The Global Food Crisis: Creating an Opportunity for Fairer and More Sustainable Food and Agriculture Systems Worldwide

Executive Summary

In 2008, agricultural commodity prices on world markets reached their highest levels in 30 years. In some cases, the nominal prices set new records. The rice rises defied decades of volatile but fundamentally declining commodity prices, a trend only occasionally interrupted by short-lived, supply-related, price spikes. Initially, most developing country governments were not too alarmed. Many of them had pursued policies of trade liberalization and were party to trade agreements that locked other countries into open trade as well. They believed that global supply would be adequate to meet demand, so that if they were to face a domestic shortfall they could easily afford the food they needed on world markets. They were wrong. By late 2007, grain prices were breaking recent records and a number of governments started to panic. Food riots broke out. The media started to talk about food on a daily basis. Suddenly every international agency and most heads of state were talking about the food crisis, setting up task forces and pouring money into emergency relief programmes.

The crisis was an accident waiting to happen. The confluence of factors that led to dramatic price rises starting in 2007 highlights long-standing failures of public policies in relation to agricultural production and food security around the world. Rather than some overwhelming act of nature—described by too many commentators as a “silent tsunami”—the food price crisis is largely human made. Supply shortfalls are cyclical. The weather has always been “make or break” for farmers. But much of the food price crisis is the result of poor policy choices, especially at national and inter-governmental levels. There have been many mistakes, including the abolition of public stockholding, the failure to invest in appropriate agriculture and infrastructure that supports local food production, and the failure to protect ecosystems and natural resources.

Some of the policy mistakes are seemingly not directly related to agriculture, but have had a profound impact on production choices, and on what kind of food is available, and to whom. Policies related to finance and investment, services, and trade have encouraged a gradual global trend towards a more homogenous diet, modelled on the eating patterns established in rich countries. These choices have led governments to ignore biological diversity and the human knowledge associated with cultivating and collecting a broad range of crops and foods.

The authors believe that if governments aim to resolve the crisis by focusing on reducing prices back to pre-2005 levels, not only will they have missed a vital opportunity to strengthen food security and agriculture but they will also quickly find themselves back in crisis, as the underlying problems with global food and agriculture make themselves increasingly apparent. Rather than cheap food, governments need to focus on human and environmental health, on ecological resilience, on increasing the development returns from agriculture, and on a fair distribution of those returns for farmers and farm workers.

Higher agricultural prices can provide the economic and social environment to invest in the transformation of agriculture. Higher prices attract investment because they signal unmet need. At least for now, demand is growing faster than supply. Both public and private investment will rush into the sector if prices remain higher than the historical trend for the foreseeable future. The challenge is to direct the new investment towards the transformation of agriculture: to reduce poverty, increase food security, and improve environmental performance.

Policies focused on securing higher prices to producers of agricultural commodities in developing countries will have to be accompanied by policies that provide support to the more than two billion people who live in poverty, unable or barely able to afford the food they need. But these people are poorly served by a policy that allows commodity prices to hit rock bottom, as they have in recent years. Governments should instead allow higher prices to reach producers while providing targeted consumption subsidies for poor consumers. Polices that pursue the establishment of minimum liveable wage offer a better path to equitable and sustained development than relying on extractive policies that undervalue food and agriculture. People living in poverty are poorly served by policies that allow wilful neglect and outright abuse of the natural resources on which many of them depend for their livelihoods, and which all of us ultimately depend on for our survival.

This paper explores the crisis and the opportunities it presents for transformative change. Building on the work of the EcoFair Trade Dialogue, the paper considers why prices rose, who was affected and how, and then makes proposals for how public policy responses to the crisis could lay the foundations for the transformation of agriculture to a fairer and more sustainable sector.

