Oxfam: Price of key crops to rise by 180%, Implications for Pacific

Oxfam has warned that rising food prices are increasing pressure on populations already struggling to buy adequate food.  Its report, Growing a Better Future, was released on 31st May 2011, and forecasts that by 2030, the average cost of key crops could increase by between 120% and 180% – see below, pinched from the Oxfam report. 

Here is the shocker: the Oxfam report predicts that up to HALF of the rise will be caused by climate change alone. 

It is the acceleration of a trend which has already seen food prices double in the last 20 years according to Food and Agricultural Organization (FAO) figures – see below.

Underlying the food price rises is a somewhat Malthusian picture:

  • rapidly rising demand of a growing population, set to reach 9bn by 2050 – which is also becoming increasingly demanding in terms of consumption per capita – as well as speculation in poorly regulated commodities markets, and
  • a supply that cannot keep up. Oxfam says that the average growth rate in agricultural yields has almost halved since 1990 – and posits that climate change bears increasing responsibility for the slowdown.  However the rise of overconsumption and waste in rich countries as well as the use of biofuels, has also put limitations on the proportion of the available food supply that is available to feed the 925 million people most in need.

In response, ahead of the 17th UN climate summit in South Africa in December, Oxfam calls on world leaders to start a global climate fund, “so that people can protect themselves from the impacts of climate change and are better equipped to grow the food they need”.  It also requests the G20 and Committee on World Food Security to:

  • increase transparency in commodities markets and regulate futures markets
  • scale up food reserves
  • end policies promoting biofuels
  • invest in smallholder farmers, especially women

Implications of higher food prices for the Pacific

Very briefly and simplistically this section considers the economic implications of higher food prices for the Pacific region.  A key emphasis of the Oxfam report is hunger and moreover it lumps the Pacific region together with the enormous Asia, so as a region we have to draw out our own implications from these trends.  The priority for human welfare in the Pacific is more overconsumption, nutrition/diet composition and lifestyle and less about hunger although that does have to be considered increasingly among the poorest populations due to rising food expenses. 

Pacific island countries are very small and micro-states (with the exception of PNG) as well as islands.  The implication is that the relationship between imports and locally produced food is absolutely pivotal and Pacific island countries are extremely vulnerable to international trends.  Rising food prices change the entire structure of incentives facing the state, farmers and consumers.

This is true from 3 perspectives:

  • the state: rising food prices are bad for the current account (value of exports minus value of imports), make for a poorer and more discontent population, stoke the fires of inflation.  Increasing local production and consumption mitigates all these effects – as well as decreasing health spending through a healthier (local) diet.  On another note, a study called “Potential Market Effects of Selected Policy Options in Emerging Economies to Address Future Commodity Price Surges” explores the effects of some policy options that the state can take to mitigate price rises.
  • farmers: higher prices of imported foods are good for farmers because consumers will tend to substitute away from imported foods towards cheaper local foods.  This increased demand is an incentive to increase local production and productivity (value of output per unit value of input).  The challenge is of course, also to make food products that actually do substitute for imported foods.
  • consumers: higher prices of imported foods are of course bad for the wallet and consumers would benefit from increased local production of foods that would substitute adequately for imported foods.  On this point, a study called “Understanding food choices in Fiji” by Owen, Vatucawaqa and Chand (2002) found that ease of preparation and value for money are key determinants of food choices, which may indicate that local production of convenience foods could be a good future direction for agribusiness.

The role of climate change in undermining the growth of crop yields underlines the importance of optimal land use policy and practice and the development of climate-resilient crops and climate-resilient livelihoods in the Pacific, and on the mitigation side of things, the production and export of low carbon agricultural products and sustainable forestry.  These are areas in which the climate fund recommended by Oxfam could help.

Thus the forecast of rising food prices in Oxfam’s report underline the rising economic importance of the work that the LRD at SPC does – and the job it has before it – to increase sustainable food production in the Pacific.

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