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8/7/2019 EcoFin Topic A
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ISB M U N 20112nd Committee of General Assembly-
ECOFINTopic A: The impact of the rising price of food
to the worlds poorest communities
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I. Introduction
The rising of food prices combined with the world economic crisis is an issue which affects the populations around the
world. During the last few years and especially the recent months the global price of agricultural commodities and
food has risen significantly and FAO underlines that its Food Price index in 2010 has gained 34 points, only 16 point
away from the record of June 2008.
This increase firstly noticed in dairy products and grains was soon followed by the climb of other commodities but for
sugar. High prices are not something new and, contrary to low prices, they do not persist for long periods. The
difference of this state of agricultural markets is the high price levels of the majority of food and feed commodities. It
is obvious that the rise of international prices of crops could be related and could lead to the rise of prices of basic
foods such as bread, milk, meat and pasta.
The continuous food price level increase is a result of many important factors such as the uncertainty in the market
resulted by supply tightness and strong relations between agricultural commodity markets and other markets. It is also
affected by the worsening of the outlook for crops in producing countries. This may lead to stocks, tighter global
supply and demand balances. Moreover, the food prices are also affected by the international monetary relations and
specifically the weakening of the United States Dollar. Another leading factor has been the weakening of the United
States Dollar. The USD is still related and sustains the prices of traded commodities.
The fear of the overall food import bill reaching the peak of 2008 led to the meeting on September of 2010. The aimwas to discuss the cause the high food prices and the possible remedies. The importance of updated information oncrop supply and demand and the need to adapt to the market developments were underlined during the meeting.Transparency and greater understanding of the role of commodity futures markets and government responses werefurther proposed as means to fight the issue. According to FAO statistics the number of hungry and malnourishedpeople in the Near East and North Africa is estimated at 37 million, almost 10 per cent of the regional population.Moreover, the number of people who live in chronic hunger reached one billion and caused the launch of a campaignby the Food and Agriculture Organization.1
It is with great interest and concern that the world community watches the inflation. Therefore we are led to heated
discussions regarding the future of agricultural commodity prices in importing and exporting, agriculture, taxes and
the use of genetically modified crops as a mean to feed the world and especially developing countries.
The Food and Agriculture Organization believes that the 2010/11 supplies will be appropriate and more than those of2007/08, when there was the crisis. This is also expected because of the larger reserves and the supplies of rice, wheatand white maize. It is however alarming that the prices have risen faster than in 2007/08 and the past December theprices hit a record high and could rise further because of unpredictable global weather. The community is now focusedon the season of 2011/12 as it is going to be crucial for the stability and future of international markets with a specialinterest in the increase of cereals production. Other commodities of interest are soybeans, sugar and cotton. This couldhowever lead to tightness and insufficiency of products which could provoke a new rise of the world prices, for whichthe world should be prepared.
FAO The ultimate target of food security is to ensure that all people at all
times have both physical and economic access to the basic food
that they need.
The global financial and food crisis the world faces could have as a consequence ripple effects on health and social
spending, especially in developing countries. It is essential that we ensure health investments will be provided along
with social structures as they are extremely important to the stability and security. It is our duty to prevent that this
economic crisis will not be transformed into a social and health crisis. Moreover, food security is also essential as
millions of people can become ill and die because of unsafe food. This inflation could also have essential effects in the
political and social sector. Algeria, Tunisia and India are only some examples of what the high food prices could
provoke. Riots, closed schools for weeks, strikes and people who are at the edge of penury and chronic poverty are
only some of the characteristics.
11billion people live in chronic hunger and IM MAD AS HELL project,http://www.1billionhungry.org/
http://www.1billionhungry.org/http://www.1billionhungry.org/http://www.1billionhungry.org/http://www.1billionhungry.org/8/7/2019 EcoFin Topic A
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II. Actual State of the Markets
a. CerealsFrom May of 2009 to December 2010 the price indices of cereals have fluctuated continually and there has
been a feeling of uncertainty. In May 2009 it was 185,5USD then fell to 157,7 and climbed again to 171,1
on December 2009.In June of 2010 it fell to 151,2 USD only to rise again and reach 237,6 this
December(2010),just 2 units below the record of August 2008 when the index was 239,5points 2. The world
production this year is forecast to reach 2.216 million tonnes, which is 2, 1% less than the 2009/10s
production and 63 million tonnes less than the Food Outlook forecasted in June 2010. The total utilization ofcereals reached 2.253.8million tonnes of which almost 1.056million is used to cover food needs, 756 feed
needs and 433 for other needs.
The rise of prices can be easily explained by the reduction of production, which was a result of weather
events, especially in major grain producers like Canada, CIS( Commonwealth of Independent States), EU
and USA.As a response to this reduction some countries decided to restrict their exports, which is also a
factor of the uncertainty and anxiety of the markets. The slide of USD had further impact on the prices and
therefore a huge 2011/12 harvest of wheat and grains is crucial. The cereal price index for 2010 is 173points.
