The Environmental Food Crisis

Trade policies that limit market access, increase the volatil- ity of commodity prices, unfairly subsidize developed coun- try exports and constrain the trade policy flexibility of the developing world affect the stability and security as well as overall economic wellbeing of developing countries. A quar- ter of the world’s governments implemented some export restrictions in the current period of high prices to ensure domestic food security. The impacts of these restrictions varied from panic-buying to the cultivation of smaller areas due to high input costs and the expectation of low product prices. These restrictions even increased price volatility of food products on the world market, thereby decreasing the food security of other countries (FAO, 2008). Earlier expe- rience shows that attempts to gain domestic price stability create global price instability (OECD, 2008; World Bank, 2008). Furthermore, once policies are established to pro- tect food markets, they are not easily dismantled. It should also be noted that global food prices are deter- mined by a small share of food products that are traded on the global market. The share of cereals traded com- pared to the volume produced is small and has increased slightly over the last four decades, from 9% to 13%. Annu- al fluctuations in world cereal production are in the same order of magnitude, varying from +9.8% to –3.9% of the previous year’s production. This implies that supplies to the world market (the sum of the surplus in the supply of each region) can be reduced by one-third or increase two-fold. Demand in the world market does not follow this trend, however, and probably even moves in the op- posite direction in case of poor harvests. These yearly trends describe the risk of discrepancy between supply and demand on the world food market. For this reason, with open markets, developing countries are very vulner- able to fluctuations in global food supply and prices and temporary protection of their own agricultural markets is promoted for these countries. Supplies from food stocks can also buffer shortages on the world market (FAO, 2008). Stocks of cereals and vegetable oil have fallen to low levels relative to use, reducing the buffer against shocks in supply and demand. Stocks are not expected to be fully replenished over the coming 10

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