CIAO DATE: 07/2008
Rising Food Prices: Drivers and Implications for Development
Alex Evans
April 2008
Chatham House
Abstract
- Global food prices have risen 83 per cent over the last three years. The increases have been driven by high income growth in emerging economies (probably the single most significant factor), use of crops for biofuels, the relative inelasticity of supply, historically low stock levels and some speculative investment.
- More recently, national concerns over inflation and prices have led some countries to reduce exports and others to try to build up stocks - creating a feedback loop that feeds on itself to drive prices up still further. In the medium to longer term, 'scarcity trends' - climate change, the cost of energy inputs, scarcity of land and water - could limit the supply-side response.
- In the immediate term, the priority is to increase both the volume and the quality of humanitarian assistance available to poor people, including by moving away from in-kind food aid and towards cash transfers or voucher systems - although it is important to be clear that there are outstanding questions about how these social protection systems will work, and they should not be seen as a panacea. The issue of compensatory financing may also arise for some countries facing balance-of-payments difficulties.
- In the longer term, the key challenge is to increase the supply of food: the World Bank estimates that demand for food will rise by 50 per cent by 2030, as a result of rising affluence and growing world population. Achieving this challenge will require something close to a revolution, and a massive investment in agriculture in developing countries.
- If supply fails to keep pace with rising demand, then the question of 'fair shares' is likely to emerge as a significant global issue. Already, the effect of a burgeoning global middle class switching to diets with more meat and dairy products - both relatively inefficient in terms of grain use - has been to reduce the affordability of staple foods for poorer consumers.
Resource link: Rising Food Prices: Drivers and Implications for Development [PDF]
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