b. WheatThe wheat price changes did not differ from the ones of the cereals. On May 2009 the wheat value was
256.70 USD per ton and it was falling till September 2009 when it reached 191.09 USD. The price has risenand fallen many times and in December 2010 it reached 306.99 USD. It has to be underlined that during the
food crisis of 2008 the price had climbed to 439.72 USD while the low record of the decade was on May
2002 when the value was 121.46 USD.3&4
This turbulence was due to weather conditions and according to FAOs forecast the production reached in2010 648 million tonnes, which is 5.1% less than the production of the previous year and 29 million tonnesless than Junes FAO Food Outlook. The production has fallen significantly in Russian Federation while it
has risen in USA, Argentina and Australia. The top ten producers of wheat are EU, PRof China, India, United States of America, Russian Federation, Australia, Pakistan,Canada, Ukraine and Turkey. The total utilization of wheat was 668 million tonnes:467.1 tonnes were used for food, 125 for feed and 75.9 for other uses. Although the
production has declined it was enough to cover the world output with stocks reaching180.9 million tonnes, which is below 2009/10 stocks but above 2008/09 ones.The tight wheat supply and demand drove to high food prices which increased more inAugust because of the decision of the Russian Federation to ban exports, the increaseof maize prices and the slide of USD. The price index of wheat for 2010 is 159 points.
c.Coarse grainOn June FAO predicted that there would be an increase of coarse grains production but the report of
November underlines that the 2010/11 production is 1.102 million tonnes, -2.1% from 2009/10 production
and 40 million tonnes from 2008/09.5Similarly with the other commodities coarse grain production was also
affected by the weather conditions, especially by the drought in Russian Federation and Ukraine, and the less
than expected production of maize in USA.
The utilization of the grains reached 1.125,7 millions tonnes with 195.6 being used for food, 626.8 for feed
and 303.2 for other uses. Moreover, the final stocks reached 198.4 million tonnes, -12% from 2009/10,
which underlines that the ratio of stocking could drop to 17.1%.
The world trade is also likely to reach 116 tonnes and since this time of the year the prices of the coarse
grains are at their low levels there is the possibility of the prices rising more than their present levels.
Top producers and exporters of coarse grains are: Argentina, Australia, Canada, EU and the United States.
The coarse grain price index of 2010 is 164 points.
22007-2008 Food Crisis,http://www.ifpri.org/publication/responding-global-food-crisis-three-perspectives(article and PDF file)3 Index Mundi, Wheat Prices,http://www.indexmundi.com/commodities/?commodity=wheat&months=124IMF, Primary Commodity Prices,http://www.imf.org/external/np/res/commod/index.asp5 2008 production was a record.
FAO
http://www.ifpri.org/publication/responding-global-food-crisis-three-perspectiveshttp://www.ifpri.org/publication/responding-global-food-crisis-three-perspectiveshttp://www.ifpri.org/publication/responding-global-food-crisis-three-perspectiveshttp://www.indexmundi.com/commodities/?commodity=wheat&months=12http://www.indexmundi.com/commodities/?commodity=wheat&months=12http://www.indexmundi.com/commodities/?commodity=wheat&months=12http://www.imf.org/external/np/res/commod/index.asphttp://www.imf.org/external/np/res/commod/index.asphttp://www.imf.org/external/np/res/commod/index.asphttp://www.imf.org/external/np/res/commod/index.asphttp://www.indexmundi.com/commodities/?commodity=wheat&months=12http://www.ifpri.org/publication/responding-global-food-crisis-three-perspectives8/7/2019 EcoFin Topic A
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d. Rice market
Like previous markets rice market was also
characterized by huge up and downs at the prices.
On May 2009 the value of metric ton was 540.75
USD and it kept rising till July 2009 when it
reached 623 USD. The turbulences continued and in
June 2010 the price fell to 458.6 USD per ton but
rose again and on December the price for a metricton was 536.78 USD. Although the prices have
escalated much they did not reach the decade record
of April 2008 when they hit the 1015.21 USD
neither the lowest one of November 2001.
The initial predictions for rice production have
worsened because of the severe floods in Asia,
especially the ones in Pakistan. However, the
estimated production will be suitable and sufficient
to cover the consumption and could even increase
the stocks, which would lead to a new record after the one of 2002 with a stock ratio of 28.5. The totalutilization of 2010/11 is forecast to reach 460.2 million tonnes of which 393.9 million tones are used for
food, rising 5% from the levels of 2009/10 mainly because of the interest of Bangladesh and Indonesia
which became active buyers. This import level will be met by the larger exports of USA and Vietnam.
The prices for all types of rice but for lower quality Indica, for which the demand has been increased, have
been lowering till June 2010 when they started rising again, mainly because of the quality of crops and the
use of reserves by the exporters. The prices are expected to rise again in 2011. The rice price index for 2010
is 223 points.
e. Cassava marketAccording to FAO food outlook the total production for 2010 is estimated to reach 248.7 million tonnes of
fresh root and 29.2 million tonnes will be used for trade. As a result of low quality harvest in Asia
(especially Thailand) the production has been reduced by 1% related to the production of 2009. Despite the
reduction in the production the traded cassava quantities will be raised compared to 2009 because of its
demand as feedstock for the ethanol industry.
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h. Meat
While talking for meat we can separate it in four categories: beef (bovine meat), poultry (chicken), lamb
(ovine meat) and swine (pork) meat.
i. During the last decade the bovine meat price fluctuated around 100 US cents per pound, starting from
88US cents per pound on December 2000, but the last year it has been rising and on December 2010 it
reached the high record of 171 US cents/pound.
ii. The poultry meat price had a similar movement. On December 2000 it was 61.5 US cents/pound and in
August 2008 it reached 88.42 US cents/pound. Since then it had some fluctuations and on July 2009 it hita high decade record of 88.56 US cents/pound. On December 2010 the price was 85.38 US cents/pound.
iii. Since December 2000, when the price was 117 US cents/pound, the lamp prices fluctuated between 130
US cents/pound and 160 USC/pound. The decade record was made on May 2008 when it reached 186.6
USC/pound, but during the last year the prices fell to an average of 140 USC/pound. On December the
price per pound was 147 US cents.
iv. On December 2000 the swine price 55 USC/pound. Since then it had fluctuated between 40.60
USC/pound, November2002, and 78.9 USC/pound, May 2004. During the food crisis of 2008 the prices
reached on August the 84.6 USC/pound, but the decade record was made on May 2010 when it raised to
85.3 USC/pound. This December the value of a pound was 69 US cents.
The total meat production is expected toreach 286.2 million tonnes, 0.8 higher than
2009, with all types of meat production
rising except for bovine meat. The total trade
is also forecast to grow by 2.8 %( 26.1
million tonnes).
