Shenggan Fan, Director General of the International Food Policy Research Institute (IFPRI) outlines five strategic measures that will help prevent a rapid surge in agricultural commodity prices. [1
Shenggan Fan, Director General of the International Food Policy Research Institute (IFPRI) outlines five strategic measures that will help prevent a rapid surge in agricultural commodity prices. [1 page]
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October 1, 2010
Five Steps to Prevent a Repeat of the 2007–08 Food Crisis
Shenggen Fan, Director General
T he recent volatility of agricultural commodity prices
has caused some observers to wonder if another
food crisis, similar to the one that occurred in 2007–
2. Effective social safety nets are needed to protect the
most vulnerable groups, including women and child-
ren. In the long term, these safety nets should be
08, is looming on the horizon. Three years ago, a variety combined with other interventions that increase pro-
of factors combined to create a ―perfect storm‖ in food ductive capacity and improve the nutrition and
prices. This time, natural disasters—amplified by harm- health of the poor.
ful trade policies—are fueling concern. Massive flooding 3. Smallholder productivity-enhancing mechanisms
in Pakistan affected about 15 million people and ruined are needed to sustainably reduce hunger and poverty.
more than 1.6 million acres of monsoon-season crops, Investments should be scaled up to improve small-
while severe drought and wildfires in Russia generated holder access to inputs such as seeds and fertilizer,
large losses in the country’s wheat crop and led to a tem- as well as financial and extension services and crop
porary ban on grain exports. Food prices have sharply insurance. New agricultural technologies suitable for
increased in some countries; food inflation has now smallholders in developing countries should also be
reached 15 percent in India, and food prices have risen strongly promoted, and rural infrastructure should be
by 34 percent in Mozambique during the past 6 months, strengthened to increase access to markets.
contributing to massive protests.
4. An international working group, comprised of key
There is no reason for another food crisis to occur, institutions such as FAO, IFPRI, the World Bank,
based on an examination of market fundamentals. the World Food Programme (WFP), and the World
Russia accounts for only 11 percent of world wheat ex- Trade Organization, should come together to regu-
ports, and the Food and Agriculture Organization of the larly monitor food production, stocks, prices, and
United Nations (FAO) projects global grain production policies in a coordinated, transparent, and timely fa-
this year to be the third highest on record. In addition, shion. Close attention should be paid to the policies
the latest estimates from the U.S. Department of Agricul- of large food importers and exporters. In particular,
ture (USDA) indicate that global wheat production in governments should be encouraged to eliminate ex-
2010–11 will be 7 percent higher than it was during the isting export bans and refrain from imposing new
food-price crisis in 2007–08, even after tallying all ones.
known losses. Today, there are 175 million metric tons
5. New institutional arrangements should be created
of global wheat stocks—nearly 50 million metric tons
to decrease price volatility in agricultural commodity
more than in 2007–08. While price volatility is a major
markets and to deal with humanitarian emergencies.
concern, IFPRI research suggests that the global wheat
A global, coordinated grain reserve, owned and ma-
supply is secure and that the long-run expectations of
naged by the WFP, should be established through
food-commodity traders are not as negative as recently
donations from large food producing countries, such
reported in the media. Global production of rice and
as the United States and China. The reserve should
maize is also projected to exceed 2007–08 production by
be physically located in these large food producing
5 and 4 percent, respectively, according to the USDA.
countries, as well as in food importing poor coun-
However, caution is warranted. The current global tries, such as Ethiopia and Bangladesh, for easy
food situation could trigger a crisis if countries impose access in times of emergencies. Regional reserves
export bans and make panic purchases and if uncon- for specific commodities could be set up first, then
trolled, excessive speculation re-emerges. Thus, careful scaled up to the global level. Better regulations
and appropriate measures are urgently needed: should be designed to avoid excessive commodity
1. Countries with large grain stocks (such as China and speculations by noncommercial institutions. A global
India) should release some of their reserves to calm market-analysis unit could be created to help fore-
down domestic prices and send positive signals to cast prices, identify price abnormalities, and trigger
global markets. When distributing public food sup- market intervention.
plies, it is important to properly target poor people.