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The Effects of High Food Prices in Africa – Q&A

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Global food prices have surged in recent months causing large spikes in the price of rice, maize and wheat, staples in many African diets. The surge has led to requests for emergency food aid in some countries. In others, citizens have rioted in the streets. In the following Q&A, Senior Economist in the World Bank’s Agriculture Unit Robert Townsend discusses what has led to the price hikes, how Africa is affected and what the World Bank is doing to help.

What are the major reasons for the recent global food price increase?

RT: Surging demand for food crops has increased faster than supply due primarily to biofuel policies in industrialized countries and to a lesser extent changing diets in rapidly-growing developing countries. Biofuel policies have diverted food crops from traditional export markets to production of ethanol and biodiesel. Growing demand for livestock products, particularly in Asia, has increased consumption of grain for feed. Erratic weather, trade policies, and seasonal lags have slowed producers’ response to the higher prices. Drought in countries such as Australia has reduced its historically large volumes of wheat and rice exports.  Some countries have recently introduced export bans, which in turn have interrupted trade. The seasonal nature of agriculture, moreover, leads to a lagged supply response. As demand has outpaced supply, prices have increased significantly, particularly for maize (corn), rice and wheat. Fertilizer prices have also increased dramatically over the last two years as increased supply to match rising demand has been held back by limited production capacity.
 
Are higher global food prices a special concern for the Africa region?

Photo by Arne Hoel, World BankRT: Yes. On average, basic staples such as maize, rice and wheat account for 20 percent of the food consumed in Sub-Saharan Africa, with these three crops alone providing about 30 percent of the calories. Higher global food prices have also led to higher local food prices, particularly for rice and wheat. Forty five percent of rice and 85 percent of wheat consumed in the region is imported. The region almost produces enough maize to meet domestic demand, with imports from international markets accounting for only five percent of consumption. Significant differences in grain consumption patterns across the region have led to differing impacts. The region imports almost all the fertilizer it uses, and because fertilizer prices have doubled over the last year, there is growing concern about the negative impacts on food production in the planting season ahead.

Which African countries are most affected by higher food prices, and why?

RT: Countries in West Africa, the Horn of Africa, and fragile African states recovering from conflict are especially vulnerable to higher global food prices. In West Africa, rice accounts for a much larger share of food consumption than in Eastern and Southern Africa. As more rice than maize is imported, local food prices in West Africa will be more affected. Countries with local supply disruptions are also particularly vulnerable to global price increases, as experience with the drought in Burkina Faso, the recent cyclone in Madagascar, and localized floods in Ghana have shown. Less local supply means more reliance on imports to meet domestic demand -- imports which are now much more costly. Within these countries, the poor will be especially vulnerable as they often spend as much as half their disposable income on food.

Can the negative impacts be addressed by emergency food aid? What other approaches are there to help ease the pressure?

Photo by Arne Hoel, World BankRT: Emergency food aid can address some of the immediate impacts on the most vulnerable groups. However, availability of food aid tends to be lower when global food prices are high, as food previously provided as aid goes to other uses. Purchases of food for emergency aid are also now more costly. Countries facing high food prices and financing their own food programs therefore need enough resources to meet food import needs. Reducing import tariffs and domestic taxes on food can lower domestic prices. Cash transfers can improve the purchasing power of the poor, as can public works programs. Some countries have in the past imposed export bans and set price ceilings, and these approaches are not effective. While they reduce prices consumers pay, they also reduce prices that farmers receive and choke off increased supply in the next season. The most effective response to high prices is to increase supply through faster growth in agriculture and productivity gains of basic food crops.

What can be done to improve food production on the African continent?

RT: Much can be done, and it is already happening.  Food production is increasing – the higher prices in Africa are not caused by a supply shock.  But agriculture has to grow faster. Use of better seeds, more fertilizer, and better methods of cultivation can double yields. More use of conservation tillage can assure that available water reaches the plants in drought-prone, rainfed areas. Investment in research can bring improved varieties, and better approaches to extension can help farmers adopt them. Cost effective and well-managed irrigation schemes can bring reliable water supply and support production of high-value crops. More freely flowing trade across national boundaries helps both producers and consumers.  New approaches to risk management such as weather based index insurance can help farmers cope with uncertainty.

What is the World Bank doing to respond to these higher food prices in the short- and long-term?

Photo by Arne Hoel, World BankRT: The World Bank is working with African countries to assist with safety net programs for the poor, with technical advice on trade and tax policies, with support for short-term supply response, and with assistance to meet additional fiscal burdens imposed by high food grain prices. The World Bank is supporting efforts of the African Union to convene a technical meeting in late May at which African countries most affected by higher food prices will design their own responses and present these to development partners for financing. In the longer-term, the World Bank, is scaling up support for agriculture in four areas critical for productivity growth: land and water management, markets and infrastructure, risk and vulnerability, and agricultural technology. Higher food prices provide additional urgency to the commitment to scale up support for African agriculture. The World Bank is almost doubling its agricultural lending -- from US$450 million to US$800 million -- and is committed to working collaboratively with other partners who are also scaling up their own assistance to the sector.




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