Some of the key questions about food security are answered below:
Q: Why is food security suddenly an issue for the OECD while the number of hungry people has been above 800 million for decades?
A: Food security has been an ongoing concern of governments and international organisations. The food price spike in 2008 rendered the situation suddenly more acute and helped the OECD to focus on the question why previous efforts to reduce food insecurity have only had limited success.
The OECD is undertaking a number of studies that address this issue both from the perspective of investment in agriculture and food production and in terms of broader economic development. Increasing food production alone does not guarantee that hunger will be alleviated. In many cases, hunger is a problem of poverty or of accessibility to available food. Here, solutions lie in an accommodating economic and policy environment.
Q: Is there a risk that the food security issue will be pushed off the international agenda by the recession and declining food prices?
A: There should be no reason for reduced attention to food security because of developments in food prices. While prices have come down, they are still relatively high compared to levels earlier this decade or during the late 1990s.
The OECD also expects more volatility in food prices and the price hikes we saw last year may become more frequent. Whenever this happens it will push yet more people into poverty and hunger. The financial crisis is aggravating poverty in developing countries and should be a strong reason to keep focused on this issue.
Q: The OECD expects more food price surges in the future, hitting the poor the hardest. What should and can be done to stabilise food markets?
A: Normal price variability is essential to encourage markets and resources to adjust to changes in relative scarcity. So we should be careful in actions that would take this essential mechanism away. There is ample evidence of price stabilisation methods that have failed or have come at the expense of massive distortion of markets.
But when food prices skyrocket this can quickly pose a threat to the lives of the poorest, particular in developing countries. We need appropriate systems of emergency response to ensure food security for the poor in times of rising prices. But in these cases the need is for urgent measures, such as cash transfers and humanitarian assistance, rather than mechanisms that would try to completely eliminate price variability.
Q: The OECD has always claimed that more open markets will reduce price variability. But agricultural markets are now more open than ever and this has not avoided major price swings in 2008/09. How can this be?
A: The logic is indeed that open markets will help to spread adjustment to shocks over a larger volume of supply and demand. OECD analysis suggests that the recent episode of commodity price volatility would have been more extreme and would have lasted longer if domestic agricultural markets had been insulated from global market realities as so many were in the past.
Fortunately, this time, and although not the case everywhere, market signals did get through to farmers and consumers and they have adjusted. Some countries, though, introduced export taxes which, though perhaps understandable from a political perspective, interfered with price transmission to domestic producers, discouraging them from increasing supplies in response to the higher world prices, and transferring the full burden of adjustment to global markets.
Q: Are we not fighting a losing battle against food insecurity in a context of a further 50% increase in the world population by 2050 and limited land resources?
A: Not at all. The forthcoming Agricultural Outlook to be published jointly by the OECD and the FAO will address this issue. There are three major aspects to be considered.
First there is still up to 500 million hectares of land that can sustainably be added to the 1.4 billion hectares currently used in agriculture. Second, there is considerable potential for further increases in productivity over the next 10-20 years. This requires increased investment in research into agricultural productivity and efforts to ensure the implementation of available technologies, particularly in developing countries.
Finally, there is the issue of water. Agriculture accounts for over 40% of water use in OECD countries, and irrigation accounts for 99% of this use. Future agricultural production will increasingly depend on water availability;improving the efficiency of water use is critical.
Q: There is growing concern that speculative behavior in commodity markets is behind price instability and the growing number of hungry people in the world. What can be done to stop this? Is more regulation required?
A: This concern is not well-supported either by economic theory or by results from empirical analysis. The volumes of speculative activity on commodity futures markets before, during and after the 2008 spike in commodity prices were not excessive given the high levels to which those prices rose.
Ultimately, it is the demand and supply of the actual commodity, not the volume of speculative activity on futures’ markets that determines prices. Commodity futures markets are one of the instruments agents in the agri-food business have to manage their risks. Regulation of these markets has to take care that this function is not weakened.
Q: What are donors doing to address global food security?
A: The international community has responded rapidly to the high food price crises last year and has maintained a large commitment in its humanitarian response. However, on a medium term response, donor countries on the Development Assistance Committee (DAC) spent only about 4% of bilateral overseas development assistance (ODA) on agriculture in 2007.
This downward-trend has to be reversed urgently. Not only does there need to be an increase in investment in agriculture but the right focus for this investment has to be found. A coordinated response to deliver aid in agriculture most effectively is essential. Donors need to scale up aid to the sector and to consider investing through comprehensive plans, formulated by the developing countries.
Q: What is the OECD’s view of rich food-importing countries buying land in developing countries to secure their own food requirements?
A: This is not a question with a simple black or white answer. The important thing is to what extent the local population will share in any benefits. And there are benefits: foreign investment in developing country agriculture will likely stimulate productivity growth, raise incomes of farm workers, increase foreign exchange earnings and enlarge global food availability.
But there may be costs as well in terms of exploiting fragile lands or displacement of rural populations. These are concerns which need to be considered.
