April 12, 2008 — A global surge in food prices is causing havoc across the developing world, and thousands of poor people are caught in a widening arc of hunger stretching from Egypt to Cameroon, to Zimbabwe.
The numbers are stark. In one month, U.S. wheat export prices shot up from $375 to $425 per ton, and prices for Thai rice rose from $365 to $475 per ton. Both countries are major cereal exporters. According to the United Nations Food and Agriculture Organization, of the 36 countries in the grip of a food security crisis, 21 are in Africa.
According to the latest report, “Rising Food Prices: Policy Options and World Bank Response,” increases in global wheat prices reached 181 percent over the 36 months leading up to February 2008, and overall global food prices increased by 83 percent.
On average, poor people spend between 50 and 75 percent of their income on food purchases.
“The major price shocks we are witnessing in the world’s poorer economies are hitting poor people the hardest,” said Obiageli Katryn Ezekwesili, World Bank Vice President for the Africa Region. “While the World Bank is committed to doing its part to help mitigate the crisis, reversing this worrisome trend will require concerted actions by governments and a broad range of partners.”
Price hikes in food have already sparked riots in several African capitals, rattling treasuries, and stoking unprecedented Malthusian scares.
A complex set of causative factors is at work, the effects of which are bleaker than the theory voiced by Thomas R. Malthus, the famous 18 th century British economist who warned of the dangers of exploding population growth rates being out of sync with the capacity to produce food.
Oil, trading at $105 and more per barrel, is a major factor impacting a large part of the farm economy by increasing prices on the entire food production and distribution chain. Equally problematic is the agriculture-led push toward biofuels where corn and sugarcane are being used to create ethanol, and oil crops are being used to create biodiesel.
The 2008 World Development Report “Agriculture for Development” provides a compelling example of the food-for-fuel debate: over 240 kilograms (or 528 pounds) of corn – enough to feed one person for a whole year – is required to produce the 26 gallons, or100 liters of ethanol needed to fill the gas tank of a modern sports utility vehicle.
Food-related Fast Facts:
- Seventy-five percent of the world’s poor people live in rural areas: an estimated 900 million people at the $1-a-day poverty level. A majority are in Sub-Saharan Africa and South Asia
- Most of the world’s poor people depend directly or indirectly on agriculture for their livelihoods
- In Africa, demand for food is expected to reach $100 billion by 2015, double its level of 2000
- Sub-Saharan Africa is the only region where yields of food crops have declined, and farmers get only one-third of the yields achieved by Asian farmers.
- A majority of farmers in Sub-Saharan Africa are women.
In addition, withering drought has decimated harvests in major wheat-producing countries as far apart as Australia and Kazakhstan, crimping supplies, and creating scarcity. Furthermore, a legion of plant breeders, agronomists, and pathologists are concerned about when and where the next disease epidemic will strike, and threaten farm yields in the world’s major granaries. The Bill and Melinda Gates Foundation just announced a $25 million grant to Cornell University to fight stem rust, a deadly wheat disease.
Meeting the challenge
Food crop prices are expected to remain high in 2008 and 2009 and then begin to decline, but they are likely to remain well above the 2004 levels through 2015 for most food crops.
The World Bank Group is helping countries to meet the challenges of high food prices by:
Calling on the international community to make up the $500 million food gap required by the United Nations World Food Program to meet emergency food needs, a large portion of which is directed to Sub-Saharan Africa
Making agriculture a priority. The Bank has announced it will double agriculture lending in Africa in 2009: from $450 million to $800 million
Increasing financial support for short-term needs (restructuring existing projects and increasing the size of upcoming grants and loans when needed)
Expanding and improving access to safety net programs, such as cash transfers, and risk management instruments to protect the poor
Informing the discussion on biofuels
Providing advocacy and highlighting the negative impacts of policies such as export bans which create price spikes in importing countries, and the high levels of trade tariffs and subsidies in the developed world.
Going forward, the World Bank is strengthening its cooperation with partners such as the New Partnership for Africa’s Development (NEPAD), its Comprehensive Africa Agriculture Development Programme (CAADP) and its four pillars: increasing food supply, market access, an area under sustainable land management, including the TerrAfrica initiative, and improving agricultural research to disseminate new technologies for farmers.