By Gustavo Ferreira and Jamie Critelli
According to the United Nations, Food and Agriculture Organization, global food prices have increased sharply throughout 2020 and 2021 and reached their highest levels in nearly six years. This increase in food prices raises concerns over inflation, food insecurity, and potential unrest in some developing countries because prices are approaching the levels seen during the food crisis of the late 2000s – a period characterized by significant social and political crises. Food inflation will adversely impact Africa more severely than any other part of the world because of perennial problems of food insecurity afflicting this region. The U.S. Army Civil Affairs community must continue to follow this situation closely and identify any emerging food crises that could bring added sociopolitical instability to certain parts of Africa.
Amid the Covid-19 pandemic, global food prices have reached their highest in almost seven years. While prices are not yet at the levels seen during the food crisis of the late 2000s, the current trend raises concerns about food inflation and hunger. The World Bank estimated that the last food crisis pushed 130 million to 155 million people into poverty worldwide in 2008. It also sparked food riots and political unrest that threatened governments and social stability in Africa, Asia, the Middle East, and Latin America and the Caribbean. In Africa, massive public protests erupted in Burkina Faso, Mozambique, Cameroon, Egypt, Guinea, Mauritania, and Senegal. More recently, in 2019, India faced a political crisis sparked by the rising prices of onions. The ubiquitous presence of onions in Indian cooking and its affordability even for poor segments of the Indian population contributed to the widespread impacts.
The current surge in food prices has been driven by market disruptions induced by the COVID-19 pandemic, rising freight costs, and tight global commodity supplies caused by lower than anticipated crop production and massive commodity purchases by China. Chinese authorities are rebuilding their domestic grain stocks, trying to prevent further increases in domestic food prices – note that grain reserve levels in China are a state secret, and the rest of the world can only guess China’s next trade moves. Lastly, previous years of low commodity prices eroded the incentives to expand production and invest more in agricultural research and development. Due to very tight global supplies, many countries limit their trade of agricultural products to preserve their domestic stocks and put a lid on domestic food prices. For instance, the Russian Federation is imposing export taxes and quotas on wheat, corn, barley, and rye. Ukraine is following suit and is setting up an export quota for corn for this year. Unfortunately, such export restrictions will only further limit supplies in international food markets, thus contributing to price increases.
Because of the current global distribution of vaccines, industrial nations will be the first ones to address their pandemic woes. Their economies will likely be the first ones to rebound. The reopening of these economies will lead to higher demand for certain food products and services. (e.g., restaurants, casinos, hotels, school lunches, etc.). This will, in turn, add upward pressure to food prices. On the flip side, developing countries will lag with their vaccination progress and possibly face prolonged economic malaise and rising food prices. This article seeks to bring these issues to the attention of Civil Affairs operators and planners who can incorporate them into their planning process. Consideration of this key metric will allow for the more efficient and targeted allocation of resources and efforts.
Global Food Prices
The FAO Food Price Index (FFPI)* averaged 118.5 points in March 2021, marking ten months of consecutive increases and the longest rising streak in a decade (see figure 1). The FFPI is now registering its highest monthly average since July 2014, driven mainly by sharp price increases for vegetable oils and meat dairy products.
Figure 1. FAO Food Price Index, 1961-2021
Source: The FAO Food Price Index (FFPI).
* Technical Note: The FAO Food Price Index (FFPI) measures the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each group over 2014-2016. These categories are (1) cereals; (2) vegetal oil; (3) dairy; (4) meat; and (5) sugar.
Africa is a global buyer of wheat and rice. While Africa produces rice, its demand for it has outpaced local production and has increased imports. On the other hand, Africa has struggled to increase its wheat production and continues to be a net importer of this grain. According to the FAO, the international prices for these two commodities have increased throughout 2020 and 2021 (FAO, 2021). Other sources such as the Economists Intelligence Unit predict significant price hikes for major commodities in 2021. Commodity prices are expected to return to more normal levels from 2022 onwards, assuming no further shocks or disruptions (EIU., 2021).
Who is likely to be most impacted by food inflation?
If this trend continues, higher food prices could: (1) adversely affect low-income consumers that tend to spend larger shares of their disposable income on food; (2) undermine ongoing efforts to reduce poverty; and (3) disrupt political and social stability of food-importing countries. In 2020, the Global Food Security Index ranked 113 countries in terms of food security. Its scores range from 0 (least food secure) to 100 (most food-secure) and are based on the three core issues: food affordability, availability, and quality. The countries with the top three scores were Finland (85.3), Ireland (84.8), and the Netherlands (79.9). Global food supply chains have gone through significant strain during the COVID-19 pandemic. The scores of this index for 2021 may present a grimmer picture.
The Famine Early Warning Systems Network (FEWS NET)