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The Environmental Food Crisis

CURRENT WORLD FOOD CRISIS

The current world food crisis is the result of the combined effects of competition for cropland from the growth in biofuels, low cereal stocks, high oil prices, speculation in food markets and extreme weather events. The crisis has resulted in a several-fold increase in several central commodity prices, driven 110 million people into poverty and added 44 million more to the already undernourished. Information on the role and constraints of the environment in increasing future food production is urgently needed. While food prices are again declining, they still widely remain above 2004 levels.

Figure 1: Changes in the prices of major commodities from 1900 to 2008 reveal a general decline in food prices, but with several peaks in the past century, the last and most recent one the most extreme. (Source: World Bank, 2009).

The objective of this report is to provide an estimate of the potential constraints of environmental degradation on future world food production and subsequent effects on food prices and food security. It also identifies policy options to increase food security and sustainability in long-term food production.

While food prices generally declined in the past decades, for some commodities, they have increased several fold since 2004, with the major surges in 2006–2008 (Brahmbhatt and Christiaensen, 2008; FAO, 2008; World Bank, 2008). The FAO index of food prices rose by 9% in 2006, 23% in 2007 and surged by 54% in 2008 (FAO 2008). Crude oil prices, affecting the use of fertilizer, transportation and price of commodities (Figures 1 and 2), peaked at US$147/barrel in July 2008, declining thereafter to US$43 in December 2008 (World Bank, 2008). In May 2008, prices of key cereals, such as Thai medium grade rice, peaked at US$1,100 /tonne, nearly threefold those of the previous decade. Although they then declined to US$730/tonne in September (FAO, 2008), they remained near double the level of 2007 (FAO, 2008). Projections are that prices will remain high at least through 2015. The current and continuing food crisis may lead to increased inflation by 5–10% (26–32% in some countries including Vietnam and the Kyrgyz Republic) and reduced GDP by 0.5–1.0% in some developing countries.

Among the diverse primary causes of the rise in food prices are four major ones (Braun, 2007; Brahmbhatt and Christiaensen, 2008; World Bank, 2008): 1) The combination of extreme weather and subsequent decline in yields and cereal stocks; 2) A rapidly increasing share of non-food crops, primarily biofuels; 3) High oil prices, affecting fertilizer use, food production, distribution and transport, and subsequently food prices (Figure 3); and 4) Speculation in the food markets. 

Figure 2: FAO food commodity price indices 2000-2008. (Source: FAO, 2008).

Although production has generally increased, the rising prices coincided with extreme weather events in several major cereal producing countries, which resulted in a depletion of cereal stocks. The 2008 world cereal stocks are forecast to fall to their lowest levels in 30 years time, to 18.7% of utilization or only 66 days of food (FAO, 2008).

Public and private investment in agriculture (especially in staple food production) in developing countries has been declining relatively (e.g., external assistance to agriculture dropped from 20% of Official Development Assistance in the early 1980s to 3% by 2007) (IAASTD, 2008; World Bank, 2008). As a result, crop yield growth became stagnant or declined in most developing countries. The rapid increase in prices and declining stocks led several food-exporting countries to impose export restrictions, while some key importers bought cereal to ensure adequate domestic food supply (Brahmbhatt and Christiaensen, 2008). This resulted in a nervous situation on the stock markets, speculation and further price increases.

Figure 3: Changes in commodity prices in relation to oil prices. (Source: FAO, 2008; IMF, 2008).

The impacts of reduced food availability, higher food prices and thus lower access to food by many people have been dramatic. It is estimated that in 2008 at least 110 million people have been driven into poverty and 44 million more became undernourished (World Bank, 2008). Over 120 million more people became impoverished in the past 2–3 years.

The major impact, however, has been on already impoverished people – they became even poorer (Wodon et al., 2008; World Bank, 2008). Rising prices directly threaten the health or even the lives of households spending 50–90% of their income on food. This has dire consequences for survival of young children, health, nutrition and subsequently productivity and ability to attend school. In fact, the current food crisis could lead to an elevation of the mortality rate of infant and children under five years old by as much as 5–25% in several countries (World Bank, 2008). The food situation is critical for people already starving, for children under two years old and pregnant or nursing women (Wodon et al., 2008), and is even worse in many African countries. Although prices have fallen between mid-2008 and early 2009, these impacts will grow if the crisis continues.