The Food Price Shock

How the Global Food Crisis is Pushing More People into Poverty

As a child, I hated being forced to finish eating my vegetables. I would always hide them in strategic locations like underneath my plate or behind the water jug. Only now as an adult have I finally realized the importance of food and how millions of people in the world are being affected by rising food prices.

Between June 2010 and February 2011, food prices rose quickly, pushing an additional 44 million people into poverty. Few people relate inflation to one of the main reasons that is preventing people from climbing out of poverty. The reasons for food inflation can be attributed to a variety of reasons, many of which cannot really be blamed on anyone. 2010 involved severe droughts, record heat waves and fires combined with floods and the forces of demand and supply caused food prices to rapidly rise. While governments (and central banks in particular) play a hand in deciding the inflation rates, the numerous forces I have mentioned above play a big part. Both corn and wheat, the staple diet of people living in developing nations, cost as much as they did in the crisis of 2008. For most of the world’s poor who are farmers and spend between 60 and 80 percent of their income on food, the inflation can cause several hardships.

Imagine this. A poor farmer in Indonesia who survives on a mere 2.25 dollars a day spends most of his money on food to support his family. Now a rise in food price, without a rise in his income, would greatly affect his livelihood simply because there is no money to cover a rise in food prices. This is exactly how inflation works and keeps people in the poverty bracket. Because of low supply or high demands of food, a familiar trend can be noticed amongst the governments of the world. China is looking abroad to import massive quantities of wheat, Saudi Arabia’s cereal imports may reach a record level this year and Indonesia has ordered 800,000 tons of rice exceeding their normal purchase rate.

We, as an international community, cannot afford to wait around and witness people going to bed hungry because of the global food crisis. Both short and long-term solutions need to be undertaken. Putting cash in the hands of poor families will help them stay afloat and also prevent a collapse of the food market. For example in Niger, mobile phones were used to distribute emergency cash after crop failure occurred because of the long drought. Long term solutions on the other hand, need to be undertaken in the form of investment in agriculture, ranging all the way from technology used to harvest crops all the way to roads used to transport them to the market. We may not have complete control of the forces of the market or nature, but we can definitely safeguard against them. Most developing countries have a large agricultural population, and dissatisfaction could have dire consequences for the country.

Udit Hinduja is a student at New York University double majoring in Economics and Political Science. As a Program and Research intern with the SISGI Group his focus areas are education, poverty and economic development in Asia and South America.

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