Several of the factors behind today’s increase parallel those that drove the 2007-2008 food-price crisis—including export controls, biofuels production, high oil prices, and poor harvests. But the prices of cereals, particularly rice, have increased less than in 2008 and domestic prices in some of the world’s poorest countries have actually fallen amid better local harvests. The lower incidence of harmful policy responses, which amplified the crisis last time, likely helped as well.What can be done to limit food price surges or lessen their adverse impact in the future ?
Today’s food price increases reinforce several aspects of what is by now common wisdom among food policy analysts. First, given the role good local harvests played in limiting the surge’s impact, global food security depends on well-functioning global markets. Policy makers must ensure markets are not disrupted or distorted by trade restrictions.
The G20 can play an important role by establishing a better framework for monitoring and increasing accountability in the global food system. Providing information on stock levels, for example, could prevent panic buying. The G20 could also develop parameters that define extreme circumstances under which export restrictions for humanitarian purposes are justified.
Moreover, the current episode shows the need to protect the poor against volatility in the prices of their most important budget items—food and fuel—which are increasingly moving in tandem. This highlights the need for policy makers in developing countries to provide conditional, targeted safety nets, such as cash and in-kind transfers, to their most vulnerable citizens. Provision of micro-credit can also help. In designing these interventions, policy makers in different countries should look to one another for best practices.
Longer-term policy measures are also crucial. Increased investment in agriculture, more research and development around increasing yields, diminished incentives for biofuels production in the United States and Europe, and limits on export restrictions, as well as agricultural trade reforms (as envisaged in the Doha Agenda), will make markets work better.