According to FAO food outlook : Worldmeat production in 2010 is anticipatedto grow by a mere 1 percent, to 286million tonnes, restrained by reduced
animal inventories, high feed costs and arelatively weak consumer demand,which will make it difficult forproducers to transfer the full increasesof costs to prices.The meat price index is forecast to be 134 points for 2010.
i. Dairy products
The price index of dairy products during the last 5
years fluctuated between 110 and 250points. During
the food crisis of 2008 the index hit 256 and 252 inJanuary and February and, but for a slight growth in
May 2008, it kept falling till it reached 117 units on
April 2009. During the last 6 months of 2009 the
prices were climbing but they fell again the first three
month of 2010. On November 2010 the index was 208
units.
The total milk production is expected to grow by 1.7
per cent, to 710.7 million tonnes. The dairy trade is
also forecast to grow and reach 46 million tonnes,
almost 6 per cent more than in 2009.While the perFAO
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capita consumption of dairy products in developed countries is less than in 2008 it is still more than the
consumption during 2009. The consumption in developing countries also grew by 1.5 percent to 67.5
kg/year and therefore the worlds per capita dairy product consumption is estimated to rise b y 0.6%,
1kg/year.
According to FAO Food Outlook of November 2010 this can be explained by the demand for milk and milkproducts: Strong import demand from Asian countries and the Russian Federation has driven dairy producttrade to historically high levels in 2010, with the demand largely met by higher exports from New Zealand andthe United States. Dairy product prices in international trade have remained firm, in particular butter, which in
October reached an all-time high.Moreover,Production in developed countries is forecast to grow by around 1percent, while that of developing countries may increase by 2.4 percent.Finally this growth of consumption is a
result of the strong economic growth in Asia.7
j. Fish and fishery ProductsThe total production is expected to be 147 million tonnes of which 89.8 are capture fisheries and 57.2
aquaculture. The capture fisheries will have a slight fall (0.2%) compared to the production of 2009. The
exports are forecast to rise by 6.8 percent to 101.9 billion USD and trade volume is expected to reach 55.3
million tonnes.
According to FAO recent information and statistics indicate that the prices are only 1% below the prices of
September 2008, when they had reached a peak, with aquaculture prices growing by 11.6% wild fish prices
falling by 10%.
Influenced by the crisis of 2008, the aquaculture producers decided to use stock products and affected the
future productions. Developing countries, especially in Asia and South America, raised their interest again
and the per capita consumption of aquaculture products is estimated to reach 8.3 kg per year. Meanwhile the
per capita consumption of capture
fisheries is likely to fall to 9 kg
per year thus making the per
capita consumption of food fish
rise to 17.3 kg per year.
According to the report of FAO :Developed country demand forfarmed products is picking up, andprices for products such as shrimp,catfish, tilapia and salmon haverisen significantly in 2010. Forcapture fisheries, the picture ismore mixed with some pricesnegatively affected by largeharvests, whereas others havestrengthened as lower fishing
quotas resulted in reduced supply.The price index for 2010 isforecast to be 127points and thepredictions for 2011 are positivewith supply and demandquantities estimated to remainfixed.
7FAO, Dairy, Commodity Markets Monitoring and Outlook,http://www.fao.org/economic/est/commodity-markets-monitoring-
and-outlook/dairy/en/
FAO Food Outlook 2011
http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/en/http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/dairy/en/http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/dairy/en/http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/dairy/en/http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/dairy/en/http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/dairy/en/http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/dairy/en/http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/en/8/7/2019 EcoFin Topic A
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FAO
III. Regions and price indexes
While examining the reasons of volatility of prices and the impact of the rising of food prices it is essential that we
also deal with each region price indexes, as they help us understand the needs of every country and the factors
which contribute to the formation of the prices.8
a) Eastern Africa: The main products that are produced and traded within the region are cereals, maize, wheat,
red sorghum and rice. While the prices of maize in Uganda rose, because of the demand of Kenya, the prices
in Kenya, Tanzania and Ethiopia remained at the same levels. Moreover, there has been an increase of wheat
prices in Ethiopia and of cereals, maize and sorghum in Somalia, mainly as a result of weather conditions, but
for the price of imported rice in Somalia which declined. Contrary to the rise of price of Sorghum in Somaliaand of wheat in Sudan, the main staple sorghum prices in Sudan dropped.
