The secret report about food prices?

A note on rising food prices;

Summary: The rapid rise in food prices has been a burden on the poor in developing countries, who spend roughly half of their household incomes on food. This paper examines the factors behind the rapid increase in internationally traded food prices since 2002 and estimates the contribution of various factors such as the increased production of biofuels from food grains and oilseeds, the weak dollar, and the increase in food production costs due to higher energy prices. It concludes that the most important factor was the large increase in biofuels production in the U.S. and the EU. Without these increases, global wheat and maize stocks would not have declined appreciably, oilseed prices would not have tripled, and price increases due to other factors, such as droughts, would have been more moderate. Recent export bans and speculative activities would probably not have occurred because they were largely responses to rising prices. While it is difficult to compare the results of this study with those of other studies due to differences in methodologies, time periods and prices considered, many other studies have also recognized biofuels production as a major driver of food prices. The contribution of biofuels to the rise in food prices raises an important policy issue, since much of the increase was due to EU and U.S. government policies that provided incentives to biofuels production, and biofuels policies which subsidize production need to be reconsidered in light of their impact on food prices.

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Bmi, Britain's third largest airline, will fly near-empty "ghost flights" in order to keep valuable take-off and landing slots at Heathrow.

The company admitted it would continue flights, despite an expected slump in passenger numbers, in order to avoid losing the multimillion-pound slots.

Government "use-it-or-lose-it" rules mean airlines must use 80 per cent of their scheduled slots, or forfeit them.

The rise in fuel prices and an expected slump in passengers after the summer break will force many airlines to cancel flights. However, bmi said it will go to extreme lengths to ensure it does not lose any of its coveted slots.

Tim Bye, deputy chief executive of bmi, said the airline would prefer to cancel uneconomic flights, especially midday flights from London to Scotland and northern England, but were forced to fly the routes eight of ten times to avoid losing the slots.

"We have to keep flying to preserve our slots," he said. "What might have been a marginal service in most winters will become even worse, partly because of the price of fuel and partly because of the drop-off in demand that the general economic cycle will bring. Economic pressures will drive the demand down even more than airlines would normally expect."

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Robert Zoellick said that in Bangladesh, staples such as rice can cost almost half of a poor family's daily income.

Prices of bread, rice, maize products, milk, oil, soybeans and others basic foods have increased sharply in recent months in a number of developing countries, despite policy measures -- including export restrictions, subsidies, tariff reductions and price controls -- taken by governments of both cereal importing and exporting countries to limit the impact of international prices on domestic food markets.

Food riots have been reported in Egypt, Cameroon, Cote d’Ivoire, Senegal, Burkina Faso, Ethiopia, Indonesia, Madagascar, the Philippines and Haiti in the past month. In Pakistan and Thailand, army troops have been deployed to avoid seizing of food from the fields and from warehouses.

“Food price inflation hits the poor hardest, as the share of food in their total expenditures is much higher than that of wealthier populations,” said Henri Josserand of FAO’s Global Information and Early Warning system. “Food represents about 10-20 percent of consumer spending in industrialized nations, but as much as 60-80 percent in developing countries, many of which are net-food-importers.

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As financial markets have tumbled, food prices have soared. Since 2005, the prices of staples have jumped 80 percent. Last month, the real price of rice hit a 19-year high; the real price of wheat rose to a 28-year high and almost twice the average price of the last 25 years.

The good news for some farmers adds a crushing load to the most vulnerable – children, as young as four or five, forced to flee the safety of their rural communities to fight for food in teeming cities; food riots threatening societal breakdown; mothers deprived of nutrition for healthy babies. The World Bank Group estimates that 33 countries around the world face potential social unrest because of the acute hike in food and energy prices. For these countries, where food comprises from half to three quarters of consumption, there is no margin for survival.

The realities of demography, changing diets, energy prices and biofuels, and climate changes suggest that high -- and volatile -- food prices will be with us for years to come.

