Rising world food prices: Can a G20 'action plan' prevent a crisis?

The last time global food prices rose sharply, in part as a result of food shortages, deadly riots shook developing countries across three continents.

Food prices are once again on the rise – in the wake of causes ranging from severe weather in some of the world’s principal grain baskets to a flurry of food export controls passed after the 2008 food riots. And this week G20 agriculture ministers are gathering in Paris for a first-ever global effort to address the fast-rising issue of food security and food prices.

The meeting of developed- and developing-world agriculture ministers is not likely to solve the food-price conundrum in one two-day conference, farm experts say. But with the world’s population on track to reach 9 billion by 2050, and food production facing new challenges, these experts say the meeting is, if nothing else, evidence that food security, like global warming, is an issue that’s not going away.

“In any scenario, just having the G20 agriculture ministers playing a role has been an important innovation and demonstrates how seriously global leaders are taking these issues around food security,” says Maximo Torero, director of the markets, trade, and institutions division of the International Food Policy Research Institute (IFPRI) in Washington. “It’s an ongoing process, but I think we’ll see these issues stay at the top of the global agenda.”

The ministers are expected to adopt an “action plan” Thursday based on a report by several international institutions that was coordinated by the UN’s Food and Agriculture Organization and the Organization for Economic Cooperation and Development. The report, which says higher global food prices commodity market volatility “are here to stay,” was prepared at the behest of G20 leaders who met in Seoul in November 2010.

The Paris meeting has revolved around four key issues: biofuel subsidies, food export restrictions, emergency and humanitarian food reserves, and commodities investment controls. The ministers’ action is likely to be a mixed bag, says Dr. Torero, reached by phone in Paris.

'Some concrete steps'

“We’ll see some concrete steps in some areas,” he says, “but some of these issues, for lack of agreement, will be put off for further study.”

Biofuel subsidies is an area of intense disagreement. Food production advocates want to see subsidies for grains as fuel (over food) eliminated, but the world’s major grain producers have been unable to find common ground on ending the subsidies.

Restrictions on commodities speculation is another hot topic. France, which presides over the G20 this year and will host a G20 summit in Cannes in November, would like the agriculture ministers to address food-price volatility through restrictions on the commodities trading market.

French President Nicolas Sarkozy opened the meeting at a reception Wednesday before the ministers got down to work Thursday.

But any action on price volatility by targeting speculation will be limited at best, most experts say. For one thing, some economists insist that a boom in investment in commodities markets in recent years has not abetted food price swings but if anything has encouraged production.

Torero notes that the United States has already implemented some regulations aimed at reducing speculation-fueled price swings. The European Union is advancing its own set of regulations.

“People are being very careful in this area because you don’t want to go too far in trying to fix a problem,” Torero says. “You don’t want to reduce liquidity in the food market, and you want to favor investment in agriculture.”

Global food reserves

Two areas of possible action are creation of a global humanitarian and emergency food reserves system, and development of a global agriculture market information system.

One possibility is creation of a food reserve in Africa which member countries could build up and then tap into when facing a humanitarian crisis, weather shocks, or seasonal food shortages.

With the World Bank estimating that rising food prices resulting from tighter food markets pushed more than 40 million people into poverty over the last year, a continental food bank could be an effective step.

Other proposals includes extending to developing countries the concept of “insurance” against food-price volatility, and a better global system for collecting and sharing information on food prices and stocks and projections.

“All of this is part of stocking a tool box to help developing countries deal better with risk,” Torero says. “This Paris meeting is about a tool box for food security.”