A new report calls for immediate short-term action to deal with the worldwide food price crisis. The Overseas Development Institute, ODI, says the crisis can be managed, but warns the problem cannot be blamed entirely on bio-fuels.
As world leaders and UN and humanitarian agencies scramble to deal with soaring food prices, many are asking if the crisis was a surprise.
“Yes it was,” says Steve Wiggins, a research fellow at the Overseas Development Institute. “If someone had asked me 18 months ago where food prices would be going I would have said they would have followed the 50 year plus trend that we’ve seen, which is that prices of food and most commodities have been moving downward steadily, with only one or two significant interruptions over about a 50 year period.”
He says the crisis can be managed as long as the world deals with the short-term effects of price spikes for such things as wheat, maize and rice.
He says first, action must be taken to help the very poor.
“There are probably two things you can do. One is you can look to find ways of enhancing their income. You can probably think about giving people, for what we believe will be a temporary price spike, vouchers, food stamps to reduce the cost of the food to people who are at risk. You can think about expanding food for work schemes for people who don’t have enough income, but are also unemployed and would like a job,” he says.
He says another option is food subsidies, but then the question is when to end them.
“But at a time when we believe we have a temporary spike, there are good reasons to take temporary and unusual measures, such as putting in some kind of food subsidy,” he says.
He says subsidies are a better choice than price controls or banning the export of food. Wiggins says the long-term solution requires much greater investment in agriculture, which has a ripple effect helping many other associated workers and industries.
“We’ve always argued that nothing reduces poverty quite as much as agricultural development,” he says.
Bio-fuel production has been taking much of the blame for the current spike in food prices. Wiggins says it is one cause.
“Last year, we have reports that in the USA something like 80 million tons of the US maize (corn) harvest went into ethanol distilleries. Now to give you some idea what 80 million tons is, in the years preceding that the US exports of maize onto the world market, and the US is by far the largest exporter of maize onto the world market, were running at 50 million tons. So the maize going to the ethanol is actually larger than the total amount that America had been exporting in the recent past,” he says.
However, he says bio-fuel production doesn’t deserve all the blame. Rice prices have soared in recent months, and rice has no connection to ethanol production or maize harvests.
“The main reasons that we’re looking to explain this have been some unusually poor harvests in countries such as Australia. We know that there have been poor harvests in places like the Ukraine. These are both places which are potentially quite large surplus exporters onto the world market of cereals,” he says.
He says at the same time, large stocks of cereals that used to be held in the United States, India, China and Europe have been depleted and are less available to deal with the crisis.
Wiggins says current price projections for five to 10 years down the road are calling for food prices to be 20 to 40 percent higher than they were around the year 2000. He also warns that the long-term, destabilizing effects of climate change could also have a major effect on food production.