Energy prices play a key role in the determination of food prices. The post-2006 boom of food prices was partly driven by higher energy costs, and the weakness in energy prices since 2014 is expected to hold food commodity prices down in the future as well.
For the first time in history, the number of people living in extreme poverty has fallen below 10%. The world has never been as ambitious about development as it is today. After adopting the Sustainable Development Goals and signing the Paris climate deal at the end of 2015, the global community is now looking into the best and most effective ways of reaching these milestones. In this five-part series I will discuss what the World Bank Group is doing and what we are planning to do in key areas that are critical for ending poverty by 2030: good governance, gender equality, conflict and fragility, preventing and adapting to climate change, and, finally, creating jobs.
Seawater is rising in coastal Bangladesh. The soil contains more and more salt as the sea encroaches on the land. As a result, farmers see their crops declining. Communities are hollowing out, as working-age adults move to cities. Freshwater fish are disappearing, reducing the amount of protein in local diets. And in the dry season, mothers have to ration drinking water for their children – in some areas, to as little as two glasses a day.
Climate change is finally being taken seriously in the developed world, but it is generally seen as a future threat, to be managed over the coming years. For poor people in poor countries, particularly those living along coastlines, in river deltas, or on islands, it is a clear and present danger – and increasingly, a dominant fact of life.
One of the projects I was proudest of getting off the ground while in (nominal) charge of Oxfam’s research team was ‘Life in a Time of Food Price Volatility’, a four year study of the impact of the chaotic food prices of recent years on the lives of poor people and communities in rural and urban communities in ten countries. DFID funded it (thanks!), and IDS were our main research partners. Ace Oxfam researcher Richard King worked his socks off managing the project, before going off to a well-earned rest at Chatham House. Now the project has published its findings in a special issue of the IDS Bulletin. And it’s free online, because unlike lots of other journals, IDS has taken the Academic Spring seriously and has gone full open access (but that’s a topic for another rant).
The research is fairly unique because we went back to the same communities year after year to see how the food price story unfolded, and combined this micro level research with macro number crunching to try and put together a more complete story than usual about how a global phenomenon like the food price spike of 2008 (and subsequent price volatility) fed through into poor people’s lives and then affected the wider society. In her article on the research methodology, Naomi Hossain (the brains behind a lot of it) captures this analytical framework in a diagram.
The halving of world oil prices over the last six months raises questions about the implications for food prices and the welfare of poor people.
Do lower oil prices mean lower food prices? To a certain extent. But for low-energy cropping systems common in most developing countries, and in areas where food is not transported far, the impact will be dampened. For large oil exporters, however, food prices may increase. In general, lower oil prices should lower the cost of moving food from producers to consumers and reduce on-farm fuel and fertilizer costs. But a countervailing factor is that cheap oil may also induce people to drive more, and as fuel ethanol mandates link biofuel use to overall fuel use, ethanol use and the volume of maize used to produce it would also go up. In countries where oil is a large share of exports, real exchange rates may depreciate, which will disproportionately increase the price of traded goods like grains relative to other prices.
Is the downturn in agriculture commodity prices necessarily bad for farmers who produce food? A major downturn in commodity prices would not be great for farm incomes, and high crop yields would be needed to help dampen the effect on farm profits. Lower fertilizer and transport costs may help mitigate any negative impacts.
How long will oil prices remain low? While there is no certainty in forecasts, current estimates suggest fuel prices will remain low for 2015, increasingly slightly in 2016. There are three main drivers of the oil price decline which are structural: Significant increases in US shale oil production, receding concerns of oil supply disruptions in the Middle East, and a change in OPEC policy to maintain rather than cut production.
Food prices in international markets have spiked three times in the past five years: in mid-2008, early 2011 and mid-2012 (Figure 1). The first of those spikes – when rice prices more than doubled – prompted urban riots in dozens of developing countries. It may have contributed even to the unrest that led to the Arab Spring. The most common government response was to alter trade restrictions so as to insulate the domestic market from the international price rise. And the most common justification for that action (tighter export restrictions or lower import barriers on food staples) was that it would reduce the number of people who would fall into poverty. Not only are food prices politically sensitive, but many poor people are vulnerable to higher food prices, because the poorest people spend a large fraction of their incomes on food.
In the last five years, higher food prices have provoked government interventions in agricultural markets across the globe, often in the name of protecting the poor. But do higher food prices actually hurt the rural poor?
Food price spikes, price insulation, and poverty
This paper looks into the impact of changes in restrictions on staple foods trade during the 2008 food price crisis on global food prices and also analyzes the impact of such insulating behavior on poverty in various developing countries and globally.
The United Nations estimates that with the population reaching 9 billion by 2050, global food demand will double, with much of that growth in developing countries.
While the gloom-and-doom predictions of Malthus and a long line of neo-Malthusians have failed to materialize, still, one does have to wonder how all those hungry mouths are going to be fed.
What will it take to ensure that the recent food crises do not become permanent features of the world of the future? While countries in Latin America and the Caribbean are quite heterogeneous in their production potential, overall they are well equipped to contribute to meeting this challenge.
- latin america
- food prices
- food crisis
- Agriculture and Rural Development
- Latin America & Caribbean
- Venezuela, Republica Bolivariana de
- Trinidad and Tobago
- St. Vincent and the Grenadines
- St. Lucia
- St. Kitts and Nevis
- St. Helena
- El Salvador
- Dominican Republic
- Costa Rica
- Bahamas, The
- Antigua and Barbuda
Ace IDS researcher Naomi Hossain introduces the first results of a big Oxfam/IDS research project on food price volatility
If the point of development is to make the Third World more like the First, then we aid-wallahs can pack our bags and go home. Job done.
The most striking finding of Squeezed, the first year results from the four year Life in a Time of Food Price Volatility research project, is how like the people of the post-industrial North the people from the proto-industrial South now sound:
- Stressed and tired
- Juggling work and home
- Surrounded by selfish individualists, led by uncaring politicians
- In strained relationships
- Constantly pressed for time
- Never enough money, even for the basics.