The policy proposals focus on both short and longer-term interventions. Twelve areas are considered: constraints on biofuels, improved humanitarian aid, regulated speculation, relaxing domestic constraints on trade rules, increased sustainable production, reform of the multilateral trading system, investment in infrastructure, investment in productive capacity, investment in institutions, regulation of market power, the establishment of food grain reserves and energy policy.

Some of the main recommendations include a built-in limit on incentives for biofuels production linked to agricultural prices, to allow technologies and production levels to respect the priority of access to food. Local and domestic use should be the priority for biofuels development. The environmental cost of bioenergy occurs mostly in production (in bad agricultural practices and in the conversion of environmentally sensitive land), while the benefits are mostly for the user of the bioenergy. By emphasizing local use, local benefits are maximized.

Funding for food aid that invests in agriculture in the regions facing shortages rather than relying on food sourced in donor countries is also important. An important pilot project is underway, led by the World Food Programme. Governments, particularly the U.S. Congress, need to re-establish controls over the extent speculators can invest in commodity markets. Countries need to be supported in their efforts to regain the right to both raise and lower tariffs to meet long-term development needs as well as to respond to short-term economic crises.

The model of agriculture supported by any new investment is vitally important. The current push by FAO, the World Bank and many bilateral donors to increase production has to be informed by past mistakes: the real costs of industrial agriculture are already evident, and the lessons learned from agro-ecological alternatives need to be shared and built upon to ensure increased production translates into viable livelihoods for small and peasant producers. Production should be about meeting local and national needs first, with export crops as appropriate but not at the expense of local development.

Governments need to support consumers to afford food at a price that respects producers (including farm workers, whether paid or unpaid members of the farm household) and the environmental constraints on production. Cheap food has proved very expensive for the global commons on which we depend for our survival. Ensuring access to food for all also depends on a reliable grain reserve, both to protect against dramatic price increases when a harvest falls short, and to protect long-term investment in agriculture. Governments need to enforce land reform measures that protect smallholders’ access to their land and that redistributes land where inequality is extreme. The development benefits that derive from investment in agriculture depend on relatively equitable landholdings to materialize.

Markets cannot work without regulation. Agricultural markets are marred by oligopolies and oligopsonies—both buyers and sellers at key points along the value chain can manage prices to their advantage, at the expense of both producers and consumers. The past 20 years of trade and investment deregulation has allowed private companies to expand their control over global food and agriculture at the expense of public policy goals such as ensuring the universal human right to food. There is an important role for the public sector in oversight and regulation, and in some cases, in supplying services the private sector is disinclined or unable to provide.

Governments and intergovernmental organizations must support the establishment of a political and economic voice for small and peasant farmers. This voice needs spaces, including support to set up voluntary associations and cooperatives and transparent policy formulation processes (for global trade negotiating positions as much as for decisions on how and where to set up local irrigation infrastructure). Governments must also pay much greater attention to the needs of women farmers, who are overwhelmingly responsible for food production worldwide (upwards of 70 percent), yet own nearly none of the land, receive nearly none of the extension services, and who are systematically discriminated against by many official agricultural policies.

The EcoFair Trade Dialogue outlined seven principles on which a vision of agricultural trade should be based. They are multifunctionality (respect for agriculture’s contribution beyond the material world, to political, social and cultural life), human rights, environmental integrity, democratic sovereignty, extra-territorial responsibility, economic subsidiarity, and trade justice. The principles make good sense. A low price, high dependence on fossil-fuel agriculture, deregulated trade and investment environment did nothing to advance that vision. Farmers around the world have alternative ideas that promise much better results. Governments can make something of this wake-up call if they choose to. We hope that they do.

About the authors

Sophia Murphy, currently living in Australia, is Senior Advisor to the US-based Institute for Agriculture and Trade Policy (IATP) and an internationally recognized expert in food and trade issues. She has authored a number of papers on food security, multilateral trade rules and the structure of global agricultural markets. She has a BA from the University of Oxford in politics, philosophy and economics and a Master’s from the London School of Economics in social policy, planning and participation in developing countries.