The Global Food Crisis: Implications of Rising Food Prices

Food commodity prices haven risen dramatically around the world, with some prices doubling in the last year. These rising food prices are contributing to growing hunger and social and political unrest. It is costing governments and aid agencies much more to provide food assistance to the most vulnerable. Additional funding will be required to just maintain current levels of assistance.

As rising prices increase hunger, even more assistance will be required to meet growing needs. The rising food prices are caused by a complex set of factors. In recent years, food production has not kept pace with rapidly rising consumption resulting in lower carry over stocks each year. Many governments no longer maintain large public stocks to stabilize food supply and prices. As a result, short term changes in supply and demand leads to more price variability.

Recent unfavourable weather has reduced production in some parts of the world. The increase in yields has also slowed in recent years. Meanwhile, consumption of grains has continued to increase rapidly. In addition to the normal increase in consumption from population growth, demand is being driven by rapidly rising meat and dairy consumption by a growing Asian middle class that requires much greater amounts of feed grains, and the increased use of grains for biofuel production.

Rising energy prices are also driving up the costs of producing and transporting food. The rise in food prices is exacerbated by speculative investment dollars flowing into food commodity markets and export controls being imposed by some countries. Most hungry people in the world depend on the market for much of their food, including small-scale subsistence farmers who usually do not produce enough to meet their food needs year round. For the poor that are living on less than a $1 a day, much of their income is spent on food.

Rapidly rising food prices will force millions of poor people to reduce the amount and variety of food they consume, reduce their expenditures on health and education, and reduce savings and sell assets leading to further impoverishment. Governments and aid agencies must provide direct assistance to the most vulnerable to prevent a growing hunger crisis.

However, rising food prices mean that budgets do not go as far. Substantial additional funds will need to be found. The Canadian Foodgrains Bank has estimated that the amount of food aid we can provide will decline by at least 25 percent and probably much more unless we can secure additional funding. We will be appealing to our donors and the Canadian government for additional funding. We need at least $5 million in additional funding to maintain current levels of programming, and even more than that to address the growing need caused by rising prices.

The Canadian Foodgrains Bank is consulting with experts and partners as to what other steps we should be calling for to address the food crisis in the short and longer term. We continue to argue that much greater public and aid investments in small holder agriculture in developing countries will strengthen livelihoods and local food supply. It is possible that rising food prices will help poor developing country farmers in the longer term. This will only happen if targeted investments by governments and aid agencies are made to support small scale farmers, including investments in extension services, roads, and market development. Otherwise much of the gain from higher prices will be captured by larger scale farmers and the poor will only be left with their hunger.

Canadian Foodgrains Bank

The Global Food Crisis: Implications of Rising Food Prices

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