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Improving the livelihood of smallholder farmers
The Recent Episode of Soaring Food Prices
Food prices escalated in 2007-2008 as shown in the figure below, causing hardship for poor people and in fact, reversing trend progress in poverty reduction in the developing world. Small farmers, many of whom are net buyers of food looking at the year as a whole, tended to lose more as consumers paying higher prices than they gained as producers selling more dearly.
In 2007 alone, the FAO food price index rose by nearly 40%, and in the first months of 2008, the trend continued. Between 2000 and mid-2008, the prices of wheat and rice in international markets more than tripled. Maize and soybean prices more than doubled. Rice prices literally exploded in late 2007. High energy prices, the declining dollar, biofuels, trade disruptions and patterns of demand that exceeded supply all played a role. “Starving your neighbour” policy, whereby many surplus producers closed off or reduced their exports in efforts to ensure food security at home, proved disruptive.
International commodity prices (US$/ton), January 2000- August 2008
Source: FAO international commodity prices database 2008
In the long run, food production growth and open markets, domestically and abroad, are the solution of choice that must be pursued. This is preferable to food aid, although the latter can be relevant in the short run and where natural and governance disasters interfere with efforts to intensify production and supply.
The fact that food prices turned and headed south post mid-2008, does not mean that long-term challenges related to supply have eased. Food prices came down because in the wake of the global economic and financial crisis, pressure on the demand side for commodities and food let up. The price of oil is key to this, since commodities and food are linked to oil. Its softening meant prices of the latter group of goods would fall. The phenomenon of falling prices may obscure for now, but does not cancel, the fact that the world's system of food supply is under stress. The situation is highly heterogeneous as one looks across the globe. But in general and going forward, agriculture and the food sector need to be given more attention. Conducive policies, investment and sustainable production patterns are needed if price crises of the kind just seen, or worse, are not to be repeated. Indeed, as warned by the International Food Policy Research Institute in 2008, the recent price crisis is a harbinger of things to come if lasting measures to prevent recurrence are not taken now.
