The State of Agricultural Commodity Markets 2009, one of the United Nations Food and Agriculture Organization’s (FAO) flagship publications, analyzes the major increase in world food prices in 2007-2008 that pushed an additional 115 million people into chronic hunger. It notes that many factors contributed to this increase, but especially biofuel demands and record oil prices were to blame.
The publication also finds that the high product prices did not bring opportunities for farmers in developing countries as the benefits of high prices did not reach them, nor did they had sufficient access to affordable inputs, good technology, infrastructure and institutions. “Some policy responses (such as price controls and tariff reductions) actually reduced incentives,” the report notes.
Themed ‘High food prices and the food crisis – experiences and lessons learned’, it warns that although food prices have declined as a result of the financial crisis, a world recession, falling oil prices and an appreciating US dollar; prices are still high by recent historical standards and the structural problems underlying the vulnerability of developing countries to international price increases remain.
The report considers the pros and cons of various policy options to deal with high food prices and to increase food productivity, such as safety nets for poor consumers; open market and stocks operations; cutting tariffs; and export restrictions. It recommends that consumers must be protected against higher food prices, but this protection must go hand in hand with maintaining incentives to increase agricultural productivity and production – a so-called twin-track approach.
“There appears to be an expanding consensus that the appropriate policy response to sustained high food prices should be a package of safety net measures to address immediate food security needs and targeting those worst affected, accompanied by measures to encourage and facilitate supply response to stabilize supplies and prices in the medium and longer terms”, the report states. However, it also notes that developing countries often lack the resources, institutions or knowledge to design and implement such policies. The State of Agricultural Commodity Markets 2009 therefore calls upon the international community to provide sufficient resources and support to developing countries in order to meet immediate food needs; to make sufficient agricultural investments, to improve the policy environment and to ensure that the WTO rules are supportive of policy measures to respond to future food crises.
The report is available online.