Unchecked rises in food prices can undermine gains made over the last decade in reducing poverty and malnutrition. Despite a recent correction in global food prices, costs remain significantly higher than even six months ago. People are suffering across the globe, particularly in countries least able to cushion the shock of high prices. Given the potential impact of trade on food prices and supply, what types of policy actions should countries and the international community be taking--or not be taking--in the face of such crises?
Thanks to all for taking part in the discussion. For more on the food crisis, please visit http://www.worldbank.org/foodprices.
In the longer term, improvements in the quality and quantity of food are the key. There is strong evidence that the returns from investments in research and development in developing country agriculture are extremely high. R&D can help improve farmers’ incomes, while helping hold down the price of staple foods to consumers. Policy controls, such as price controls, by contrast, have many problems such as reducing returns to farmers and creating shortages.
How much truth is there in the Guardian artilce titled
" Secret report: biofuel caused food crisis"
4 July 2008
(The Guardian1© Copyright 2008. The Guardian. All rights reserved.)
Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian.
The damning unpublished assessment ...etc..." ?
>>> The Bank is used to being lambasted left right and center for good and bad reasons. It's reports and policies are often criticized just because they are from the Bank. It is ironic in this case to see one of its supposedly leaked reports being brandished as the latest gospel on the issue.
The paper in question is a preliminary draft that has been circulated for comment prior to finalization. The study tries to assess the importance of the relative contributing factors to the increase in prices. It finds that demand from developing countries has been growing more or less in line with supply, and that weather-related shocks have been relatively minor. Dollar weakness has been a much more important factor.
A fundamental change in the market has been the growth in use of food products for biofuels. The initial increase in prices from this source has been compounded by consequences of this shock, such as low grain stocks and export bans.
I believe the skyrocketing prices of both food and fuel have so negatively affected millions of peoples. What would you think are most significant solutions G8 nations should address first to better the worst-ever crises?
I concur with your assessment. In the short run, we really need to deal with the problems of the most critically-affected people through measures such as food aid. Social protection policies can perform a vitally important role if they are able to build on existing measures, or to be expanded quickly. In the longer term, improvements in agricultural technology are very important since they can benefit farmers, while helping reduce the cost of food to consumers. Longer term, we need a well-functioning international trading system that avoids a recurrence of such crises.
A continuing Green Revolution that raises the productivity of poor farmers in developing countries is the key in the longer term. Liberalizing world trade will, indeed, raise world prices. But the estimates in my recent book with Kym Anderson suggest that full global trade liberalization would raise world prices of staple foods by around 5 percent. Consumer prices in most developing countries would actually fall in this situation because of the abolition of tariffs. Liberalization of the type undertaken under WTO agreements on agriculture tends to be poverty reducing because it covers a much wider range of commodities than just staple foods, and creates opportunities for developing countries in value-added commodities.
Also, wouldn't you agree that it is irresponsible to leak the conclusions of a report to the press without making the full anlaysis available for scrutiny and critique?
The study in question is an unpublished draft that was circulated for review and comment with the stipulation that it should not be cited or released. Unfortunately, someone, somewhere did not respect this request.
On the substance, there is, and needs to be, a lively debate about the relative importance of different contributing factors to the big in crease in prices. The version of the study that I’ve seen takes a very careful approach to decomposing the causes of the increase in prices.
I certainly hope that the completed study will be publicly available very soon to help promote the much-needed debate on this topic.
Major importers of rice, such as the Philippines, tend to have unfavorable geography for rice production. Improvements in production technology can play a big role in reducing the problem, and generally appear to have very high returns that can raise economic growth. By contrast, protection policies lower economic growth.
The food crisis is particularly serious for many African people. I completely agree that improving the performance of African agriculture is extremely important. But protection of uncompetitive sectors is the answer, because it inevitably raises the cost of food to poor people, who spend up to 75 percent of their incomes on staple foods. Improving the productivity and competitiveness of African agriculture through development and extension of improve techniques is critical. The World Bank has recently announced a near doubling in its support for African agriculture. See http://www.worldbank.org/foodprices/
I'd suggest looking at the paper by Ataman Aksoy and Francis Ng in the Bank's Policy Research Working Paper series. To download the paper, see http://go.worldbank.org/2Q90MSGTS0.
The Bank has many instruments to help farmers to expand their production of food. One of the key approaches is through its support for research and development under the Consultative Group for International Agricultural Research, online at http://www.cgiar.org. The Bank's country teams are also very actively engaged in supporting agricultural development both directly and through investments in supporting infrastructure. Through our economic research, we aim to encourage and promote adoption of good economic policies for agricultural development. In a major forthcoming study with Kym Anderson, we highlight, for instance, the high costs of historical practices of agricultural taxation in many countries.