On July 2010 the East Africa Common Market Protocol, which was signed by Kenya, United Republic of
Tanzania, Uganda, Rwanda and Burundi came into effect. According to the agreement the free movement of
goods, services, capital and labor is allowed between the above mentioned nations. With this agreement the
ban of export, in Tanzania and Ethiopia, has been lifted, the import taxes of wheat and rice, in Kenya, has
been announced to be reduced and in the Upper Nile State of Southern Sudan all food commodities have
been exempted from taxation with the aim to reduce the price of food in the region following a 2009 poor
agricultural season.9
b) Western Africa: The consumption of Western Africa countries is mainly focused on millet, maize, sorghum,coarse grains, rice and wheat. In Chad, the prices of millet and sorghum declined because of the cropsharvested, far below the levels of the year before. Meanwhile, in Burkina Faso there has been a continuous fall
of coarse grains prices and in Niger a fall of the main staples millet and sorghum prices. In Mali, although the
price of coarse grain rose, after a period of declining, they still remain below the levels of 2009. Contrary to
the prices of imported rice, which is a main staple in Senegal, the prices of millet also declined in the country
throughout the region. Following a similar movement with the prices of coarse grains in Mali, the maize and
sorghum prices in Nigeria rose by 21% and 14% respectively , leaving the prices of millet slightly risen ,sill at
low levels. Last but not least, in Mauritania the prices of the entirely imported main staple, wheat, grew and
were higher than the levels of 2009, affected by the international markets.
According to FAO monitoring policy system on February 2010 Chad introduced the export ban of female
cattle and on March of the same year it was decided in Mali that the Rice Intensification (SRI) program would
be expanded for a year more. Since July 1stthe program Selling cereal at subsidized prices is in progress.
Since March 2010 the Government has approved the release of 60 000 tonnes of cereals in the most
vulnerable areas of the country at FCFA 130 (USD 0.23) per kilogram, targeting 1 million people, which
corresponds to the 30 percent of the total population in moderate and severe food insecurity .10In Nigeria the
National Rice Development Strategy (NRDS) was launched so that the production can be improved and the
rice imports reduced. Moreover, the reference price for imported rice was raised to USD 640 per ton and the
milled rice import duties have been increased to 32 percent from a rate of 30 percent established in October 2008.
8This study guide will focus on the regions that the global food price monitor examines. Source: FAO, GIEWS, global food price
monitor9&10
FAO, Country Policy Monitoring,http://www.fao.org/giews/countrybrief/policy_detail.jsp?code=SDN#SDN
http://www.fao.org/giews/countrybrief/policy_detail.jsp?code=SDN#SDNhttp://www.fao.org/giews/countrybrief/policy_detail.jsp?code=SDN#SDNhttp://www.fao.org/giews/countrybrief/policy_detail.jsp?code=SDN#SDNhttp://www.fao.org/giews/countrybrief/policy_detail.jsp?code=SDN#SDN8/7/2019 EcoFin Topic A
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On February 2010, Senegal confirmed the import ban of palm oil with acidity levels of 30 +%. 11
c) Southern Africa: The main staples at the majority of the countries are maize, white maize and rice. During the
last year the prices have been escalating. In Madagascar the prices of rice rose because of the rains which
delayed the harvesting of the secondary crop. In Mozambique the maize prices have been growing since July
and in December, at the capital of the country, rice prices also started to increase and reached record highs. It
should be underlined that rice is a product which is imported and is the most consumed cereal. In Malawi,
South Africa and Zambia the prices of maize remained fixed at low levels. On the other hand, in Zimbabwe
the prices rose in October and November.In Zambia: The Government announced a plan to buy 300 000 tonnes of maize at ZMK 65 000 per 50 kg-
bag (USD 256 per tonne) during the marketing season 2010/2011 (May-April) to build up the strategic food
reserve. At the same time in Angola it was decided that a total amount of 350USD million would be
approved so that the production of small and middle farmers and fishermen could be supported. In Botswana
the Integrated Support Program for Arable Agriculture Development (ISPAAD) provided to farmers with
seeds and other agricultural inputs and in Namibia a temporary ban on maize imports was introduced.
d) Far East Asia: The prices in Far East Asia have been escalating during the whole year with few exceptions. In
Bangladesh the price of rice hit a new record on December and the government is importing rice through the
international market. The wheat also stayed fixed at high levels and this December both rice and wheat prices
were 42% higher than the year before. In Indonesia rice prices in November reached the record level of
8668IDK/kg (0.96 USD/kg) and since the prices follow the moves of international markets Indonesia is
importing huge quantities from Thailand and Viet Nam in order to ease this growth. In Viet Nam prices also
rose and at the Dong Thap market they hit records, being 60%above the levels of July. In Laos, where
glutinous rice is the most consumed variety, its prices also reached new high records but they declined again
after the secondary crop of October, still being 25-70% higher than some months before. In Sri Lanka rice
prices have been rising but they still are lower than the years before. Because of this raise the Government
decided to introduce a price ceiling. Meanwhile the wheat flour prices are still climbing higher than the levels
of last year. According to FAO global food monitor report of January 2011 the price of wheat and wheat flour
remained generally stable after the rapid increase from July to October. In Heart, however, the prices are
still growing because of the huge demand from traders and in December 2010 they were 25 and 56 percent
higher than in 2009. At the other markets, though, the prices were only 10% higher than those of 2009. In
Pakistan the prices of wheat and wheat flour were also stable in November and December after the increase of
the months before. Contrary to the prices in Afghanistan the price in Pakistan were close to the ones of 2009.
