Food Prices and World Hunger

The following is a summary from “Escalating Food Prices”, a UNICEF publication by Ortiz et al., 2011:

Worldwide food (dairy, meat, sugar, and oilseeds) and cereal prices have each increased 75% since 2007. The 2007-2008 food crisis (remember when gas and corn got so expensive?) was partly caused by weather issues (Drought in Eurasia and South America, Flooding in Central and North America) that produced crop shortfalls. Other than that, it was pretty politically driven by energy matters.

Government policy can directly impact food economics worldwide. For example, Russia in 2010 announced its ban on grain exports, and European wheat futures flew up 12% within that one day.

The relationship between financial speculation pressure and food prices was also observed. Buying commodity futures is supposed to be about “hedging” risk, but rather it has turned into an investment game just like any other non-food commodity or stock. Two percent of the time, contracts end on the commodity delivery date. The remaining 98 percent are traded before they expire so that speculative gains may be won. This kind of activity adds to volatility in food commodity markets, which can threaten the lives of people around the world who await the physical commodities as food.

Additionally, what might be a slight price increase in richer countries consistently has poorer countries feeling a sharply increasing price. Low-income countries paid an average of 8.3% more for food than higher-income countries. Higher food costs in poor households increases debt, malnutrition, child labor, mothers and fathers’ work hours. It decreases meals eaten and medical attention sought.

From 1970 to 2010, the number of hungry persons has increased from slightly less than 900 million to just over 900 million. The proportion of the world’s population that this represents has decreased from just under 40% to around 16%, going from about 1 in 3 people hungry to about 1 in 6 people hungry worldwide. However, it should be noted that in the food crisis of 2008, that number of hungry people spiked to over 1 billion (20%, or 1 in 5 people hungry worldwide). Rising prices in food can generate more poverty, economic inequality, and inflation.

According to Nobel Peace Prize winner Amartya Sen who research worldwide hunger, the main obstacle for feeding everyone is food’s distribution and access. A greater need for transportation and storage infrastructure as well as for domestic agriculture exists in hungry countries. More attention has been brought to the matter of excessive commodity speculation and many governments have pledged to increase supervision of these activities.

Governments can respond to or prepare for food crises by:

Managing Consumption:
Food assistance, price subsidies, price controls, cash transfers, lower taxes, food-for-work

Managing Production:

Creating production subsidies, lowering taxes

Managing Commodity Markets:

Lowering import tariffs, building up food stocks, banning imports, raising tariffs, banning exports, price support

For the poor across the world, from the U.S.A. to the Sudan, increases in food price can stomp out someone’s dreams, unravel the family structure, disempower, sicken and even kill. You may hear over and over that the U.S. average is 10% of the income is spent on food (USDA 2008 Percent ofIncome Spent on Food). We are so blessed to have up to 90% of the rest of our income to spend as we please. Some of our “Media Foodies” disagree with this, saying we need to be spending a greater portion of our income on food, but they never suggest what is to be eliminated from our expenditures to make this replacement possible. Even when local, fresh food is available, fabulous, and nationally famous, the neighbors just might not come and buy it if it’s too expensive. Remember the book Animal, Vegetable, Miracle? Their farm store isn’t doing too well financially. Pressing the local food movement on people just won't work if it doesn't work in their budget.

We rarely hear that currently, low-income (< $20,000/y) Americans spend 19 - 25% of their income on food. Americans spent about 25% (on average) of their income on food in 1930. Still, middle income countries spend 25-40% per capita on food, while low income countries spend from 40 – 47% (US Census Data, 2012). Again, how blessed we’ve been with equipment improvements and mechanizations, hybrid seeds and advanced breeding techniques, fertilizer and safe pesticides, that even at our “poorest” this last century, we were still eating like middle-income countries! 

What do you Think?