A Devastating Perfect Storm

Global Food Prices Continue to Rise

Jake Caldwell explains why a confluence of factors is making a bad situation worse for the world’s poor, with possible cuts to U.S. food aid just over the horizon.

Global food prices increased for the eighth consecutive month in a row, according to a report released today by the United Nations Food and Agriculture Organization, soaring to record levels last month—with devastating consequences for the world’s poor. Food prices are on the rise due to growing populations and rising incomes across much of the developing world alongside tight supplies, high oil prices, and stockpiling of imports as the main factors, although profound uncertainty regarding future harvests due to global warming is also a clear catalyst.

The FAO report is the latest troubling analysis to land at the feet of U.S. policymakers as they consider the possibility of deep and misguided cuts to U.S. food assistance by Congress in the coming weeks. The World Bank estimates that the spike in food prices since June has placed 44 million people into extreme poverty. And the U.S. Department of Agriculture is forecasting U.S. food prices will increase 4 percent this year, squeezing already tight family budgets.

FAO food price index

Yet as food prices continue to climb, conservatives in the U.S. House of Representatives are responding by slashing the budgets of the very U.S. government assistance programs that hold the most promise to end the misery and despair that global hunger brings. The House-passed budget proposal, H.R. 1, sends our overseas food aid commitments backwards to 2001 levels, slashing $800 million from the food aid budget at the precise moment when it is needed most and when it will have the greatest impact.

These drastic and shortsighted cuts will inevitably lead to more people going hungry around the world, lost opportunities to sell U.S. products and services in healthy overseas markets, and increased levels of global poverty and instability that threaten our national security. The funding for agricultural investment and emergency food aid needs to be restored immediately.

In particular, Congress needs to embrace the Obama administration’s $1.64 billion budget request to bolster the U.S. investment in global food security through the Feed the Future initiative, which is included in his budget proposal for fiscal year 2012, which begins in October this year. U.S. overseas agriculture assistance today stands at only 3.5 percent of overall U.S. development aid, down from 18 percent in 1979.

These funds are urgently needed. Agricultural productivity growth in developing countries is now less than 1 percent annually. The Feed the Future initiative puts us back on the right course by prioritizing investment in agricultural development in developing countries and establishing partnerships with key countries to leverage local and technical expertise in sub-Saharan Africa and other regions. As the global population surges to 9 billion by 2050, the Feed the Future program represents a forward-leaning investment in the world’s capacity to produce and make accessible more food for all.

The program deserves the nation’s full support, especially due to uncertainty about future harvests and overstretched capacity in the global food system in the face of climate change. In the past year, a series of extreme weather events have increased the level of uncertainty and unpredictability surrounding the success or failure of upcoming harvests. The status of future food stocks are affected by flooding in Australia, Pakistan, and Brazil, and unprecedented heat waves and drought in Russia, Ukraine, and now China. Heavy rains in Iowa and Illinois and dry conditions in key U.S. wheat growing regions such as Kansas and Colorado are also sending prices higher and playing havoc with harvest forecasts.

Leading global companies such as reinsurer Munich Re, whose business it is to know and understand natural disasters, recently noted “It would seem that the only plausible explanation for the rise in weather-related catastrophes is climate change.” And the American Association for the Advancement of Science reports that extreme weather events such as drought and heavy rains exacerbated by climate change are already having an effect on the safety of the world’s food supplies as crops are wiped out and health threats to humans from such toxic organisms as mycotoxins flourish in scarce food supply conditions.

Indeed, the consequences of climate change on agriculture could well be even more severe in the coming decades. Agriculture in the United States and the world is at risk from the negative effects of rising temperatures, prolonged drought, and increased evaporation and water consumption. And a rising sea level will lead to more intense flooding and the potential loss of limited arable land. As resources become more scarce, mass migrations of millions of people will intensify.

Given the magnitude of the coming crisis, it is in the national security interests of the United States to provide financing to allow the most vulnerable developing countries to prepare for and adapt to the effects of climate change in agriculture and development. Congress must act to restore funding for climate change adaptation, drought resistance, and tropical forest conservation, consistent with the commitments the United States has made to the world.

The Group of Twenty industrial and industrializing nations have pledged $20 billion for agricultural development in developing countries, and $6 billion for a World Bank fund for food security. To date, however, only $925 million has been delivered. At its June 2011 summit, the G-20 plan to make global food security a centerpiece of their annual summit. In order for the world to make progress on ensuring reliable and affordable access to food, all nations must fulfill their financial commitments.

Of course, rising oil prices also are driving food prices higher. Oil and fossil fuels are a significant agricultural input cost, from fertilizer and crop production, to fuel to drive machinery for farmers and producers. The price of oil also has an impact on the cost of storage and transportation of food around the world. As oil prices rise, inflationary pressures send food prices soaring in both developing countries and the United States.

World food index vs. Brent oil price

This is why the United States also must reduce its dependence on foreign oil. The United States must maintain and increase efforts to improve fuel efficiency, invest in non-fossil fuel based research and transportation infrastructure, and bring advanced biofuels to commercial scale. And in light of current ethanol policy and the growing competition for grain, there is a need in the United States to transition beyond corn as a biofuels feedstock and strive to produce advanced biofuels that deliver measurable life cycle greenhouse gas reductions, utilize non-food based feedstocks grown in closed tanks or on semi-arable land that does not compete with food or feed.

Finally, the United States needs to take the lead in combatting shortsighted government and private-sector actions such as government food-export bans and the hoarding of tight supplies. Prohibiting the export of essential staples and the secretive stockpiling of grain supplies are government practices that must end. In addition, subsidies and tariffs in developed countries, and barriers to trade between developing countries must be eliminated.

Eight consecutive months of rising food prices are a threat to global health and poverty reduction. We have moved well beyond a wake-up call. The increases in food and fuel prices are hurting families all over the world, roiling markets, and threatening to stall the global economic recovery. The world needs to work cooperatively toward investing in agriculture, combating climate change, and promoting open and transparent government actions. Congress needs to fully fund the U.S. commitment to agricultural development and food security.

Ultimately, the global food system is resting on a knife’s edge with little margin for error. The condition of new crops due in a few months is now paramount. In order to prevent a full-fledged food crisis, the world will require good harvests in the major food producing nations in the coming months, and the strong political will to make the long-term investments in global food security immediately.

Jake Caldwell is Director of Policy for Agriculture, Trade and Energy at the Center for American Progress.

See also

Making Egypt More Food Secure by Jake Caldwell

The Coming Food Crisis (Foreign Policy) by John Podesta and Jake Caldwell

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