It is expected that Pakistan will also begin to export cereal since the three-year ban on wheat export has been
lifted. In India wheat and rice prices were rising, mainly because of the inflation in the economy. While
cereals remained at high prices, the wheat price in Chennai market rose to 24INR/kg (0.51USD), the rice price
to 22INR/kg (0.48USD/kg) and in Mumbai market both prices slightly declined. Taking all these into
consideration, the Government decided to announce the release of 5 million tonnes of wheat and rice stocks
at subsidized rates. According to FAO GFPM report: In Mongolia, that heavily depends on wheat imports,
prices of wheat flour in November remained at the high levels of the previous month and were 37percent
above their averages in July when they started to rise following international market rates. Bread prices,generally subsidized in the capital city Ulaanbaatar, are more stable and lower than the wheat flour prices.
e) CIS: The main products that these countries consume are potatoes, wheat and wheat flour. In Russian
Federation, after the summer drought, the potato prices began to rise steadily and in December 2010 they were
60% higher than last year. The same movement was noticed in Kyrgyzstan where the prices in December
reached 17KGS/kg (0.35 USD/kg) and in Belarus where they climbed to 1758 BYR/kg (0.58 USD/kg). Wheat
flour and bread prices in Russian Federation remained at high levels, approximately 12% percent higher than
in June. In Ukraine, domestic wheat flour prices were fixed to about 315USD, still higher than in June, and in
Kyrgyzstan, in December, they were 50 percent higher than in June. It can be assumed that the prices in
11 Theban was introduced in September 2009. Cte dIvoire is the main palm oil supplier of Senegal. , FAO, Country
Policy Monitoring,http://www.fao.org/giews/countrybrief/policy_detail.jsp?code=NER#NER
http://www.fao.org/giews/countrybrief/policy_detail.jsp?code=NER#NERhttp://www.fao.org/giews/countrybrief/policy_detail.jsp?code=NER#NERhttp://www.fao.org/giews/countrybrief/policy_detail.jsp?code=NER#NERhttp://www.fao.org/giews/countrybrief/policy_detail.jsp?code=NER#NER8/7/2019 EcoFin Topic A
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As far as energy is concerned we should focus on bio-fuels, Chinese and Indian demand and input costs. In
United States of America it is estimated that about $7billion are used per year to support ethanol, which can be
translated to $500 per tonne of CO2 abated. This is well over ten times as expensive as carbon permits in the EU
emissions trading scheme. Ethanol consumes 20% of US corn crop14 and is likely to have risen to 32% by 2016.
Meanwhile, with the entrance of second generation bio fuels in the markets the demand for crops used for fuels could
be reduced. However, if countries deliver their stated aims on bio fuels there will be the fear of severe consequences in
the international markets.
The development of emerging economies is also a driver which affects food prices. According to recent statistics thefood demand in developing countries is rosining and it could lead to a larger demand of meat and dairy products. At
the same time some scientists fear that the population growth is also going to provoke problems with the demanding
food quantities while the majority of them agree with the fact that the per capita consumption in rich and emerging
countries is a more crucial driver.
A crucial factor which has significant effects on food prices are the input costs, which includes fuel, land, seeds and
fertilizers costs. The fuel price rising is significant not only during the cultivation but also during processing and
freight. It has to be strengthened that the freight costs are also currently rising and hitting high records, while shipping
costs are 10 times their last decade levels. As the climate, change and global public goods program report states the
cultivation of new lands also raises significant costs, mainly because new lands would be in isolated parts of the world
with poor infrastructure. On top of that the fertilizers costs are also growing and it should be underlined that they are
related to energy.
The main environmental drivers are the short term perturbations, the climate change and the water scarcity. According
to UBS short term weather conditions can have tremendous effects on food productions and they are often
underestimated. Moreover, another issue is that the world stocks are at their lowest historical levels since consumption
has outstripped supply the last years.
Climate changes in most cases cannot be shown in short term. Predictions, however, claim that agriculture based on
rain may be halved by 2020and the tropical harvests are also likely reducing. According to IPCC 4 th assessment report
the modeling studies suggest that increasing frequency of crop loss due to extreme events, such as droughts and
heavy precipitation, may overcome positive effects of moderate temperature increase. Moreover, climate change
increases the number ofpeople at risk of hunger and is estimated to increase the number of undernourished people
between 40 million and 170 million. In the CIC report on rising food prices the lack of country specific data
concerning the climate changes effects on agriculture is further underlined. It is estimated that developing countries
would have to face a 10-25% reduction of their agricultural productivity by 2080s.
Water is a much debated issue. Many claim that it will be the reason for a Third World War, especially after
considering the fact that it is needed not only for food production but also for many other uses. Global demand for
water had tripled till 2007, related to 50 years earlier, and 500million live in countries which suffer from chronically
short of water. This number is estimated to reach 4 billion by 2050. 97.5% of total amount of water is salt water and
only 0.4% of it is fresh and on the surface of the earth (rivers, lakes, soil, biomass). For one quarter of the worlds
population the only source of drinking water is underground water. According to CIC CCGPGP report on food prices
Countries in which aquifer withdrawal > rate of recharge include: US, Libya, Egypt, Israel, Saudi Arabia, Pakistan,
India, P. R. of China. Moreover, International Water Management Institute states: Many of the most populouscountries of the world have literally been having a free ride over the past two or three decades by depleting their groundwater
resources. The penalty for mismanagement of this valuable resource is now coming due and it is no exaggeration to say that the
results could be catastrophic for these countries and, given their importance, for the world as a whole.
Lastly, there are economists and analysts who claim that the US and EU agricultural subsidies were also key factors
for the food price rising. According to these analysts the subsidies have made agriculture unprofitable for other
countries. CIC CCGGP: Outlook on trade policy in future- including prospects for Doha round and for elimination of
subsidies in US and EU- hence major variable in determining longer term food price outlook.
