United Nations (FAO)
|