MercoPress. South Atlantic News Agency

Food high prices and volatility to continue; investment in agriculture critical, says UN

FAO calls for promotion of private investment and increases farm productivity

Food price volatility featuring high prices is likely to continue and possibly increase, making poor farmers, consumers and countries more vulnerable to poverty and food insecurity, the United Nations' three Rome-based agencies said in the global hunger report published Monday.

Small, import-dependent countries, particularly in Africa, are especially at risk. Many of them still face severe problems following the world food and economic crises of 2006-2008, the UN Food and Agriculture Organization (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) said in “The State of Food Insecurity in the World 2011” (SOFI), an annual flagship report which they jointly produced this year.

Such crises, including in the Horn of Africa, ”are challenging our efforts to achieve the Millennium Development Goal (MDG) of reducing the proportion of people who suffer from hunger by half in 2015,“ the heads of the three agencies, Jacques Diouf of FAO, Kanayo F. Nwanze of IFAD and Josette Sheeran of WFP, warned in a preface to the report.

”Governments must ensure that a transparent and predictable regulatory environment is in place, one that promotes private investment and increases farm productivity. We must reduce food waste in developed countries through education and policies, and reduce food losses in developing countries by boosting investment in the entire value chain, especially post-harvest processing. More sustainable management of our natural resources, forests and fisheries are critical for the food security of many of the poorest members of society,“ the three heads said.

This year's report focuses on high and volatile food prices, identified as major contributing factors in food insecurity at global level and a source of grave concern to the international community.

”Demand from consumers in rapidly growing economies will increase, the population continues to grow, and further growth in bio-fuels will place additional demands on the food system,” the report said.

Moreover, food price volatility may increase over the next decade due to stronger linkages between agricultural and energy markets and more frequent extreme weather events.

Stronger economies and high food prices present incentives for increased long-term investment in the agricultural sector, which can contribute to improved food security in the long run. When farmers react to higher prices with increased production it is essential to build on their short-term response with increased investment in agriculture, with emphasis on initiatives that support smallholders, who are the main food producers in many parts of the developing world.

At the same time, targeted safety nets are crucial for alleviating food insecurity in the short term. They must be designed in advance in consultation with the most vulnerable people.

The report stresses that investment in agriculture remains critical to sustainable, long-term food security. Key areas where such investments should be directed are cost-effective irrigation, improved land-management practices and better seeds developed through agricultural research. That would help reduce the production risks facing farmers, especially smallholders, and mitigate price volatility.

Private initiatives by millions of farmers and rural entrepreneurs will form the bulk of agricultural investments. High food prices have also provided incentives for increased investments by corporate investors (including cross-border public and private entities) in all parts of the agricultural value chain. It is important that all investment considers and respects the rights of all existing users of land and related natural resources, benefits local communities, promotes food security and environmental sustainability, and contributes to adaptation to and mitigation of climate change impacts.

Together with increased investments, greater policy predictability and general openness to trade are more effective than other strategies such as export bans, the report noted. Restrictive trade policies can protect domestic prices from international price swings, but such restrictions often also increase susceptibility to domestic production shocks, thus failing to reduce domestic price volatility. Restrictive trade policies also risk increasing volatility and prices on international markets.