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Immediate action and long-term approaches for food security and food price volatility

23 June 2011

Click to see the OECD-FAO Outlook

This post is contributed by OECD Secretary-General Angel Gurría, following his address to the agriculture ministers of the G20 countries meeting in Paris on June 22.   

The OECD-FAO Agricultural Outlook to 2020 published this week expects commodity prices for cereals to be 20% higher over the coming decade compared with the 2000s, and meat 30% higher. That’s good news for farmers the world over, but for the one in seven of the world’s population who goes to bed hungry, it could spell disaster.

Moreover, price volatility could make matters worse.

So what should we do?

The immediate priority is to address the severe consequences of hunger and malnutrition, whose root cause is poverty. Undernourishment rapidly leads to underweight babies and prevents young children from developing properly, both physically and cognitively. The related problems generally last for life.

In a report including contributions from 10 international organisations OECD coordinated with FAO, we make a number of recommendations to deal with the consequences of high and volatile prices on the most vulnerable.

Working closely with the UN World Food Programme, we propose setting up small strategic food reserves for rapid deployment through safety net programmes in situations where countries find it impossible to procure supplies for themselves.

We also outline a number of market-based financial instruments to assist vulnerable countries and households, including measures designed to help farmers manage unavoidable risks.

In brief, we propose a wide range of safety nets that can come to the aid of the most vulnerable, quickly.

The long term priority – the sustainable solution to price volatility and food insecurity – is to improve the productivity and resilience of global agriculture. Doing so requires action on a number of fronts.

OECD and FAO have a joint proposal for a new Agricultural Market Information System (AMIS). Associated with AMIS is a proposal for a Rapid Response Forum to improve international coordination of government responses to food emergencies, preferably before a situation becomes a widespread crisis.

Better information and transparency on financial markets is also important, as is consistency between regulatory regimes. This would help reduce opportunity for market manipulation and ensure that the farm and food sector has instruments at its disposal to help smooth price fluctuations and to manage risk.

Agricultural trade will be even more important in the years to come. Food has to flow more easily from surplus to deficit areas and humanitarian food purchases and shipments must not be caught up in export restrictions or be taxed. Most of the future growth of supply – and demand – will come from developing countries, but supply growth will be stalled if competitive suppliers around the world are not able to access regional and global markets.

Even if WTO trade negotiations are currently in great difficulty, we must reduce the import and export barriers to trade in food, feed and fuel that add to price volatility and constrain global food security.

We have also made tough recommendations on biofuel policies that subsidize production, mandate blends, and restrict trade.

Let’s be very clear about this. We support the development of a wide variety of renewable fuels, including biofuels. But our analysis has shown that there are higher costs and lower benefits than anticipated, as well as unintended negative impacts, from current biofuel policies.

Finally – and arguably most importantly – in our report, the international organisations make a strong case for various actions to improve farm productivity. This is an essential ingredient in a sustainable and long-term solution to the challenge of increasing food production between 70% and 100% by 2050.

For many developing countries, greater use of existing technologies offers immediate and significant opportunities. For all countries, new science and technology offers further promise.

Returns to investment in agricultural research are enormous: generally over 20% and as high as 80 % a year. But the lead times are very long – often 20 years or more. The investment that will bring those long-term benefits has to start now.

Required investments are way beyond what can be achieved with public funds or development aid, although both are important. National governments have to create an enabling environment that encourages private and public-private investments to flow.

OECD will focus more on this, drawing upon its agriculture, science and development communities to highlight best policy practices for increased innovation in agriculture.

Can the global food and agriculture system meet the challenges of the coming decades? I’m optimistic. Throughout history, farmers have demonstrated again and again their capacity to adapt to new circumstances, adopt new methods and technologies, and supply safe and nutritious food for growing populations.

Since 1960, cereal production world-wide has doubled, and fruit and vegetable production has tripled. The increases in meat production have been even more dramatic – pork production has more than tripled and poultry has increased sevenfold.

The G20 is giving agriculture the importance it deserves. And acting now will position the sector well for a profitable future in the service of us all.

Useful links

OECD work on agriculture

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