We need a New Deal for Global Food Policy. This New Deal should focus not only on hunger and malnutrition, access to food and its supply, but also the interconnections with energy, yields, climate change, investment, the marginalization of women and others, and economic resiliency and growth. Food policy needs to gain the attention of the highest political levels, because no one country or group can meet these interconnected challenges.

We should start by helping those whose needs are immediate. The UN’s World Food Program requires at least $500 million of additional food supplies to meet emergency calls. The United States, the European Union, Japan, and other OECD countries must act now to fill this gap – or many more people will suffer and starve.

Skyrocketing food prices have increased attention to the larger challenge of overcoming hunger and malnutrition, the “Forgotten” U.N. Millennium Development Goal (MDG).

Even though hunger and malnutrition fall under the very first MDG, beyond traditional food aid, they receive only about one tenth of the resources appropriately directed to HIV/AIDS, another killer. Yet malnutrition is the MDG with the greatest “multiplier” effect: it is the largest risk factor for kids under five and the underlying cause of an estimated 3.5 million of their deaths each year. More than 20 percent of maternal deaths are traced to malnutrition. It weakens immunities to diseases. Research in Guatemala has shown that boys who received nutritional supplements during their first two years earned on average 46percent higher wages as adults. When impoverished families cut back, young girls are the first to lose out. Hunger and malnutrition are a cause, not just a result, of poverty.

This New Deal requires a stronger delivery system, to overcome fragmentation in food security, health, agriculture, water, sanitation, rural infrastructure, and gender policies.

A shift from traditional food aid to a broader concept of food and nutrition assistance must be part of this New Deal. In many cases, cash or vouchers, as opposed to commodity support, is appropriate and can enable the assistance to build local food markets and farm production. When commodities are needed, purchasing from local farmers can strengthen communities. Funds can buy micro-nutrients customized to locations. School lunch programs draw children to classrooms, while helping healthy kids to learn, and some offer parents food, too.

The World Bank Group can help by backing emergency measures that support the poor while encouraging incentives to produce and market food as part of sustainable development. Countries as diverse as Bhutan and Brazil, Madagascar and Morocco, have feeding programs for vulnerable groups. Mozambique, Cambodia, and Bangladesh employ locally-selected public works programs in exchange for food – developing roads, wells, schools, protections against natural disasters, and forests. Others, such as China, Egypt, Ethiopia, and Mexico offer cash transfers conditional on self-help steps – sending children to school or preventive health checkups. Countries also have to stop dangerous border barriers to the trade in food, which put neighbors in need at greater risk and stifle signals to stimulate more production.

We will work with countries, especially in Africa, and partner institutions, to seize an opportunity from the higher demand for food. Our World Development Report 2008, on Agriculture for Development, points the way. We can help create a “Green Revolution” for sub-Saharan Africa by assisting countries to boost productivity throughout the agricultural value chain and help small-holder farmers to break the cycle of poverty. We will almost double our own lending for agriculture in Africa, from $450 million to $800 million, and can help countries and farmers manage systemic risks, including through financial innovations to counter weather variability, such as drought. We can offer access to technology and science to boost yields.

The International Finance Corporation, or IFC, our private sector arm, will scale up investment and advisory support to agribusiness operations in Africa and elsewhere, including through working with the Bank on land titling and productivity, local currency financing, working capital, distribution and logistics, and support for the intermediary services on which farmers must rely.

To be most successful, we will need to integrate and mobilize a diverse range of partners – the FAO, WFP, and IFAD; other MDBs; private donors such as the Gates Foundation; agricultural research institutes; developing countries with great agricultural experience, such as Brazil; and most of all, the private sector.

A New Deal for Global Food Policy will contribute to inclusive and sustainable development. Poor, middle income, and developed countries will benefit together. Income gains from agriculture have three times the power in overcoming poverty than increases in other sectors, and 75 percent of the world’s poor are rural, with most involved in farming. Almost all rural women active in the economies of developing countries are engaged in agriculture. With support, women can seize the opportunities of globalized food demand.

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