16.05.2022 |

Reform food systems to prevent future food price crises, report says

We need to avoid the next ‘perfect storm’ (Photo: CC0)

Failure to reform food systems has allowed the Ukraine conflict to “become a full-blown global food price crisis and a major threat to the food security of millions of people”, leading food experts have warned. According to the special report ‘Another Perfect Storm?’, published by the International Panel of Experts on Sustainable Food Systems (IPES-Food) on May 6th, the current food price crisis could have been avoided but fundamental flaws in global food systems, such as heavy reliance on food imports and excessive commodity speculation, meant that the invasion of Ukraine sparked a third global food price crisis in 15 years. “A new generation is once again facing mounting food insecurity, and it seems no lessons have been learned since the last food price crisis,” said Olivier De Schutter, co-chair of IPES-Food and UN Special Rapporteur on Extreme Poverty and Human Rights. “Continuing to rely on a handful of food commodities and countries for global food supplies, combined with predatory financiers betting on food, is a recipe for disaster,” he added.

World food prices continued to see record-breaking highs in April 2022, hitting food insecure countries and populations hard. FAO modelling suggests that in a ‘severe shock’ scenario, which is increasingly likely, the global number of undernourished people will increase by 13.1 million this year. But the FAO food price index had already hit levels as high as 2008 peaks back in January 2022. “In this context, it was inevitable that a supply shock affecting two of the world’s major grain exporting countries would destabilize global markets on some level,” the authors write. For example, 26 countries source over 50% of wheat imports from Ukraine and Russia. In the case of Eritrea, Somalia and the Democratic Republic of the Congo, the figure is 80-100%. However, the food experts doubt that the current food price and food security crises would have been an inevitable impact of this conflict. IPES-Food argues that “a number of underlying rigidities, weaknesses, and flaws in global food systems are amplifying the effects of the Ukraine conflict on food security”. “The world’s food security is built on a house of cards – the whole edifice can tumble when one card falls,” writes Jennifer Clapp, vice chair of IPES-Food and one of the lead authors of the report, in an op-ed for Civil Eats. “The concentrated nature of the global food system creates vulnerabilities, which can have cascading consequences when there are disruptions to any part of it. These economies of scale might be designed for profitable efficiency, when things operate according to plan. But they’re neither stable, resilient, nor dependable in the face of risks, especially for vulnerable people.”

The authors analyse four structural weaknesses that are leaving food systems vulnerable to price shocks. The first problem are food import dependencies of many countries. Global dietary diversity has been declining for decades. Already by 1995, wheat, rice and maize – just 3 of the 7,000 plants consumed by humans – accounted for more than 50% of the world’s plant-derived food energy intake. “In many countries, cash crops have taken the place of more diverse food cropping and nutritionally important foodstuffs,” the report found. “For example, tobacco farming is considered to have displaced vegetables and pulses in Bangladesh, as well as cassava, millet, and sweet potatoes in a number of African countries.” While most countries continue to produce staple crops for domestic consumption, many do not produce enough of them to meet their needs, and have become reliant on large volumes of imports,” according to the authors. Some countries are now 100% dependent on imports of staple foods while being highly indebted. Food importing countries have also become dependent on a limited number of grain exporters. Just seven countries plus the EU account for 90% of the world’s wheat exports, and just four countries account for over 80% of the world’s maize exports. Global trade in staple crops is dominated by a handful of countries and corporations. For example, 70-90% of all grain trade is controlled by four companies: Archer-Daniels Midland, Bunge, Cargill, Dreyfus. This is leading to significant disruptions when a major exporter goes offline, says the report.

