The Environmental Food Crisis

While food prices generally declined in the past decades, for some commodities, they have increased several fold since 2004, with the major surges in 2006–2008 (Brahmbhatt and Christiaensen, 2008; FAO, 2008; World Bank, 2008). The FAO index of food prices rose by 9% in 2006, 23% in 2007 and surged by 54% in 2008 (FAO 2008). Crude oil prices, af- fecting the use of fertilizer, transportation and price of com- modities (Figures 1 and 2), peaked at US$147/barrel in July 2008, declining thereafter to US$43 in December 2008 (World Bank, 2008). In May 2008, prices of key cereals, such as Thai medium grade rice, peaked at US$1,100 /tonne, nearly three- fold those of the previous decade. Although they then declined to US$730/tonne in September (FAO, 2008), they remained near double the level of 2007 (FAO, 2008). Projections are that prices will remain high at least through 2015. The cur- rent and continuing food crisis may lead to increased inflation by 5–10% (26–32% in some countries including Vietnam and the Kyrgyz Republic) and reduced GDP by 0.5–1.0% in some developing countries.

2008; World Bank, 2008): 1) The combination of extreme weather and subsequent decline in yields and cereal stocks; 2) A rapidly increasing share of non-food crops, primarily biofu- els; 3) High oil prices, affecting fertilizer use, food production, distribution and transport, and subsequently food prices (Fig- ure 3); and 4) Speculation in the food markets. Although production has generally increased, the rising prices coincided with extreme weather events in several major cereal producing countries, which resulted in a depletion of cereal stocks. The 2008 world cereal stocks are forecast to fall to their lowest levels in 30 years time, to 18.7% of utilization or only 66 days of food (FAO, 2008). Public and private investment in agriculture (especially in sta- ple food production) in developing countries has been declin- ing relatively (e.g., external assistance to agriculture dropped from 20% of Official Development Assistance in the early 1980s to 3% by 2007) (IAASTD, 2008; World Bank, 2008). As a result, crop yield growth became stagnant or declined in most developing countries. The rapid increase in prices and declining stocks led several food-exporting countries to im-

Among the diverse primary causes of the rise in food prices are four major ones (Braun, 2007; Brahmbhatt and Christiaensen,

FAO Commodity Price Indices

300

300

Dairy

250

250

Cereals

Oils and Fats

200

200

Sugar

150

150

Meat

Index reference: 1998-2000

100

100

2000

2002

2004

2006 2007

2008

J F M A M J J A S O N D J F M A M J J A S O N D

Figure 2: FAO food commodity price indices 2000-2008. (Source: FAO, 2008).

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