Soaring Food Prices: Facts, Perspectives, Impacts, and Actions Required
The world is experiencing a dramatic increase in food prices. During the first three months of 2008, international nominal prices of all major food commodities reached their highest levels in nearly 50 years while prices in real terms were the highest in nearly 30 years. Although the food market situation differs from country to country and future evolution remains highly uncertain, best projections suggest that food prices are likely to remain high in the next few years and high prices are expected to affect most developing country markets.
Rising food prices are causing severe hardship and suffering. For many of the 800 million people who are already affected by chronic hunger, higher food prices can be devastating. Already their ranks are being swelled by many other millions of poor people who now find themselves unable to buy the food that their families need for a healthy life. It is not surprising that this is provoking social unrest across the developing world. It is also prompting short-term policy responses from governments in both exporting and importing countries that risk exacerbating instability in world markets. In the short run, those food buyers in the cities and in the rural areas (including the poorest rural households that are predominantly net food buyers) who spend a large share of their income on food will be the most adversely affected. In some countries, urgent action is required to maintain and, in some cases, enhance emergency safety nets. On the other hand, high prices will stimulate a supply side response where the market signals are transmitted to food producers who have capacity to increase production and, where existing transport and market infrastructure allow, to supply the market. This may represent an important opportunity for promoting agricultural and rural development in many low-income countries, provided an enabling policy environment and supportive measures are established quickly.
The general purpose of this technical background document is to discuss the causes and consequences of the recent increases in food prices. The paper starts from a broad, global perspective, proceeds to national level impacts, and then to household level effects. The concluding section discusses possible actions to deal with rising prices.
