Food prices have stabilized, but analysts see another crisis on the horizon

Spiking food prices over the past decade caused shortages, unrest, and maybe even revolutions. Now that prices have returned to normal levels, the question is whether the worst of the food crisis is over.

Economists and policymakers convened by the Council on Foreign Relations (CFR) don’t think so. A majority believe that prices will spike again within five years. All of them think it will happen within 10 years.

No coordinated effort

After the most recent spikes, many countries ramped up food production, leading to large stockpiles that are now helping to stabilize prices. But the CFR gathering, held in January in Washington, DC, wasn’t optimistic about maintaining those caches of food. “The sense of the group was that there is no fundamental reason why we are going to consistently have high stockpile levels over time,” Michael Levi, the CFR fellow who chaired the workshop, said in an interview.

Faced with rising prices, individual nations often adopt export bans or other protectionist policies. These can push prices up by handicapping the international market’s ability to adapt to shifting demand. Though opinions are split on whether these policies are ever a good idea, in aggregate they tend to wreak havoc with global trade.

The effects are further aggravated by countries either not collecting or not sharing information about their domestic activity. “Food markets are spreading increasingly to places with poor transparency,” Levi said. China, with 1.4 billion people to feed, is one of those countries that rarely publishes useful data about its agricultural needs. That information gap keeps traders guessing about how high demand is.

Workshop participants also said that the consolidation of food production makes future crises more likely. Most of the global food supply is controlled by a handful of countries. A financial or agricultural disaster in any one of them could easily derail the market. Severe weather caused by climate change is already making those sorts of disasters more common.

Not all experts concur with the pessimistic vision of CFR’s experts. Steve Wiggins, an analyst who studies food prices at the Overseas Development Institute, said he was unconvinced by the workshop’s conclusions. He listed several forces that are working to moderate food prices, such as the plateauing demand for biofuels and improving yields amongst smaller producers.

Avoiding another shock

What everyone can agree on is that changes should be made to make the global market more resilient to the most likely sources of instability. This is where CFR’s panel of experts turn dour.

International coordination around agricultural issues has never been robust, and it seems especially poor today. “Even countries that might be willing to cooperate during a crisis [are] unlikely to agree in advance of a crisis to do that,” Levi said.

In lieu of any coordinated effort, many countries invest in their own, state-run food stockpiles. While useful for humanitarian relief, those stockpiles are more often used to control domestic prices, which undermines the global market. There is little leverage available to persuade individual countries to put global stability ahead of their national interests.

The economists were more optimistic about technological solutions to the problem, like increasing access to drought-resistant crops and improving planting methods and machinery. These are effective ways to raise yields and reduce the dependency on outside suppliers.

The global market also needs faster and more complete information about national food supplies, so that international production can better adapt to meet regional and national needs. That means developing the statistical capacity of countries and encouraging them to be more transparent.

All of these measures are stopgaps against something that is very difficult to predict. Experts can be wrong. The market could be sailing into another long stretch of stability, as Wiggins argues. However, there are so many individual actors in the global food system, and so little coordination among them, that trouble is never that far away.

In lieu of global mandate to make the system more robust, the best hope to ensure stability may be a sort of reverse globalization: using the tools that allowed big producers to leapfrog ahead to make the rest of the world more self-sufficient.

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