World Hunger Series Hunger and Markets - WFP Remote Access ...

3 High food prices: trends, causes and impacts“Progress in reducing hunger is now beingeroded by the worldwide increase in foodprices.”United Nations, 2008bThe world has experienced increased food prices inrecent years, with a dramatic peak in 2008. Prices arelikely to remain relatively high in the next few years.The impact of high food prices on hunger has longtermconsequences, and has jeopardized the fightagainst hunger and the prospects for achieving theMillennium Development Goals (MDGs).Trends and causes: demand isoutpacing supplyFood prices have increased since 2001, and roseparticularly steeply in 2007 and 2008, declining sharplyin the second half of 2008 (Figure 3.1). The causes canbe categorized as demand and supply factors (Table3.1). Demand for food has been increasing as a resultof rising incomes in rapidly growing economies,particularly Asia. Higher incomes usually mean lesscereal consumption and more meat production, whichrequires intensive use of cereals.The production of food crops for conversion intobiofuels has expanded rapidly in recent years,particularly in developed countries. This is largelybecause of high energy prices and policy measures toreduce the dependence on fossil fuels, such as throughmandatory mixing and use requirements, subsidies andtariffs. Most experts agree that biofuels have asignificant impact in boosting demand and prices.Although biofuels account for only about 1.5 percentof global liquid fuel supply, they accounted for nearlyhalf the increase in consumption of major food cropsin 2006/2007 (IMF, 2008d). Globally, 126 million MT ofgrains will be used to produce ethanol in 2008/2009,accounting for about 6 percent of global productionand about a third of US maize production (IGC,2008b).Biofuels have pushed up the prices not only of thecrops used for energy, such as maize and vegetable oil,but also of other foods, because of production orconsumption substitutions or through cost-pusheffects. When the prize of maize increases, farmers areencouraged to grow more maize and use less land forother crops. Moreover, consumers might prefer othercereals, increasing the demand for and prices of theseFigure 3.1 – Food prices have increased to different degrees and remain volatile (1998–2000 = 100)350Meat Dairy Cereals Oils Sugar3002502001501005001990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008YearSource: FAO, 2008b32