World Food Crisis: Canada needs to step it up
posted Wednesday, 16 April 2008
Context
Since the 1970s, the cost of agricultural commodities has steadily decreased. This drop can be linked to agriculture subsidy policies forwarded by OCED countries. Now, after years of decline, agriculture community prices (in real terms), are increasing. Indeed, the global costs of food has increased 20% since 2006.
Two factors distinguish the current shift in prices from others. First, the price rallies are expected to last longer. Second, the price increases are affecting all major food and feed commodities.
To put the increase in context, commodity prices (again, in real terms), are comparable to highs experiences during the Asian crisis in the mid 1990s and are lower than 1970 levels.
A shift away from subsidy policies coupled with resource constraints (water) and a slower diffusion of existing and new technologies could restrain the growth of food supplied as world demand continues to increase. In this context, it is unlikely that food commodity prices will drop to the lows of the last two decades.
In low-income countries and those facing food defecate, a rise in food costs presents significant social problems and will undoubtedly negatively impact the balance of payments for these countries.
Developing nations could not compete with subsidized agriculture in OECD countries and consequently, investment in agriculture declined leading to agricultural dependence. As subsidies decrease there is the potential that higher commodity prices could trickledown to the farm level leading to positive impact on food production and rural economies.
A report released in April 2008 by the International Assessment of Agriculture Science and Technology for Development (IAASTD), a group sponsored by the World Bank, FAO and WHO, concludes that food trade liberalization in developing countries can hurt attempts to alleviate poverty and is likely to damage the environment.
Sixty governments, including Brazil, India, China and France, have approved the report. Australia, Canada and the US are to submit their reservations later this week and the UK has yet to offer a response.
Understanding the rising food prices
1. Low levels of world stock
2. Crop failures
3. Rapidly growing demand for grain-based bio-fuel production supported by subsidies
4. Shifts in agriculture policies of OECD countries
5. Strong economic growth in developing countries and expanding world population
6. Agricultural markets are increasingly linked and intertwined with non-agricultural markets (e.g., energy, manufacturing)
7. Climate change and resource constraints (notably water)