Spiralling food prices and the way forward


Food PricesThe term ‘Food Crisis’ has captured the world’s attention as being one of the biggest challenges facing the global economy today. The media has consistently covered this issue over the past few months. What is causing the global food crisis? What is the nature of this crisis in
Pakistan? What is the solution to this problem? This article is aimed at examining food crisis situation by answering such questions.

Since the past few years, the world has witnessed sharp increases in food prices. This has led to global social unrest and caused political and economical instability in both developing and developed countries. From 2006 onwards, the average world price for rice has risen by 217 per cent, milk by 170 per cent, wheat by 136 per cent and maize by 125 per cent. Consequently, as estimated by the UN International Task Force, 854 million people are in a state of food insecurity around the world.

Numerous reasons have been put forth for the worldwide rise in food prices. Initially, in the causes for such increases included unseasonable droughts suffered by grain producing countries and hike in oil prices. The costs of fertilizers, food transport, and industrial agriculture have been further increased due to oil prices. Other reasons could be the greater utilization of biofuels by the developed world, depreciation of the US dollar and an escalating demand for a more varied diet acrossAsia among the expanding middle-class populations. These factors, coupled with declining world food stocks have all led to the world-wide rise in food prices to unprecedented levels. Long-term causes may include structural changes in agricultural and trade production, agricultural subsidies in developed countries, greater diversion of production of food to high input foods and fuel, commodity market speculation and climate changes.

The world’s financial experts have placed Pakistanon a list of 36 countries that face a serious food crisis issuing the warning that people may raid food storage areas if the situation becomes worse. The state of the food crisis in Pakistanhas two sides; the first is unavailability of edibles and the second is sharp increases in prices because of the gap between demand and supply. ‘A Global Call to Action Against Poverty’ (GCAP) report states that the failure of governments, including Pakistan’s, to monitor prices in a transparent way and support food production and storage before the crisis reached this alarming level, are major causes of the current food crisis.

According to the Asian Development Bank, an estimated 1.2 billion poor people who spend about 60% of their income on food have been hit hard in Asiadue to the food crisis. This situation is leading to further social unrest in Pakistan, causing hunger among the poor and having adverse effects on their health, particulary for the rural poor and the middle class. Reports of suicides caused by extreme poverty indicate that indigence is becoming unbearable for many. Furthermore, child nutrition is also severely affected by insufficient intake of nutritious food. In its annual report for 2007, UNICEF confirmed that yearly, about 420,000 children under the age of five die in Pakistanand warned that this infant mortality rates could rise further if the government did not overcome the predicament of food inflation.


For farmers in developing economies, if global price movements transmit to local markets, they could benefit from food price increases. However, according to the Overseas Development Institute, this mainly depends on farmers’ capacity to respond to changing market conditions. Previous evidence suggests that farmers are incapable of responding in the short-term due to unavailabity of inputs and credit. However, in the long term, they could benefit, but this would require strong institutional support to gain access to the required inputs and loans.

Now the question arises: What can be done to curb this food crisis? International organisations are proposing various action plans as solutions for this diifficult situation. The answers fall into three broad categories: humanitarian solutions; trade and other policy measures; and a rise in productivity and production in the long run.

The World Bank’s President, Robert Zoellick, in this context, has put forward a 10-point plan for solving the food crisis. It has been proposed that protecting the most vulnerable (about one- third of the world’s population) must assume the greatest priority. A safety net in the form of buffer stocks that can be distributed at affordable prices seems to be the best response for the problem. Robert Zoellick has also urged countries not to employ export bans to protect food stocks. “These controls encourage hoarding, drive up prices and hurt the poorest people around the world” he stated. UN Secretary General Ban Ki-Moon has suggested measures like expanding aid, boosting small-holder production and minimizing export restrictions and import tariffs. There is also a need to protect the available farm land and invest in improving agricultural productivity. The notion of a green revolution needs to be turned into a sustainable long-term reality.

Pakistanneeds a cohesive strategy including the emphasis on revising the import parity pricing formula and revised structure of taxes levied on petroleum products. In addition it requires further demand and supply management in the energy, agriculture, and communication sectors. Therefore, the government must take concrete steps to curb the food crisis. The Planning Commission of Pakistan, in addition to Ministry of Finance among other ministries, should also take the lead in formulating proposals in this regard. The accountability of the political leadership, which was responsible for current energy deficit and the resultant price hikes, is also required. In addition, agriculture productivity needs to be increased with innovative approaches such as the use of aricultural extension services.

The food crisis calls for an immediate response of the international community. The Australian Government is formulating a long-term action plan for food security, its latest response being to provide food assistance inPakistan, in addition to some other countries. Other developed countries also need to take long-term measures in this direction.

According to Martin Wolf (Financial Times), “The food crisis of 2008 is a cry for our attention.” There is an urgent need for quick policy measures. There are choices to be made between aiding the poor and letting more starve and between investing in enhancing supply and letting food deficiencise to rise. We know the correct policy options and must take immediate action.



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