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Global Food Crisis: How Will Philanthropy Answer?

By Tom Watson on June 4, 2008No Comment

The Problem

To begin with, international food prices have been climbing, beginning as early as 2004 and accelerating in the past year. Since March 2007, wheat prices have risen 130%, soy prices have jumped 87%, and in just two months, rice prices have climbed about 75%. According to World Bank estimates, prices are expected to remain high in 2008 and 2009 and likely above 2004 levels through 2015.

The reasons for the sharp increases are numerous. At the most basic level, demand is outstripping supply. On the supply side, production has been hit by natural disasters in exporting countries, including droughts in Australia, poor crops in the EU and Ukraine, and insect pests in Southeast Asia. Export curbs in supplier countries like India, Egypt, and Vietnam, falling world inventories, and hoarding in places like South Korea and the Philippines have also been contributing factors.

Yet some point out that these supply setbacks are largely offset by good crops and increased exports in other countries, so on their own, they would not have had a significant impact on prices. If anything, world food output has been steadily increasing for the last several decades, and one Reuters report from last month predicted that world rice output is expected to hit a record high this year.

The bigger issue is ever-growing demand. Population growth, especially an expanding middle class in some developing countries, is outpacing world food production.  Nigeria’s rising middle class, for instance, has helped triple the nation’s per capita wheat consumption between 1995 and 2005. The demand is not only in developing countries, however.  As a recent New Yorker article pointed out, the eight hundred million hungry people on the planet in 2006 were “outnumbered by the billion who were overweight.” Thus, the issue is not a matter of food output per person but rather the elastic demand of consumption itself.

Another factor is the rise of bio-fuel production, which diverts land and resources to energy needs that could otherwise be put toward growing food. Higher fuel prices not only incentivize farmers to convert land to bio-fuel production, but also affect production costs of food itself. Agricultural policies in the U.S. and Europe that have subsidized bio-fuels have contributed to the higher food prices.

And, finally, due to the food surpluses of recent decades, less funding was directed to helping countries improve their agriculture. Thus, vital research programs, such as those to create certain insect-resistant rice varieties, for instance, have been cut, leaving crops more vulnerable.

Hardest hit, of course, are the poorest of the poor. World Bank President Robert B. Zoellick has said, “Based on a very rough analysis, we estimate that a doubling of food prices over the last three years could potentially push 100 million people in low-income countries deeper into poverty.” Particularly affected are large rice importers such as Bangladesh, Indonesia, the Philippines and Afghanistan. Some poor families are now spending as much as 70-80% of their budgets on food.

Other countries are switching to less familiar, cheaper foods. According to BBC News, some Liberians, for example, have switched from their traditional rice dishes to spaghetti, albeit prepared the “Liberian way, with lots of African [chili] pepper.” Meanwhile, the government of Bangladesh is waging a campaign to encourage its citizens to substitute potatoes, which have had an unusually high crop this year, for rice, which traditionally forms the bulk of the Bangladeshi diet. The main slogan of a three-day potato festival in Dhaka in May was “Think potato, grow potato, and eat potato.”

Philanthropic Responses

The largest aid donor overall, the United States is also the largest donor of food aid, providing $2.1 billion in 2007. Yet some 80% of all US food donations must come in the form of US-farmed commodities and be shipped on US-flagged cargo ships. While these “tied” in-kind donations have certainly been vital relief for millions of hungry people, their impact is also felt by subsistence farmers in the recipient countries who face going out of business when their potential buyers receive free food.  In periods of food crisis, these local farmers are less able to supply food for their communities. Though there are areas in which absolute shortages necessitate immediate food supplies, donors may want to consider giving cash or vouchers to the poor for food purchases in order to provide aid without distorting local markets. 

The UN’s World Food Programme (WFP) put out an emergency appeal this year for $755 million to compensate for the increased costs of food and fuel. On May 23, it reported that it had met its call, with 31 countries donating a collective $460 million and Saudi Arabia donating $500 million. Still, the need for donations continues, both with WFP and other worthy organizations working to alleviate global famine and hunger. Organizations will point out that it is important for donors not to wait until a crisis strikes, at which point it can be too late to ensure that funds are used for those most in need.

Finally, agriculture has to become a main focus of development efforts, whether to improve technology, such as capital-intensive irrigation projects, or pay for basic science research, such as to produce higher-yielding seeds. Given the recent decades of relative food security, agriculture has been somewhat neglected as a philanthropic priority. As WFP head Josette Sheeran says, “Soaring food prices should be a wake-up call for the world to make long-term investment in the food supply chain.”

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