Widespread famine

This development was to be expected. The past year was marked by three global crises, all of which had negative impacts on the food situation worldwide. It started with the 2007-2008 food crisis, which was sparked by extremely high food prices and caused a rise in the number of people exposed to hunger from 800 million to 900 million. It was followed virtually at once by the economic and financial crisis, which further exacerbated world food situation. The third crisis, climate change, manifested itself in the same period of time, particularly in major droughts and crop failures in many parts of the world.

But back to the topic of the food crisis. Following years of low food prices - which benefitted the urban population in developing countries, while at the same time harming small-scale agriculture - food prices suddenly soared in 2006-2007, soon reaching record levels. The reasons for this rise in prices were many and varied. On the one hand, high oil prices led to a rise in production costs, above all for diesel and fertilizers. On the other hand, the numerous biodiesel support programs adopted by a good number of industrialized countries served to raise the competitiveness of biodiesel, leading regionally to further rises in food prices. Extensive crop failures, e.g. in Australia, led, in addition, to a rapid and sharp depletion of world grain stocks. This, in turn, led to "panic purchasing", and many countries imposed restrictions on food imports with the aim of securing their own populations' food supply. This in turn encouraged financial market speculation, leading to further price increases.

Financial instability played a role

As far as medium-term developments are concerned, though, it appeared at first that the food crisis had one positive effect: growing expectations that investment in agricultural development might pay off again, restoring the economic viability of small-scale agriculture. However, the world was then shaken by the economic and financial crisis before any effects of this kind had been able to materialize. Commodity prices went into decline again, dragging grain prices in the most important international markets along with them. While this entailed a slight short-term improvement in the food situation, it ultimately undercut incentives to invest in the agricultural sector, leading to a decline in the ability to invest. Declining direct investments and remittances from abroad as well as sinking government revenues led to sharp declines in household incomes, especially in poor developing countries.

Since a crucial factor in investment decisions is not only the current price level but its stability as well, the economic crisis has served to seriously hamper investment decisions. For the famers affected, this rising uncertainty is reflected in increasingly costly loans at markedly unfavorable terms.

The food crisis is thus by no means over, even though this may have seemed to be the case during the brief improvement in the food situation, and with the economic crisis drawing attention away from the food crisis. It is still very much with us, and will continue to be with us until effective counter-measures have been taken.

So, what can we do?

Investing in agriculture is essential

Despite the setbacks recently experienced, increased investment in agricultural development continues to be the only way to increase the food supply and to enable poor countries in particular to lower their dependence on international grain prices. It is essential that steps be taken to better protect agricultural systems against sharply changing weather events due to climate change, as well as to shield them more effectively from the effects of volatile developments in world market prices. But another factor of major importance is that the financial commitments made to the UN World Food Programme by industrialized countries be honored in full and that the International Monetary Fund (IMF) adopt a coherent policy designed to mitigate "external shocks" of this kind.

However, developing countries also need to step up their engagement as far as a consistent implementation of the Comprehensive Africa Agricultural Programme (CAADP), a fledgling structure of the New Partnership for Africa’s Development (NEPAD), is concerned. It will take nothing less than a "green revolution" in Africa to make up for the deficits of the past. Instead of following the old model, though, it should contain a policy geared to consistent adaptation to climate change and remain mindful of the sharp fluctuations in international prices for agricultural inputs. This would imply a shift from agriculture based on high levels of external inputs to land management centered on efforts to conserve water and to raise soil fertility and geared to intelligently combining these strategies with sustainable seed cultivation and irrigation technologies, with the aim of increasing local buffer capacities for times of drought.

Leading regional powers like China and India should, in addition, become involved in working out crisis plans designed to increase international buffer capacities, including, for example, world grain stocks, bearing their own situation in mind as well. One thing that would be called for is development of strategies to reduce the increasingly meat-based nutritional habits of the more prosperous segments of the world population. Not only that - over-nutrition is plainly and simply unhealthy. As a mass phenomenon, and in view of the present food crisis, the only term that seems appropriate to characterize the fact that that even today over 1.2 billion people are overfed is cynicism. What this means in effect for word agriculture is that animal food products - especially those based on grain-eating livestock - require far more land and water to produce the same quantity of food for each individual. And we can no longer afford to do this.

Dr. Susanne Neubert is a researcher in the Environmental Policy and Management of Natural Resources department at the German Development Institute (DIE).

Based in Bonn, the German Development Institute draws together the knowledge of development research available worldwide, dedicating its work to key issues facing the future of development policy. It consults on the basis of independent research findings in Germany and worldwide and deals with current issues in cooperation between industrial and developing countries.