14Center on International Cooperation, Climate Change and Global Public Goods Program, Rising food prices: international drivers and
implications,http://www.cic.nyu.edu/staff/docs/alx_evans/FoodpresentationtoPMSU.pdf
http://www.cic.nyu.edu/staff/docs/alx_evans/FoodpresentationtoPMSU.pdfhttp://www.cic.nyu.edu/staff/docs/alx_evans/FoodpresentationtoPMSU.pdfhttp://www.cic.nyu.edu/staff/docs/alx_evans/FoodpresentationtoPMSU.pdfhttp://www.cic.nyu.edu/staff/docs/alx_evans/FoodpresentationtoPMSU.pdf8/7/2019 EcoFin Topic A
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V. ResultsAccording to FAO food outlookThe composition of the imported food basket, by andlarge, mirrors a returnto economic growth in many countries,with large increases expected for the high-value products. In particular,expenditures on vegetables and fruits could climbby USD 25 billion to USD 191 billion, firmly establishing this
product group as the most expensive in the globally traded food basket. Strong gains are also anticipated forvegetableoils and for fish products. In spite of soaring sugar quotations since mid-2010, the annual rise in theglobal sugar billcould be limited to around 8 percent owing to a foreseencontraction in trade. In contrast, the
world cereal import bill in 2010 is expected to remain virtually unchanged from the previous years level.
Furthermore, according to CICs report on global development The food outlook is further complicated by potential constraints on the availability of land. While the Food and Agricultural Organization and the UN
Environment Program have suggested that 12% more arable land is available globally, they also estimate that
16% of the arable land used now is degraded. Intensifying competition between different land uses is likely to
emerge in future, including food crops; livestock (both pastureland for grazing and arable land to produce
feedstock); bio fuels; fiber (such as paper and timber); conservation; carbon sequestration; and the worldsexpanding cities.
15Entering 2011, worlds concern has now turned on the increases in grains, sugar and oilseeds. It is assumedthat the effects of higher prices will be containedwithin their respective sectors, as many of these commodities
constitute major feedstock ingredients for the livestock orbiofuel sectors. With price increases largely reflectingscarcityin export supply, global competition for securing foodstuffs isset to intensify. (FAO, Food Outlook)
However, it is estimated that there is going to be an increase in purchasing food costs on internationalmarkets which will mainly affect the most economically vulnerable groups. The Least Developedcountries expenditures may face a rise of 11 per cent. However, the most affected countries will be theLow-Income Food Deficit Countries (LIFDCs) which are forecast to have a 20 growth in their bills. Thisraise at the LIFDCs will be the highest of all economic groups.Although there are the countries that suffer from food price escalation there are others which might end up with a
benefice. According to CIC the countries which could win include the United States of America, Canada,
Australia, Brazil, Argentina, Namibia, India, South Africa and Swaziland, mainly because of their exports. US
net farm income this year (2007) 87USD billion, 50 percent higher than average of last ten years.
On the other hand, the importer countries will have severe consequences of food price rising. Thesecountries are Japan, Mexico, Saudi Arabia, Bangladesh, Nepal, Benin and Niger. The food import bill in
this countries continues rising. In these countries which are developing and depend on import the negative short-run effects are obvious. The majority of the households of both rural and urban areas constitute of net food buyers.Because of all these the bred riots which can further cause political instability are not surprising. Some countrieswhich already face these problems are Burkina Faso, Cameroon, Egypt, Guinea, Haiti, Mauritania, Mexico,Morocco, Nepal, Senegal, Uzbekistan and Yemen. It is, therefore, highlighted, that food price rising is not only a
developmental issues but also a political one. It should be stressed that food products are expected to accountfor roughly 17 percent of all expenditures on imports of vulnerable countries, contrary to the world averagewhich is limited to only 7 percent. This lift could be constrained by a reduction in the cost of importing,which could however be counteracted by a growth of expenses of other food commodities. The foodprices combined with the energy import bill place a heavy burden on LIFDCs, which also have to face under-nourishment.
The ones heavily affected by all these trends are the millions of desperately poor households. According toConsultative Group on International Agricultural Research, the impact of a doubling of food prices for a family offive living on just US$1 per person per day is the cut of $1.50 out of their $5 daily budget. It can be concludedthat this family has no other option but to consume less food and lower the quality of their diet. The deterioratednutrition and the lack of access to services such as health care and education eliminates the familys prospects forovercoming hunger. Almost a billion people fall in the category described; whilst 2.1 billion lives on less thanUS$2 a day. As World Bank President Robert Zoellick states that food price inflation could push at least 100million more people into poverty, erasing the advantages previously gained.
15CIC,Resource Scarcity,Climate Change and the Risk of Violent Conflict,
http://www.cic.nyu.edu/internationalsecurity/docs/evans_wdrbackground.pdf
http://www.cic.nyu.edu/internationalsecurity/docs/evans_wdrbackground.pdfhttp://www.cic.nyu.edu/internationalsecurity/docs/evans_wdrbackground.pdfhttp://www.cic.nyu.edu/internationalsecurity/docs/evans_wdrbackground.pdfhttp://www.cic.nyu.edu/internationalsecurity/docs/evans_wdrbackground.pdfhttp://www.cic.nyu.edu/internationalsecurity/docs/evans_wdrbackground.pdf8/7/2019 EcoFin Topic A
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Households in developing countries, where food represents 60-80 percent of consumer spending, also have totackle with domestic food inflation. Such countries are Cote dIvoire, where prices of rice in March 2008 weredouble their level of a year earlier, Senegal, with raised prices in wheat and sorghum, Nigeria, where prices ofsorghum and millet have grown and Somalia, with greatly risen wheat flour prices. Sudan (Khartoum), Uganda,Mozambique (Maputo), Philippines, Sri Lanka, Bangladesh, Tajikistan and Armenia are only some of othercountries which also face inflation in food price. It has to be underlined that Haiti, which was hit by theearthquake last year, also has huge issues which have deteriorated because of the earthquake and still, a year later,is struggling to face all its problems.16
The impact on household food security is also expected to be significant. Rising of food prices makes the fightagainst hunger and poverty even harder unless additional actions are taken. World Bank household data indicatethat less than 10 percent of poor households in Bolivia, Ethiopia and Bangladesh are net sellers of food. In Malawia 10 percent increase in food prices can cause a 1.2 % loss in rural areas and a 2.6 % loss in urban areas, accordingto FAO researches. The same research indicates that the richest rural quintile, only, can gain from food pricerising.
