Mitigating the Nutritional Impacts of the Global Food Price Crisis Workshop Summary (2010) / Chapter Skim
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2 The Dual Crises: Tandem Threats to Nutrition
2 The Dual Crises: Tandem Threats to Nutrition
Pages 13-30
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From page 13... ...
Then the recent abrupt increases in global food prices, exacerbated by the current global economic downturn, began to threaten the hoped-for trajectory of progress. Between March 2007 and March 2008, price increases of 31 percent for corn, 74 percent for rice, 87 percent for soya, and 130 percent for wheat were documented (Hawtin, 2008)
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From page 14... ...
On the demand side, these factors included biofuel production, increased demand for meat and dairy products, increased feed demand, economic growth in middle-income countries, and economic recession. The market factors included low and falling stock levels, capital market transfers (capital invested into commodity futures)
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From page 15... ...
This increase in demand resulted in the pulling away of food commodi ties from the food market. Supply reduced, and food prices rose.
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From page 16... ...
Market Factors There were also various market factors contributing to the rapid increase in food prices. Stock levels, especially of grain, were very low from 1998 onwards.
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From page 17... ...
Even in the United States, some retail chains rationed rice for a short period of time. Impact of Food Price Fluctuations Factors that determine the impact of food prices at the household level include: • Price transmission, • Whether the household is a net buyer or net seller, • Household budget share for food, • Extent of value addition, • Relative price changes among diet components,
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From page 18... ...
Therefore, it is important to remember that there is not a direct link between global trade policies and the prices that poor people are faced with in developing countries. Another factor that determines the impact of food prices on a household is whether the household is a net buyer or net seller.
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From page 19... ...
Governments are motivated to stay in power, which requires national support. This desire to maintain legitimacy when food prices began to increase led to price controls, export bans, reduced import tariffs, rationing, and food distribution.
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Attempts to be self-sufficient will cause increased food pro duction where it should not necessarily be produced, while disincentivizing food production where it is most efficiently produced. The strong links between oil and food prices may lead to a reconsideration of biofuel policies.
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From page 21... ...
Because of different policy reactions to this financial crisis, including aggressive stimuli by governments and severe reactions by monetary authorities, the World Bank predicts that the total crisis will not be as dire as the Great Depression of the early 1930s. International policy responses helped sta bilize financial and commodity markets and stopped the "free fall" in trade and production.
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From page 22... ...
. In total, developing countries need some $1.1 trillion this year to repay former or finance current account defi cits (International Bank for Reconstruction and Development, the World Bank, 2009b)
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From page 23... ...
Because of the withdrawal of capital flows and the global panic in financial markets, investors in developing countries stopped investing, and consumers in developing countries stopped purchasing. Within a month after Sep tember 2008, the car sales in India, South Africa, and even in China were 15–20 percent below the previous year's sales.
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From page 24... ...
On average, developing countries are still growing; a 1.2 percent growth is expected in 2009 (International Bank for Reconstruction and Development, The World Bank, 2009b)
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Second, protecting the growth prospects of developing countries serves the interest of rich countries as well. Major reforms in the developing world were seen during the 1990s that led to strong growth in many countries.
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Temporality of Food Price Spikes and Economic Downturn The spike in food prices occurred in June and July 2008; the global economy dropped in the fall of 2008. Is there a temporal connection to be drawn between the two?
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From page 27... ...
The World Bank does not believe that the financial markets were the cause of the swings in the food prices or in commodity prices in general. In addition, the World Bank does not believe that the financial markets were the cause of the sharp increase that was seen in the middle of 2008, and it is believed financial markets were not the cause of the downturn.
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From page 28... ...
If, instead, the agreements were made in negotiation with the farmers who are currently on the land, and if investment in rural infrastructure came along with such agreements, this type of agricultural foreign direct investment would have positive effects. Trends in Development Assistance Certain financial flows to developing countries are more resilient than other flows.
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From page 29... ...
The World Bank Response In responding to the food price crisis, the World Bank focused on three areas, starting with safety nets. A safety net refers to the institutions through which targeted transfers to those who need help most can be facilitated.
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From page 30... ...
Additionally, the very dominant position of the United States in financial markets and international policy making will be diminished somewhat, and the role of other countries -- especially in Asia -- will increase. The G20 is already more important than the G8 in many policy dis cussions, part of a growing trend toward increasing the voice of developing countries.
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