Are rising world food prices a threat to the MDG hunger target?

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Are rising world food prices a threat to the MDG
hunger target?

• Alan Matthews
• Millennium Development Goal lecture series
• Trinity College Dublin
• 13 February 2008

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Main messages

• Answer Possibly, but can be a great opportunity
  to help meet those targets
• Rising world food prices represent a fantastic
  opportunity to revitalise agricultural and rural
  development in low income countries where the
  bulk of the worlds poor live and work
• ..but clear strategies are needed to avoid
  squandering these opportunities..
• ... and there is an important role and
  opportunity for Irish Aid

The author wishes to acknowledge the support of
the Advisory Board for Irish Aid under its
Framework Project on Policy Coherence for
research into this issue
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Per capita food production index 1961-2005
Source Ugarte 2007
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The world food context

• Steadily growing world food supplies..
• .. Despite improving nutrition and increasing
  food demand in all regions
• .. Have led to a steady fall in real food prices
  during the past four decades.
• For commodity-dependent poor country exporters,
  that also translates into adverse terms of trade
  movement

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Evolution of calorie supply
Source Ugarte 2007
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Source FAO World Agriculture Towards 2015/2030
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MDG Goal 1 Eradicate Extreme Hunger and Poverty

• Target 2. Halve, between 1990 and 2015, the
  proportion of people who suffer from hunger
• Indicators
• Prevalence of underweight children under five
  years of age (UNICEF-WHO)
• Proportion of population below minimum level of
  dietary energy consumption (FAO)
• Progress
• FAO and UN believe MDG goal will be met overall
  because of good performance in East Asia, but
  missed in many individual countries

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Source FAO, State of Food Insecurity, 2006
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Source FAO, State of Food Insecurity, 2006
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Source FAO, State of Food Insecurity, 2006
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Source FAO, State of Food Insecurity, 2006
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Source UN MDG Report 2007
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But now dramatic changes in world food markets

• Recent years have seen a sharp increase in real
  food prices, with particularly large jumps in
  recent months for some commodities..

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Factors behind jump in food prices

• Rising incomes
• Link with energy markets
• Resource scarcity
• Failure to invest sufficiently in increasing
  agricultural productivity
• short run climate, low global stocks

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The biofuels contribution

• Biofuels
• Bioethanol alcohol derived from sugar or starch
  crops by fermentation
• Biodiesel derived from vegetable oils by
  reaction with methanol
• Biomass and bioenergy
• Energy (oil) prices set a floor price for some
  agricultural commodities
• but also set a ceiling price
• Long term, food price increases will move in line
  with real energy price increases

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The market opportunity for biofuels

• Developing countries can
• Produce their own domestic transportation fuels,
  improving energy security
• Take advantage of export markets with unlimited
  demand
• Lower GHG emissions and assist move to low-carbon
  economy
• Create new jobs in rural economies

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Problems with developing biofuels

• The effect on other land uses of production of
  energy crops
• Environmental stresses of intensifying land use
• Effects on food prices, particularly for net food
  importing countries
• Inclusion of small producers to ensure they
  benefit from the dynamism of the new sector

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Trade issues

• Trade between efficient tropical producers and
  OECD countries will be mutually beneficial
• But is mostly absent due to high import tariffs
  and production subsidies
• Recall EU has low tariffs on biodiesel but high
  (45-65) tariff on bioethanol
• Whether to allow easier bioethanol imports
  divides EU countries.
• Those in favour point to the more favourable
  energy and GHG balances of Brazilian ethanol
• Those opposed (France and Germany) put more
  emphasis on the potential gains to their own
  farmers

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Food security a major issue

• Food vs fuel an old debate
• During the 1970s should we stop eating meat to
  make more grain available for poor people?
• During the 2000s should we stop driving cars to
  make more grain available for poor people
• Concern that rising food prices will make it more
  difficult for the poor to purchase food
• There are lots of good reasons why it might be
  good to eat less meat or drive less often, but
  would it actually contribute to reduced hunger?

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Food security impacts

• UN Special Rapporteur on the Right to Food
• Biofuels a crime against humanity
• has called for 5-year moratorium on increased
  biofuel production
• But income effects from energy crop cultivation
  can potentially offset the short-term negative
  impacts on poor consumers

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Who are the poor in developing countries?

• 80 of food-insecure people are in rural areas
• 50 are small farmers
• 20 are landless farm workers
• 10 are pastoralists, fishermen or forest
  gatherers
• Energising the economic viability of rural areas
  through agriculture has significant potential to
  reduce poverty and hunger
• Poverty multiplier of agricultural-led growth far
  higher than for other forms of growth (minerals,
  industry)

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World food prices the CAP analogy

• NGOs have long campaigned against the EUs export
  subsidies on food, on the grounds that they
  depressed world market prices for poor country
  producers
• Higher food prices due to biofuel demand, for
  example, have the potential to far outweigh the
  price-depressing effects of rich country
  agricultural policies

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Food security concerns

• Higher food prices raise the expenditure
  requirements of the poor, but they also
  contribute to higher incomes and more jobs for
  food producers
• Potential now exists to reverse the decades-long
  neglect of agricultural and rural development in
  many developing countries

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But winners and losers

• Between countries
• If food prices move in tandem with energy prices,
  then countries gain or lose depending on whether
  they are net energy exporters and/or net food
  exporters
• Many least developed countries are BOTH net food
  AND energy importers

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Winners and losers

• Within countries
• Only 50 of the food insecure are small farmers
• Other 50 are potentially food purchasers
• Need to take on board interests of the urban poor
  plus other marginalised groups
• Need to assess the gender impact of rising food
  prices on division of labour and intra-household
  distribution

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Getting poor families involved

• Role for public policy
• Resource and land rights of vulnerable groups and
  protected forests are often weak
• Encouraging contract farming and outgrower
  schemes
• Improving infrastructure, transportation, market
  coordination, investment in research
• Promoting competition in the marketing chain to
  ensure that higher prices really do reach the
  poor
• Trade certification schemes (biofuels)

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Are rising world food prices a threat to the MDG
hunger target?

• Answer Possibly, but can be a great opportunity
  to help meet those targets
• Rising world food prices represent a fantastic
  opportunity to revitalise agricultural and rural
  development in low income countries where the
  bulk of the worlds poor live and work
• ..but clear strategies are needed to avoid
  squandering these opportunities..
• ... and there is an important role and
  opportunity for Irish Aid