2007-2008 Food Crisis: Causes, Responses, and Lessons Learned

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By Jameson Spivack

The world food crisis of 2007-2008 caused a substantial rise in the cost of food, especially staple foods such as rice, wheat, and corn. This rise in price had a devastating effect on hungry people in the developing world.

When food prices rise, poor people in developing countries are hurt the most. (Image source: IFPRI)

Between 2005 and 2011, world prices for rice, wheat, and maize rose 102 percent, 115 percent, and 204 percent, respectively, according to the UN Food and Agriculture Organization (FAO). With price increases, people with less disposable income must spend a larger percentage of their earnings on essential staple grains, and less on other food and non-food items. This can have a significant impact on nutrition.

In seven Latin American countries, this increase in price led to an average 8 percent decrease in the amount of calories consumed. Before the crisis, 35 percent of households in Ecuador received an adequate amount of calories; afterwards, only 22 percent were receiving healthy levels of calories. In developing countries, if prices rise 50 percent across the board, and there is no rise in income, iron intake will decrease by 30 percent, according to the International Food Policy Research Institute (IFPRI). In the Philippines, this 30 percent decrease in iron consumption would mean that only 5 percent of women have adequate levels of iron.

The high food prices have pushed 44 million people into severe poverty and hunger between June 2010 and February 2011 alone. According to a report by FAO, even brief periods of high food prices can have lasting effects on the food security of people living on less than US$2 per day. FAO also predicts that, due to a number of factors, including climate change, a growing demand for biofuels, and increased financialization of food and agricultural commodities, price volatility will continue into the future.

How can we use this experience to be prepared for food crises in the future? According to the U.S. Department of State (DoS), there are a number of lessons to be learned. On one hand, there were policies that made the crisis worse, while, on the other hand, there were policies that helped to combat the crisis:

Policies that Intensified the Problem:

1)   Export restrictions: IFPRI concluded in its Reflections on the Global Food Crisis that about three-fourths of rice price increases occurred in 2008 due to export bans from major exporters. These restrictions caused panic buying in importer countries, which drove up prices and disrupted supply responses by local producers.

2)   Panic buying, stock building and lack of transparency: Some nations purchased more basic grains than necessary, in an attempt to increase stocks and decrease prices. However, this resulted in large food losses and food waste.

Policies That Protected the Poor and Helped to End the Crisis:

1)   Market-based responses coupled with targeted safety nets: According to the Organisation for Economic Cooperation and Development (OECD), safety nets “support the purchasing power of the poor without distorting domestic incentives to produce more food, and without reducing the incomes of poor food sellers.” This helps to alleviate the immediate impacts of high food prices without disrupting pricing for farmers.

2)   Reducing import restrictions, releasing stocks, and reassuring the markets: Governments that decreased tariffs and taxes on imports decreased prices for staples in their own countries. Also, by publicizing stock information on food, countries were able to end price hikes.

3)   Long-term attention to the agricultural sector: Countries that focus on investing in their agricultural sectors decrease their vulnerability during times of volatility and crisis. Investment strategies the DoS suggest include “[alleviating] transportation, distribution, and supply-chain bottlenecks, promoting sound market-based principles for agricultural sector development and regional trade, encouraging private investment, and undertaking appropriate public investments and use of new agricultural technologies.”

4)   Emergency donor assistance: As a short-term fix, the international community, including governments, NGOs, private sector organizations, and international partners, can provide aid assistance to those in emergency situations.

When food prices rise, the poor are the most vulnerable. Rising food prices can have significant impacts on the nutritional levels of people in developing countries. The responses to these crises are also important in shaping how the most vulnerable fare during these times of emergency.

Jameson Spivack is a research intern with the Nourishing the Planet project. 

To read more about high food prices see: Food Price Instability hurting millions, Global Food Prices Fall Slightly, But Remain Significantly High, Food Riots Return as Global Food Prices Reach Record High, Soaring Food Prices Raise Global Security Concerns, Mapping world food price volatility, and FAO Food Outlook Predicts Continued High Food Prices Worldwide.

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