Oxfam International Position on Food Prices | Food Security

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Food prices are going up. Prices of rice, corn, and wheat have all reached record highs. This is a big threat to poor people in developing countries, but it may also be an opportunity. There is a need for urgent global action. This briefing provides a wide range of recommendations for developed and developing nations to help ensure that the poorest consumers are protected from high and volatile food prices.
  Oxfam International Position on Food Prices. Author: Amy Barry. Date: 29 April 2008 April 2008 OXFAM INTERNATIONAL POSITION ON FOOD PRICES CONTENTS: 1. Introduction 2. Main messages 3. Policy Recommendations 4. Further Q&A 5. Selected country case studies 6. Some facts and figures 7. Further reading 1. Introduction Food prices are going up. Prices of rice, corn, and wheat have all reached record highs in the last few months (see facts below). There have been food riots in a number of developing countries (e.g. Mexico, Egypt, Tanzania, Yemen, Morocco, Senegal, Cameroon and Burkina Faso) and concern is increasing worldwide. Price rises have been driven by a number of factors including bad weather – in part caused by climate change, increased demand from India and China and other advanced developing countries, population growth, increased demand for biofuels, failure to improve crop yields, and high oil and input prices (e.g. fertilizer) leading to increasing input costs for producers and traders. Speculation on commodity markets is also pushing up prices. Food insecurity is also caused by structural problems – underinvestment in agriculture and infrastructure, the dominance in supply chains of big companies, and mismanagement of food and agricultural policies.  A large number of developing countries have taken action in response to the threat, including banning or restricting exports (e.g. Argentina, Kazakhstan, India, Thailand, Indonesia, Vietnam and Cambodia) and reducing tariffs on imported food products (e.g. India). At the same time, some governments in countries with large rural sectors see this as an opportunity to boost agricultural production and exports, and have started to increase subsidies to agriculture (e.g. Egypt, Indonesia). There has been a lot in the media recently about this issue. The World Food Program and USAID have both put out urgent calls for action and more money and warned that their food aid may not be able to meet demand. The World Bank and the UN Food and  Agriculture Organization have also spoken publicly about the crisis. This story is relevant to much of what Oxfam does, including humanitarian relief, longer-term development and the Rights In Crisis and Economic Justice campaigns. 2. Main messages This is a big threat to poor people in developing countries… Oxfam is concerned that high food prices will cause an increase in food insecurity and widespread food crises in many developing countries. Poor people in developing countries spend between 50-80% of their income on food and poor rural households tend  Oxfam International Position on Food Prices. Author: Amy Barry. Date: 29 April 2008 to be net consumers of food. Any increase in food prices will reduce food consumption and increase hunger. Those already living on the edge are particularly vulnerable (e.g. landless, slum dwellers, itinerant farmworkers). If consumption decreases, women and children will suffer most, as women tend to prioritise men’s consumption over their own. Women will also struggle disproportionately with increased prices, as they are usually responsible for buying food to feed their families. Families may be forced to sell productive assets, like livestock and even land, which may durably harm livelihoods and put farmers on a path of no return. But it may also be an opportunity… While food price increases clearly present a major threat to poor people in developing countries, they may also provide an opportunity for poor farmers and waged agricultural workers to benefit from higher prices. Most of the poorest people in developing countries make a living from agriculture, so higher prices offer the possibility of a better livelihood. However, strong efforts must be made to ensure that benefits reach small-scale producers in remote markets, not just large-scale commercial operations and agribusinesses. The current situation should be a spur for greater investment in agriculture and other policies to reduce rural poverty. Urgent need for action now! There is a need for urgent global action. National governments should ensure that the poorest consumers are protected from high and volatile food prices. The international community must support them and donors must commit additional financial resources to help meet poor populations’ food needs. Investment in and support to small-scale, sustainable agriculture must increase. 3. Policy recommendations   National governments and international donors should: Act now to reduce food insecurity , particularly considering the needs of women as care givers, foragers and preparers of food. Countries without adequate resources should call for international support. Design a better global system of safety nets.  Poor families faced with fluctuating prices need social protection schemes such as minimum income guarantees and cash for work programmes to help them survive shocks and meet basic needs. More money and support is needed from the international community. Revamp humanitarian response   strategies  to include a broader range of interventions and better preventative actions. Reform the food aid system to be faster, more flexible, cheaper.  Instead of dumping surplus domestic production as ‘in kind’ food aid, donors should provide cash for governments and aid agencies to buy locally. This is usually more efficient and better for local agriculture. Stop adding fuel to fire by pushing biofuels.  Large-scale growth in biofuels demand has pushed up food prices and done little to reduce carbon emissions. Natural carbon sinks such as rainforests and grasslands are being destroyed to make way for new biofuel plantations and biofuel crops are displacing food production.  