Rising food prices: drivers and implications for development

Global food prices have risen 83 per cent over the last three years, with significant impacts for the world's poorest people. This briefing paper focuses on what this important change means for international development. It assesses the drivers of rising prices, discusses the implications of higher prices for developing countries, and surveys implications for development policy. The author argues for a revolution in global food policy and urges development actors to engage with the difficult questions at the centre of current debates.<br /><br /> The paper outlines a number of factors that have contributed to the current increases in food prices, including high income growth in emerging economies (probably the single most significant factor), use of crops for biofuels, the relative inelasticity of supply, historically low stock levels and some speculative investment.<br /><br />Describing the impact on developing countries, it notes that national concerns over inflation and prices have led some countries to reduce exports and others to try to build up stocks &ndash; creating a feedback loop that feeds on itself to drive prices up further. In the medium to longer term, however, it warns that &lsquo;scarcity trends&rsquo; &ndash; climate change, the cost of energy inputs, scarcity of land and water &ndash; could limit the supply-side response.<br /><br />Regarding the implications for development policy, the paper argues that the immediate priority is to increase both the volume and the quality of humanitarian assistance available to poor people, including by moving away from in-kind food aid and towards cash transfers or voucher systems. However, outstanding questions are highlighted regarding how these social protection systems will work, as well as the issue of compensatory financing for some countries facing balance-of-payments difficulties.<br /><br />In the longer term, the paper argues that the key challenge is to increase the supply of food, and that achieving this will require something close to a revolution in global food policy in developed as well as developing countries. In addition to the concerns about what higher food prices, the author notes that there are a range of other issues, including environmental standards; obesity and health; animal welfare; competitiveness between countries and companies and the security of globalised supply chains. <br /><br />The author raises two questions central to current debates on food policy:<br /> What should global food policy be trying to achieve? Who is the &lsquo;we&rsquo; that decides the shape of 21st-century food policy?<br />It is argued that, to address the challenges ahead, advocates of development need to engage in these debates to understand the nature of the choices being faced. However, the author suggests, the emergence of food as a top-rank political issue provides an opportunity to form new alliances, new coalitions and new drivers for change.