The spikes in global food prices in 2007-8 served as a wake-up call to the global community on the inadequacies of our global food system. Commodity prices doubled, the estimated number of hungry people topped one billion, and food riots spread through the developing world. A second price spike in 2010-11, which drove the global food import bill for 2011 to an estimated $1.3 trillion, showed that while global leaders may now be alert to the problems, our agricultural systems remain deeply flawed.
Various inter-governmental institutions responded with alacrity to the food price alarms. But the most powerful governments remain resistant to reform. In the final two months of last year alone, the G20, the WTO, and the Durban Climate Summit all turned big opportunities for action into small communiqués of little import.
In our new report, “Resolving the Food Crisis: Assessing Global Policy Reforms Since 2007,” we find that the recent crisis has been a catalyst for important policy reforms, but governments have yet to address its underlying causes. By avoiding deeper structural reforms, the countries that dominate international agricultural markets leave the world at risk of another devastating food crisis.
The WTO ministerial meeting in Geneva last week failed to take any decisions on the question of food security. Indeed, we knew this would be the outcome even before the meeting began. As the ICTSD reported, two proposals on food security – both calling for exemptions from export restrictions for the world’s least developed and net food importing developing countries and for humanitarian food purchases by the World Food Programme – did not gain sufficient support at the WTO General Council meeting in late November to make the Ministerial agenda.
The fact that WTO members could not even support discussion of these specific measures does not bode well for the adoption of a broader and more comprehensive food security agenda at the WTO. The disagreements over rules on export restrictions have in fact served as a distraction from the broader food security issues that the WTO is already supposed to be working on.
ROME, OCTOBER 2011 – Multilateralism is in crisis. It is perhaps most evident in the painful and truly frightening failure of governments to come to grips with the implications of climate change. But it was also evident on a much less well-publicized stage in mid-October in Rome, where governments were gathered at the U.N. Committee on Food Security (CFS) to discuss food price volatility…
As the G20 takes its November meetings into the belly of the eurozone crisis, its food security agenda drifts toward irrelevance. Or worse. Early promises to address commodity speculation and market volatility have given way to tepid recommendations from G20 agricultural ministers in June and last month’s underwhelming communiqué from its Washington meeting on development, with its one snappy paragraph on food security issues. Now that finance ministers on their gilded steeds have turned and fled from the dragons of commodity speculation, the G20 is unlikely to slay any of the monsters threatening global food security – biofuels expansion, land grabs, speculation, price volatility, low public investment.
Fortunately, new research keeps coming, and it should inform the debate. The latest is from a group of researchers at New England Complex Systems Institute (NECSI). As their name would indicate, these are modelers, and their paper, “The Food Crises: A quantitative model of food prices including speculators and ethanol conversion,” offers evidence that the underlying cause of rising food prices over the last decade is primarily the US corn ethanol program, while the cause of the two recent price spikes is speculation.
An extraordinary new process has been at work in the past few years: the aggressive entry of Indian corporations into the markets for agricultural land in Africa. At one level, this process is simply following the hoary old tradition in global capitalism, of firms (often supported by the governments of the originating countries) entering new areas in search of access to natural resources on preferential terms.
Several centuries ago, the growth of plantation agriculture in large parts of the western hemisphere was essentially the product of such a process. This was further facilitated by cross-border movements of labour (in the extreme case of African labour through slavery, then through indentured labour contracts largely from South Asia, then through supposedly more ”free” movements driven by lack of adequate income opportunities in the home countries). Together these flows generated production and trade patterns that were critical in shaping the international division of labour by the mid-twentieth century.
International assistance for food and agriculture has seen a dramatic drop since the late 1980s, with the share of agriculture in ODA and funding for food aid both falling. The food price rises and climbing rates of global hunger that occurred as a result of the 2007-08 food price rises have not yet led to a significant reversal of these trends. The lacklustre global commitment to food and agriculture is disconcerting in a context where food prices have remained high and famine is currently gripping parts of the Horn of Africa.
Agriculture used to have a prominent role in development assistance programs. But according to the OECD, the share of agriculture in official development assistance (ODA) fell from approximately 17 percent in the late 1980s to around 6 percent today, which is up from below 4 percent in 2003.
Recognizing that this level of support for agriculture was unacceptable, the G8 countries and others pledged at the L’Aquila summit in 2009 to mobilize US$20 billion over a three year period for investments in sustainable agricultural development as part of the L’Aquila Food Security Initiative (AFSI). This funding pledge was reiterated by the G20 at Pittsburgh later that year. The G8 and G20 both endorsed the World Bank managed multilateral fund, the Global Agriculture and Food Security Program (GAFSP), as a key channel for these funds. It should be noted that not all of this US$20 billion is new funds over what these donors had already pledged.
Have donors lived up to their commitment for increased agricultural assistance? Two full years later, only US$ 925.2 million has actually been pledged to the GAFSP, and only just over half of that amount was actually received. And only some US$345 million in project funding decisions have actually been made through this funding window.
The most important and hotly contested economic issues in the news recently have been the focus of several Triple Crisis Posts. Here is a compilation of what bloggers have to say on the Greek Crisis, the debate on commodity speculation, and the US debt ceiling:
Sophia Murphy and her colleagues have produced an excellent report as part of the Commission on Food Security’s coordinated effort to respond to recent food price increases. The report, “Price Volatility and Food Security,” is one of several from the so-called High Level Panel of Experts (HLPE) to help inform the CFS’s fall meetings on the crisis. As Sophia points out in a recent post on the IATP blog, their report offers a strong challenge to the G20, which recently convened its agriculture ministers for a lackluster effort to take strong action to address volatility and food security. (See recent posts in our Spotlight G20 series.)
Among the intriguing findings in the HLPE report is the analysis of the evolution of demand for agricultural products and the dominant role that biofuels is playing in that demand. The authors rightly point out that while there remains some debate about the role of financial speculation in driving up food prices, there is near-consensus that biofuel policies, primarily in the United States and the European Union, are contributing significantly to price increases and that current policies to encourage biofuels use should be ended. The G20, of course, is only a reluctant part of that consensus.
The G20 agriculture ministers dodged most of the tough issues in their meeting last month in Paris, leaving the heavy lifting on France’s ambitious G20 agenda to finance ministers later this year. Among the dodged issues were agricultural price volatility and the so-called “financialization” of commodity markets. Despite a relatively ambitious set of reforms proposed by an interagency group, the agriculture ministers “action plan” took very few actions beyond pushing for better information on grain inventories, as Jennifer Clapp and Sarah Martin explained on this blog. Action was missing, too, on a more serious consideration of grain reserves to curb price volatility (see Sophia Murphy’s recent post).
For their part, volatility and speculation celebrated the continued inaction by further roiling commodity markets, driving global food prices to new highs. And the debate rages on over the extent to which financialization and speculation are to blame for the spike in commodity prices. As I noted in earlier posts and subsequent comments (here and here), the disagreement is less over whether financial speculation causes volatility on commodities futures markets than it is over whether volatile futures markets drive up real commodity prices.
Fortunately, new research from UNCTAD is drawing light from the heat of the debate. The June report “Price Formation in Financialized Commodity Markets,” reviews the evidence and concludes that while market fundamentals determine medium and long-run commodity prices, financial speculation can lead to significant short-term price distortions in real commodity prices.