FINANCE AND DEVELOPMENT
Grappling with grain prices Joachim von Braun, Director General, International Food Policy Research Institute (IFPRI), and Maximo Torero, Division Director, Markets, Trade, and Institutions, IFPRI
A three-pronged grain reserve system could protect poor countries from volatile food prices and shocks, and help respond to food emergencies. The world’s poor people face unprecedented challenges. The combination of a collapsing financial market, speculation in agricultural futures and ad hoc trade policies have all combined to raise the level and volatility of market prices for staple foods. Because the financial crisis has further lowered the real wages and purchasing power of the poor, they are less able to adapt to future international economic shocks. Scarcer capital and lower consumer spending have also led countries to cut short new agricultural production to address the food crisis. At the same time, purchases of food for emergency aid have grown and food is more difficult to procure.
©Anthony Njuguna/Reuters
Only concerted action at the global level can protect poor people from economic shocks and volatile food prices. Researchers at the International Food Policy Research Institute (IFPRI), in collaboration with Justin Lin, senior vice president and chief economist at the World Bank, propose three global collective actions to meet these goals: the creation of a small emergency physical food reserve; an international co-ordinated global food reserve; and a virtual reserve. These actions bring together developed and developing countries for a sustainable policy response to a global crisis.
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Unfortunately, the food price crisis will continue for the foreseeable future. Although at time of writing, prices had eased from their 2007-2008 spike, IFPRI projections for the year 2020 show the trend will be towards more expensive food. If agricultural investment and productivity decline in a depressed economic climate, which is likely, by the year 2020, maize, wheat, and rice prices would be 27, 15, and 13% higher, respectively, than a scenario in which current investment and productivity levels are maintained. Consumers in poor countries would bear the brunt of changing staple food prices, as they rely on these foods