As everyone knows, the price of many basic foodstuffs has surged in the past half year. Rice tripled in price over just the first four months of 2008, wheat doubled and corn rose 46 per cent. The New York Times has dubbed this a "world food crisis" and the Economist called it a "silent tsunami." High grain import prices, on top of high fuel prices, place an acute economic squeeze on urban consumers in developing countries that depend heavily on the world market. In Haiti, Egypt, Cameroon, Ivory Coast, Senegal and Ethiopia, the urban poor have been taking to the streets.
Yet it is a mistake to see high prices as a proxy for actual hunger. Most of the world's hungry citizens do not get their food from the world market, and most who rely on the world market are not poor or vulnerable to hunger.
In south Asia and sub-Saharan Africa, hunger levels are twice as high as in the developing countries of east Asia and four times as high as in Latin America. Yet these two hungry regions import very little food from the world market. The countries of sub-Saharan Africa take only 16 per cent of their total grain consumption from the world market, and less than 10 per cent of total calorie consumption. The developing countries of south Asia satisfy only 4 per cent of their grain consumption through imports. So fluctuations in international prices will have little impact within these hungry regions—far less than fluctuations in rainfall, job loss, government subsidies or civil conflict.
Countries deep in poverty rely very little on food imports in part because they lack foreign exchange or simple purchasing power, but also because they consider the world market to be unstable and unreliable—and the current price spike illustrates why.
In poor countries, roughly 850m people are chronically malnourished all the time, even when world market prices are low. Most of the hungry are rural dwellers, far from grain import terminals. The rural poor can fall victim to hunger because of any number of local circumstances, including low productivity in farming, illiteracy, poor health or low status linked to caste, ethnicity, and gender—or all of the above. In sub-Saharan Africa in 2005, a year when food was cheap on the international market, 23 out of 37 countries were consuming less than their nutritional requirements, and one third of all citizens were malnourished.
The causes of the recent price spike have also been misunderstood. We hear that China's growing appetite for food must be driving up world prices, and there is an element of truth here in soybean markets, but with wheat, corn and rice, China grows what it needs at home and is a net exporter. We hear a lot about how corn use for ethanol has driven up prices, and this is true for corn markets, yet the highest price spike has been for rice, a crop not heavily influenced by biofuels pressures. Global rice prices are up in part because so many Asian rice-producing countries—India, Vietnam, Cambodia, Indonesia and China—have responded to inflation fears at home by restricting rice exports. When multiple exporters do this at the same time, an artificial shortage is created and international prices spike upwards. Global rice production this year actually grew more rapidly than total consumption.
In today's commodity markets, changing behaviour by private investors can temporarily influence prices more than changes in production or consumption. All commodity prices are up—for petroleum and minerals as well as farm products—in part because of a big shift of capital out of equity markets and real estate (as those bubbles have burst) into commodities, which are favoured as a hedge against inflation at a time of rate-cutting. Pension funds and large institutions have poured roughly $200bn into commodity-linked index funds since 2001, helping to drive prices temporarily higher. This bubble, too, could soon burst.
For all these reasons, price fluctuations in the world market are not a particularly reliable indicator of actual trends in hunger, and success in bringing down world prices will not suffice as an adequate remedy. The long-term solution has to include much larger investments in poverty reduction, focused especially on the rural poor in sub-Saharan Africa and south Asia. International responses to the current crisis have focused on urban dwellers because they make more political noise and are within easy reach of the news cameras, but the real world food crisis is mostly found in the countryside.
More than 60 per cent of all Africans live and work in impoverished rural communities—starving for lack of any modern investments. The average African smallholder farmer is a woman who works constantly yet earns only about $1 a day. This is because she does not plant any modern seed varieties, applies no nitrogen fertiliser to replace soil nutrients, and has no irrigation (only 4 per cent of farmland in Africa is irrigated). African farmers use hand tools because they have no access to modern machinery or electrical power. Their animals are diseased and weak because they have no access to veterinary medicine. Rural women in Africa also have to provide their own transport. They carry in firewood and water on foot, and carry out the products they try to sell the same way. This style of farming is sometimes romanticised by northern NGOs because it is free from any dependence on agribusiness, has a small carbon footprint, and is de facto "organic." Yet it fails to meet Africa's food needs. On a per capita basis, farming in Africa today is actually producing 19 per cent less than it did in 1970. Taking into account the added burdens anticipated from climate change, the number of undernourished people in Africa could triple by 2080—with or without high world market prices.
Governments in Africa, notoriously urban-biased, have made little effort to improve the circumstances of their own rural poor. They typically devote less than 5 per cent of their national budget to the agricultural sector. Yet part of the blame also lies with rich donor countries, who have been encouraging this neglect of agriculture. For example, the US agency for international development now devotes only 1 per cent of its bilateral development assistance budget to agriculture, and in the past two decades it has cut its assistance to agricultural science in Africa by 75 per cent. The World Bank devoted 30 per cent of its lending to agriculture in 1978, but that share has now fallen to just 8 per cent.
One reason the rich countries moved out of supporting agricultural development after the 1970s was an illusion—caused by falling international market prices in the 1980s and 1990s—that the world's food problems had been solved. But using price trends as a policy guide was just as unreliable a practice then as it is today.
Fortunately, some in the donor community are now reviving long-term investments in rural infrastructure and local farm productivity, particularly in Africa. The new World Bank president, Robert B Zoellick, recently announced a plan to raise agricultural lending to Africa next year from $450m to $800m, and in the past two years the Bill and Melinda Gates Foundation has begun to focus more of its grant-making on the needs of poor farmers in Africa.
One particularly useful poverty-reducing investment to help farmers in Africa would be crops better able to tolerate drought. Private companies in the US, such as Pioneer-Dupont and Monsanto, have recently used genetic engineering to introduce drought tolerance traits into yellow maize, a product likely to be placed on the western market several years from now. But it is farmers in Africa growing tropical varieties of white maize that need this new drought-tolerance trait the most, and until now governments in Africa have felt under pressure not to approve any GM crops for fear of losing access to export markets in Europe. Well-fed Europeans don't need the added productivity these technologies provide and so GM crops have been shunned by consumers. Perhaps the current interlude of higher commodity prices will remind us all that farmers in the developing world cannot yet take productivity and abundance for granted.