VI. ConclusionRising of food prices is a significant and challenging issue which can have severe consequences in manyaspects of millions of people lives. During the last decade the prices have been climbing and especiallysince the food and economic crisis of 2008 they have been climbing to historical records. The prices ofmain food commodities have risen significantly and according to FAO the import bills, especially ofdeveloping countries, regarding vegetables and fruit can hit historical highs. In many regions of Africa,Asia and Latin America the prices of main staples have grown and it can be estimated that a hugenumber of people is driven to under-nourishment because of the raises.The factors which lead to this increase are many and various. Some of them could be named as:demand growth, relationship between energy and agriculture, movements of USD, weather conditions,deforestation, water scarcity, fuels prices, land and new land costs and trading policies. Many scientistsargue that the main drivers of food prices are the excessive demand of emerging developing countriesand weather conditions which affect world production while others insist on the fact that earth is stillcapable of feeding the world and that these movements of the prices are a result of trade policy and
prices of other products and costs for the production of the crops.Either way the effects of this increase are significant and mainly found on developing countries. Riots,strikes, marches, protests, under-nourishment, chronic poverty are only some of the possible outcomesfor the households and the countries which face the negative effects of high prices. Moreover, there canbe restrictions of exporting goods or importing taxes. Another consequence which has to be consideredis the possible change in relationships between different states and the possibility of conflicts. There isalso the risk of foreign-owned farmland expropriation and further price spikes. Countries which areheavily affected by these changes in price levels are African countries and Asian countries, such asCameroon, Egypt, Haiti, Bolivia, Ethiopia, Uzbekistan, Pakistan, mainly because they import products.On the other hand export countries are benefited by these raise.According to Mr. James Bond, chief operating officer of the World Banks political risk insurance arm
the Multilateral Investment Guarantee Agency, stated that Food price increases impact t he poor hardestas food is a higher proportion of their incomes. It creates significant tension in poorer countries,
exacerbates standard of living disparities and is major source of unrest.According to the World Bank Group President, Mr. Robert B. Zoellick, Poor people are suffering daily fromthe impact of high food prices, especially in urban areas and in low income countries, and In some countries,hard-won gains in overcoming poverty may now be reversed. As an international community we must rally not
only to offer immediate support, but to help countries identify actions and policies to reduce the impact on the
worlds most vulnerable.Mr. Danny Leipziger, World Bank Group Vice President for Poverty Reduction and Economic Management(PREM), stressed that The poor are not just facing higher food prices but also higher energy costs, which is aworrying combination, and that Policy responses to protect the poor from food price rises are urgent, and need
16 World Food Program, get involved,http://www.wfp.org/get-involved
http://www.wfp.org/get-involvedhttp://www.wfp.org/get-involvedhttp://www.wfp.org/get-involvedhttp://www.wfp.org/get-involved8/7/2019 EcoFin Topic A
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to be designed in a way that is conducive to stimulating greater agricultural production in the long run.While working on your positions and your resolutions regarding the issue you should try to answer somequestions, always keeping in mind that they are some guidelines. What does really provoke the food price rising?Who are the ones who are mainly affected by the changes? Who are the ones who gain and who lose? Moreover,it is crucial that you try to find solutions to the issue. How could the world be fed? Is world production enough tocover the need of every person on the planet or is it not? How could agriculture be used?
8/7/2019 EcoFin Topic A
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EcoFin Topic A
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UN General Assembly, Sixty-fifth General Assembly, Second Committee 20 th & 21st Meeting (AM& PM),Stagnant Food Production, Rising Malnourishment Threaten Africas Ability to Feed Itself,
Delegate Says as Second Committee Considers Agriculture, Food Securityhttp://www.un.org/News/Press/docs/2010/gaef3292.doc.htm
UN Global Issues, Food,http://www.un.org/en/globalissues/food/index.shtml UN News Center, Rising food prices highlight need to boost investment in agricultureUN official,
http://www.un.org/apps/news/story.asp?NewsID=36840&Cr=food+crisis&Cr1 = USAID, from the American people, USAID responds to global food crisis,
http://www.usaid.gov/our_work/humanitarian_assistance/foodcrisis/ World vision, About Hunger/ Hunger related issue(global food crisis),
http://www.worldvision.org/content.nsf/learn/hunger-issues?open&lpos=rgt_txt_hunger-issues
World Health Organization,http://www.who.int/en/
Further reading:
BBC news, The cost of food: Facts and figures,http://news.bbc.co.uk/2/hi/7284196.stm
BBC news,High food costs 'a global burden',http://news.bbc.co.uk/2/hi/business/7671612.stm Consultative Group on International Agricultural Research,http://www.cgiar.org/
FAO, price tool,http://www.fao.org/giews/pricetool/
Spiegel online international, Guarding the Pork Barrel, Germany Opposes Attempts to Reform EU
Agricultural Subsidies,http://www.spiegel.de/international/europe/0,1518,737662,00.html
Spiegel online international, Eating Well: Giving Up Meat for a Better World,
http://www.spiegel.de/international/zeitgeist/0,1518,711163,00.html
Spiegel online international, The race to feed the planet, why we need a new green revolution to stop
hunger,http://www.spiegel.de/international/world/0,1518,718387,00.html
Spiegel online international, A New Approach to Aid, How a Basic Income Program Saved a
Namibian Village,http://www.spiegel.de/international/world/0,1518,642310,00.html
The economist, Farmers and food prices,
http://www.economist.com/node/17627826?story_id=17627826
The economist, The world in figures: Industries,http://www.economist.com/node/17509798?story_id=17509798
UBS,http://www.ubs.com/3/e?el=t&lo=t&utf=%E2%82%AC&qt=food+prices&b_search_e.x=0&b_sear
ch_e.y=0
All online articles have been last updated on January of 2011.