Secondly, the report finds that a number of entrenched obstacles hold back farmers’ ability to shift and diversify their production in response to global market instability and food security needs. These include geographical over-specialisation, trader and governmental preferences for commodity crops and biofuels, and reliance on synthetic fertilizers. For example, regions such as the US ‘corn belt’ or the Argentine ‘soybelt’ have become highly specialized in the production of specific commodity crops. Accumulated investments in these crops create ‘path dependencies’, the authors explain. Commodity-specific skills, training, equipment, networks, and retail relationships are costly to obtain, and might no longer be relevant if farmers shifted to different crops or different modes of production. Thirdly, market failure and speculation are additional problems. According to IPES-Food, evidence suggests financial speculators are likely contributing to exacerbating food price rises and volatility. “In just 9 days in March 2022, the price of wheat on futures markets jumped 54%. This is despite global wheat stocks being high relative to historical trends – global wheat and maize supplies have steadily increased since 2012. Stock-to-use ratios in 2022 for cereals are reasonable at 29.7% in 2022, just marginally below the 2020/21 level, indicating a relatively comfortable supply level.” The authors point out that since the Ukraine invasion began, there has been increased investment in commodity futures and commodity linked funds. Daily trades of one such fund increased up to 100-fold from January to early March. Trade volumes on the Chicago Mercantile Exchange rose, and the share of speculators in the wheat and maize markets increased.

The fourth structural weakness analysed in the report is the vicious cycle of conflict, climate change, poverty and food insecurity that is leaving hundreds of millions of people without the ability to adapt to sudden shocks. The current crisis has shown that hundreds of millions of people lack the income or resources to cope with rising food prices or climate-related shocks. “More than 50% of farmers and rural workers live below the poverty line in several countries in the Global South with the largest rural populations. The poorest populations in low income countries spend over 60% of their income on food, and as such, even small price rises can have devastating impacts – vulnerabilities that were cruelly exposed by the COVID-19 pandemic,” reads the report.

The expert panel warns against short-sighted responses to the crisis that exacerbate current trends, such as suspending environmental regulations, ramping up industrial food production or further promoting export-oriented fertilizer-dependent agriculture. Instead, IPES-Food calls for urgent action to support food importing countries, including through debt relief. The report highlights that actions that enhance the ability of countries to build and sustain social protection systems will provide the greatest and most lasting benefits, as acknowledged by governments in the wake of the 2007-2008 food price crisis. The establishment of a new financing mechanism, in the form of a Global Fund for Social Protection, would enable poorer countries to provide social protection schemes, the authors stress. Ultimately, debt relief/cancellation is essential in order for net food importing low-income countries to be able to pay spiraling import bills, and to put social protection systems in place. “For decades, rich governments and institutions like the International Monetary Fund and the World Bank have pushed low-income countries to grow crops for export to the rich world and to import staples like wheat and corn to feed themselves,” said Raj Patel, IPES-Food expert and Professor in the Lyndon B Johnson School of Public Affairs at the University of Texas. “Now millions of people are left exposed to recurrent food price shocks, countries are in debt, and interest rates are rising. Cancelling debt for food import-dependent countries is essential to help them prevent domestic unrest, protect vulnerable populations, and to rebuild and diversify food production,” he urged.

Another recommendation is to curb excessive commodity speculation and enhance market transparency. “Evidence suggests financial speculators are jumping into commodity investments and gambling on rising food prices, and this is pushing the world’s poorest people deeper into hunger,” confirms Jennifer Clapp. “Governments have failed to curb excessive speculation and ensure transparency of food stocks and commodity markets – this must be urgently addressed.” Moreover, the food experts call on governments to build up regional grain reserves and food security response systems. “It’s alarming to see rising prices and the threat of hunger and food riots return to many countries in Africa. Rebuilding regional sovereign grain reserves is a key to resilience when these sorts of shocks hit – West Africa has made some progress, but it’s a wake-up call and all regions need support to accelerate this,” said IPES-Food’s Mamadou Goïta, Mali who is executive director of Institut de Recherche et de Promotion des Alternatives en Développement Afrique (IRPAD Afrique). In addition, the authors recommend to accelerate steps to diversify food production and restructure trade flows. Steps to rebuild domestic food production over the coming months and years could help to mitigate price spikes and ensure access to staple foods. “Countries need context-specific approaches allowing them to rebuild a degree of self-sufficiency in key staple foods where resources allow, shift to more resilient traditional crops (e.g. millet instead of rice) in tandem with re-diversifying food consumption, and ensure a more diverse mix of local and global supplies,” according to the authors. Finally, IPES-Food points to the need to reduce the reliance on fertilizers and fossil energy in food production through diversity and agroecology. “Agroecology is a form of crisis response, a route to resilience, and a low-cost way to hedge against various shocks,” the authors conclude. (ab)

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