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Food security

Dangerous volatility

by Vera Dicke

In brief

According to the latest Global Hunger Index GHI in the decades 1990-2011, famine problems have continued to increase in three countries: Côte d‘Ivoire, Democratic Republic of Congo and North Korea

According to the latest Global Hunger Index GHI in the decades 1990-2011, famine problems have continued to increase in three countries: Côte d‘Ivoire, Democratic Republic of Congo and North Korea

he Global Hunger Index 2011 (GHI) shows the impact fast changing food prices have on poor people in developing countries. The recently published GHI report not only discusses the consequences of volatility; it also assesses the causes.

The GHI ranks 122 countries on a continuous scale and, on that basis, sorts them into five categories. According to these categories, a country’s challenge of hunger can be “low”, “moderate”, “serious”, “alarming” or “extremely alarming”. In October, this year’s edition was published by the International Food Policy Research Institute (IFPRI) in cooperation with the charitable organisations Welthungerhilfe (Germany) and Concern Worldwide (Irland).

Some trends – particularly in Latin America and Southeast Asia – foster hope. Since 1990, 15 nations have halved their GHI ranking, and 19 have escaped the two worst categories. Nonetheless, the food situation is still “alarming” in 22 countries, and even “extremely alarming” in the four African countries of Burundi, Eritrea, Chad and the DR Congo. The DR Congo’s hunger index rose by a staggering 63 % in the course of one year. Due to a lack of data, the GHI 2011 does not assess the current hunger crisis in the Horn of Africa.

The GHI authors consider food price volatility a crucial, international problem, arguing that wheat and maize prices almost doubled from June 2010 to June 2011, for instance. According to them, the most important causes are
– rising demand for biofuels, which is driven by policies to reduce the use of fossil fuels in various countries,
– climate change, which is causing harvest failures due to floods or draughts, and finally
– increasing speculation with food, which artificially inflates both demand and prices.

According to the GHI report, consumers in rich nations hardly feel price volatility, whereas it is putting lives at risk in developing countries where people spend up to 60 % of their incomes on food. In rich nations, the share is only 10 %. When prices rise by 100 %, that affects many people who react by buying less and lower-quality food. Children, in particular, suffer long-term health consequences. Families, moreover, are forced to cut their spending on health and education, so their chances of escaping poverty are reduced.

Call for more regulation

To improve matters, the authors demand an international re-think on biofuel policies, the replenishment of food reserves and support for sustainable smallholder farming. To stem speculation-induced price volatitlity, they demand more stringent regulation of commodity markets as well as open access to data on global supplies.

Foodwatch, the German consumer protection group, similarly wants speculation to be controlled. A recent publication of this organisation is entitled “The hunger makers”. This study links price volatility to capital markets, stating that the use of futures contracts for long-term capital investments is artificially raising demand. Foodwatch proposes to make purely specu­lative deals illegal.

IFAD considers smallholders neglected

Africa’s potential for feeding itself has not yet been tapped sufficiently, according to IFAD President Kanayo F. Nwanze. Estimates by the International Fund for Rural Development show that Africa only produces a quarter as much food as Latin America. Nwanze stresses that farming creates employment and contributes to political stability.

Nwanze says the famine in eastern Africa is so devastating because farming in the region was neglected for decades. For too long, he argues, the international community and regional governments focused on manufacturing. In future, they should invest more vigorously in agriculture, Nwanze recommends. Just like the GHI authors, IFAD is in favour of supporting smallholders and raising awareness among them of better methods, fertilisers and irrigation to improve yields and boost incomes.

Vera Dicke