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Datamyne Resource Center

Covering trade & transport, with tips on using import-export data to advantage

Sizing up the Usual Suspects

Sorting out possible causes as yet another global food crisis looms

The world’s poorest are at risk of being priced out of the market for food because … we’re burning corn and other staple crops for biofuel … the rising middle classes in the BRICs and beyond are eating more meat … extreme weather is destroying grain supplies at the source … speculators in global commodities markets are driving up prices … any, all, or none of the above.

A new monograph, Reflections on the Global Food Crisis, from the International Food Policy Research Institute (IFPRI) aims at coming up with the right answer by analyzing the available data on the causes and consequences of the 2007-08 food crisis.

The IFPRI researchers find that some explanations hold up much better than others. The strongest case can be made against the interaction of rising energy prices, the depreciation of the U.S. dollar, low interest rates, and investment portfolios swinging to commodities. The 2008 spike in rice prices, however, stands apart as a bubble phenomenon.

The IFPRI monograph dismisses rising demand for meat, slowing yield growth in cereal production, or declines  in national grain stocks as significant contributors to sharply higher prices worldwide, as the global market takes these fluctuations in supply and demand in stride. The great threat to food security is the longer term regional imbalance in cereal production that makes large swaths of the developing world dependent on imports.

IFPRI concludes that there is a “strong possibility” that recurring crises are built into the current global food system, “which is pervaded by various distortions of production, trade, and agricultural investment and suffers from a huge regional imbalance in cereal production.”

Demand for biofuel and climate change will continue as daunting challenges to production. To correct the distortions in trade, the researchers recommend either a more formal arrangement to ensure adequate global grain reserves (which are maintained by just a few exporting countries) or much more free trade in agricultural products (which would preclude export restrictions on commodities).

Source: FAO Global Information and Early Warning System (GIEWS)

Date posted: January 18, 2011


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