Anatomy Of A Crisis The Causes And Consequences Of Surging Food Prices

Although the potential causes and consequences of recent increases in international food prices have attracted widespread attention, many existing appraisals are superficial and/or piecemeal. This paper attempts to provide a more comprehensive review of these issues based on the best and most recent research, and includes fresh theoretical and empirical analysis. We first analyze the causes of the current crisis by considering how well standard explanations hold up against relevant economic theory and important stylized facts. Some explanations, especially rising oil prices, the depreciation of the US dollar, biofuel demand, and some commodity-specific explanations, hold up much better than some others. We then provide an appraisal of the likely macro- and microeconomic impacts of the crisis in developing countries. We observe a large gap in the effects of macro and micro factors, and note that when these factors are used to identify the most vulnerable countries, the results often point in different directions. We conclude with a brief discussion of what ought to be learned from this crisis.

In 2007 and 2008, the world witnessed a dramatic increase in food prices. The global financial crisis that began in 2008 compounded the burden of high food prices, exacerbating the problems of hunger and malnutrition in developing countries. The tandem food price and economic crises struck amidst the massive, chronic problem of hunger and undernutrition in developing countries. National governments and international actors have taken a variety of steps to mitigate the negative effects of increased food prices on particular groups. The recent abrupt increase in food prices, in tandem with the current global economic crisis, threatens progress already made in these areas, and could inhibit future efforts. The Institute of Medicine held a workshop, summarized in this volume, to describe the dynamic technological, agricultural, and economic issues contributing to the food price increases of 2007 and 2008 and their impacts on health and nutrition in resource-poor regions. The compounding effects of the current global economic downturn on nutrition motivated additional discussions on these dual crises, their impacts on the nutritional status of vulnerable populations, and opportunities to mitigate their negative nutritional effects.

This paper aims to document IFPRI’s communications activities during the recent food crisis which peaked in mid-2008. IFPRI’s communications activities during the food crisis were somewhat unusual for the Institute. The communications campaign included IFPRI’s usual avenues, and built on IFPRI’s existing place in the global food policy system, but was unusual in its concerted coordination across all divisions of the Institute, the relatively low number of publications and unusually high engagement with the media, as well as a high number of face-to-face presentations and meetings. All in all the campaign, which arose in response to the policy window that opened up in early and mid-2008, was considered particularly effective, and IFPRI earned the position as one of the “thought leaders” during the crisis.

Dramatic increases in food prices, as witnessed on a global scale in recent years, threaten the food security of hundreds of millions of the rural poor in Sub-Saharan Africa alone. This book focuses on recent food and financial crises as they have affected Africa, illustrating the problems using country case studies, that cover their origins, effects on agriculture and rural poverty, their underlying factors and making recommendations as to how such crises could best be addressed in the future.

This book provides a clear-eyed analysis of questions at the intersection of commodity markets, natural resource economics, and public policy.

Standard microeconomic methods consistently suggest that, in the short run, higher food prices increase poverty in developing countries. In contrast, macroeconomic models that allow for an agricultural supply response and consequent wage adjustments suggest that the poor ultimately benefit from higher food prices. In this paper we use international data to systematically test the relationship between changes in domestic food prices and changes in poverty. We find robust evidence that in the long run (one to five years) higher food prices reduce poverty and inequality. The magnitudes of these effects vary across specifications and are not precisely estimated, but they are large enough to suggest that the recent increase in global food prices has significantly accelerated the rate of global poverty reduction.