Oxfam International Position on Food Prices. Author: Amy Barry. Date: 29 April 2008 Countries driving biofuel demand (e.g. the EU and US) must monitor the impacts of their policies on global food security and provide financial support for affected countries. Mandatory targets should be reassessed in terms of likely impact on emissions and negative social and environmental side effects in developing countries, including higher food prices, land grabs and labour rights abuses. Developing countries need to integrate their biofuel strategies with food security policies to address issues such as land allocation and crop use. Increase donor and national government investment in small-scale agriculture in developing countries, especially in Sub-Saharan Africa. Most African governments have failed to meet their 2003 promise to allocate at least a tenth of their spending to agriculture and they are now reaping the consequences. Countries such as Malawi and Zambia have shown the way, moving from dependence on food aid to become cereal exporters in recent years. Greater international support is needed. All actors must ensure that women can access the opportunities that are created. Ensure financial services such as insurance and credit are available to poor farmers.  In Thailand, for example, small producers are going to the wall because banks will not lend them money to manage between harvests. Allow space for national trade policies to manage food security and rural development and to support the poorest and most marginalised farmers to gain from current price rises.  Recognise that climate change is going to exacerbate these problems , requiring urgent mitigation and adaptation response Eliminate rich countries’ trade-distorting export agricultural subsidies . This will correct distortions in world markets and pave the way towards a long-term solution to unstable food prices. The potential negative implications for Net Food Importing Developing Countries can be addressed through safeguards and national policies. 4. Further Q&A Q. Who gains and who loses from price increases?  A. This is a key question, and it is not yet completely clear what the net effect will be, though it is likely to be negative for the poorest people. People who are poor and are net-purchasers of food (i.e. they spend more on food than they earn from selling it) will lose out from higher prices. This means lots of poor urban consumers, including slum-dwellers, but also many rural families who do not grow enough to feed themselves. Those who are already vulnerable or living on the edge will be hardest hit, for example landless workers or slum dwellers. Small-scale producers and agricultural workers could potentially benefit from higher prices, but it is not guaranteed. In many countries, reform is needed to ensure that small-scale farmers and farm workers can access the gains. Winners are likely to include larger-scale commercial farms, where there is capacity to store food and money to invest and buy higher-priced inputs. Also, packers, millers and others involved in the processing and trading of food should gain from higher prices, through they may also be negatively affected by increased (transport and other) costs resulting from higher oil prices. Speculators on commodity markets stand to gain as do large vertically integrated agribusinesses. Q. What do you mean when you say this could be an opportunity?  Oxfam International Position on Food Prices. Author: Amy Barry. Date: 29 April 2008  A. There are gains to be made if governments in poor countries take the necessary policy steps and invest in agriculture. But they need to act fast and do more than they have in the past. When adequate investments are made, countries that are food aid recipients can become self sufficient and even turn into exporters (e.g. Zambia and Malawi in the past few years). Higher prices may also provide an incentive for small-scale farmers to modernize, become more financially savvy and increase their productivity. National governments should support them to do so. Q. What is the main cause of the increases?  A. The causes are various and analysts disagree on the relative strengths but key drivers agreed to be increased demand from India and China, erratic weather (due in part to climate change), higher oil and energy prices and increased demand for biofuels. Q. What is the link to climate change?  A. Increasingly erratic weather, due in part to climate change, has had a negative impact on food supplies – with crop failures in some key grain producing countries. Harvests are less predictable and small-scale and subsistence farmers are particular vulnerable to shocks. Climate change is also expected to reduce agricultural productivity in tropical zones, putting further pressure on national food security in the poorest countries. Q. And biofuels?  A. The switch to biofuels is correlated with food price rises over the past year, and, with consumption likely to grow, is expected to drive further food price inflation. Biofuels are also a potential driver of food price volatility. Consumption mandates, such as the EU’s 10% target and US ethanol mandates, are expected to exacerbate volatility, as they make demand less responsive to price rises. Q. How seriously should we take this threat?  A. This price increases have not resulted yet in the kind of humanitarian crisis that has been seen in the past in Sub-Saharan Africa. Care should be taken to avoid fuelling the kind of panic and speculation that can further exacerbate the situation. However, the threat is significant. The combination of low world food stocks and high prices means that humanitarian agencies will struggle to respond to unforeseen events. WFP and USAID are already losing ground; faced with a large drought or a humanitarian crisis like the  Asian tsunami, there would be grave problems. Q. What does this have to do with food aid?  A. High prices also affect the food aid system, which is counter-cyclical – in other words, when food prices are high, food aid declines - partly because it is used as a way to get rid of excess from northern markets. Current food aid levels are the lowest in the past five decades. While food aid is clearly extremely important the system needs improving. Even without high prices, food aid often arrives too late, often in the wrong form, and can undermine local market recovery. Cash is often preferable. The current situation could spur much needed reform, and is in this sense an opportunity. Higher food prices will hurt marginalised populations across many different countries. This makes humanitarian interventions more difficult: it’s much easier to deliver massive food aid to refugee camps or specific regions facing drought than to find and assist millions of families spread across the world. In this context, broader safety nets and monitoring programs will be much more important and appropriate. Q. Why haven’t governments acted sooner to prevent this?  A. The gravity of current situation has taken many people by surprise – not just developing country governments but aid agencies, northern governments and international institutions. A ‘perfect storm’ of factors led rapidly to an unprecedented situation, to which many actors were ill equipped to respond.
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