http://www.un.org/News/Press/docs/2010/gaef3292.doc.htmhttp://www.un.org/News/Press/docs/2010/gaef3292.doc.htmhttp://www.un.org/en/globalissues/food/index.shtmlhttp://www.un.org/en/globalissues/food/index.shtmlhttp://www.un.org/en/globalissues/food/index.shtmlhttp://www.un.org/apps/news/story.asp?NewsID=36840&Cr=food+crisis&Cr1http://www.usaid.gov/our_work/humanitarian_assistance/foodcrisis/http://www.usaid.gov/our_work/humanitarian_assistance/foodcrisis/http://www.worldvision.org/content.nsf/learn/hunger-issues?open&lpos=rgt_txt_hunger-issueshttp://www.worldvision.org/content.nsf/learn/hunger-issues?open&lpos=rgt_txt_hunger-issueshttp://www.who.int/en/http://www.who.int/en/http://www.who.int/en/http://news.bbc.co.uk/2/hi/7284196.stmhttp://news.bbc.co.uk/2/hi/7284196.stmhttp://news.bbc.co.uk/2/hi/7284196.stmhttp://news.bbc.co.uk/2/hi/business/7671612.stmhttp://news.bbc.co.uk/2/hi/business/7671612.stmhttp://news.bbc.co.uk/2/hi/business/7671612.stmhttp://www.cgiar.org/http://www.cgiar.org/http://www.cgiar.org/http://www.fao.org/giews/pricetool/http://www.fao.org/giews/pricetool/http://www.fao.org/giews/pricetool/http://www.spiegel.de/international/europe/0,1518,737662,00.htmlhttp://www.spiegel.de/international/europe/0,1518,737662,00.htmlhttp://www.spiegel.de/international/europe/0,1518,737662,00.htmlhttp://www.spiegel.de/international/zeitgeist/0,1518,711163,00.htmlhttp://www.spiegel.de/international/zeitgeist/0,1518,711163,00.htmlhttp://www.spiegel.de/international/world/0,1518,718387,00.htmlhttp://www.spiegel.de/international/world/0,1518,718387,00.htmlhttp://www.spiegel.de/international/world/0,1518,718387,00.htmlhttp://www.spiegel.de/international/world/0,1518,642310,00.htmlhttp://www.spiegel.de/international/world/0,1518,642310,00.htmlhttp://www.spiegel.de/international/world/0,1518,642310,00.htmlhttp://www.economist.com/node/17627826?story_id=17627826http://www.economist.com/node/17627826?story_id=17627826http://www.economist.com/node/17509798?story_id=17509798http://www.economist.com/node/17509798?story_id=17509798http://www.ubs.com/3/e?el=t&lo=t&utf=%E2%82%AC&qt=food+prices&b_search_e.x=0&b_search_e.y=0http://www.ubs.com/3/e?el=t&lo=t&utf=%E2%82%AC&qt=food+prices&b_search_e.x=0&b_search_e.y=0http://www.ubs.com/3/e?el=t&lo=t&utf=%E2%82%AC&qt=food+prices&b_search_e.x=0&b_search_e.y=0http://www.ubs.com/3/e?el=t&lo=t&utf=%E2%82%AC&qt=food+prices&b_search_e.x=0&b_search_e.y=0http://www.ubs.com/3/e?el=t&lo=t&utf=%E2%82%AC&qt=food+prices&b_search_e.x=0&b_search_e.y=0http://www.economist.com/node/17509798?story_id=17509798http://www.economist.com/node/17627826?story_id=17627826http://www.spiegel.de/international/world/0,1518,642310,00.htmlhttp://www.spiegel.de/international/world/0,1518,718387,00.htmlhttp://www.spiegel.de/international/zeitgeist/0,1518,711163,00.htmlhttp://www.spiegel.de/international/europe/0,1518,737662,00.htmlhttp://www.fao.org/giews/pricetool/http://www.cgiar.org/http://news.bbc.co.uk/2/hi/business/7671612.stmhttp://news.bbc.co.uk/2/hi/7284196.stmhttp://www.who.int/en/http://www.worldvision.org/content.nsf/learn/hunger-issues?open&lpos=rgt_txt_hunger-issueshttp://www.usaid.gov/our_work/humanitarian_assistance/foodcrisis/http://www.un.org/apps/news/story.asp?NewsID=36840&Cr=food+crisis&Cr1http://www.un.org/en/globalissues/food/index.shtmlhttp://www.un.org/News/Press/docs/2010/gaef3292.doc.htm