The world is currently experiencing waves of food insecurity, particularly in developing countries that lack sufficient food resources to meet the needs of their populations. This phenomenon has intensified in recent years due to global political unrest, natural disasters, and health pandemics such as COVID-19.
However, the negative effects of this crisis are not limited to developing nations; they have also extended to developed countries in light of globalization’s repercussions. As a result, the issue of global food insecurity has become a focal point for research centers in Europe, including the Heinrich Böll Foundation in Germany, which published a research paper in June 2024 titled “Global Food Insecurity: Causes and Dynamics of Solutions.” The paper discusses the main current causes of the crisis and potential exit strategies in the short and long term.
Facts and Causes:
According to the Food and Agriculture Organization (FAO), food security is achieved when all people consistently have access to sufficient, safe, and nutritious food that meets their dietary needs and preferences for an active and healthy life. Despite current global advancements across various fields, the issue of food insecurity has worsened. In 2022, statistics indicated that 800 million people worldwide suffer from chronic hunger, representing an increase of 122 million compared to 2019.
The roots of the current food insecurity crisis can be traced back to the COVID-19 pandemic. The measures implemented to curb the spread of the virus led to border closures and a decline in international trade, adversely affecting food supplies in developing countries that rely on imports. The difficulty in obtaining food during the pandemic resulted in rising inflation, which in turn caused global food import expenses to increase by $268 billion; developing countries bore two-thirds of this cost increase. Other political, social, and economic factors compounded the food insecurity crisis, including:
The Russian-Ukrainian War: Both Russia and Ukraine are significant exporters of corn, oilseeds, and wheat. When the war erupted in February 2022, global grain markets witnessed enormous price hikes exacerbated by intensified speculative trading. This had particularly detrimental effects on Africa and the Middle East, which are major importers of these goods from the warring nations. As the search for alternative export sources intensified amid rising inflation and interest rates, the external debt of low- and middle-income countries exceeded $3 trillion in 2023, double what it was in 2010.
The Link Between Energy and Food Prices: Food production at various stages consumes approximately 15% of global fossil fuel production, which is employed in the manufacture of synthetic fertilizers and pesticides, as well as for fueling agricultural machinery. Fertilizer prices surged by 200% in April 2022 compared to the previous year, partly due to sanctions on gas exports from Russia and Belarus resulting from the war in Ukraine.
Rising Speculation in Food: Speculative trading in food commodities has grown significantly since the early 1990s, particularly following the removal of restrictions on capital flows and reduced regulatory oversight in financial markets. Speculators profit from the volatility of food prices by betting on price fluctuations, leading to quick profits. In the first week of March 2022 (after the onset of the Russian-Ukrainian war), $4.5 billion flowed into funds speculating on agricultural commodities globally, equivalent to typical investment flows over a month in normal conditions, resulting in severe price volatility that harmed many countries.
Food Industry Monopoly: Five major companies dominate 70% to 90% of the global grain production: Archer Daniels (a U.S. firm specializing in grain and oilseed processing), Bunge (a global leader in oilseed processing and grain trading), COFCO (China’s largest state-owned food processor), Cargill (a major player in agriculture and food), and Louis Dreyfus (an international grain and agricultural commodities trader). These companies comprise extensive economic entities with hundreds of subsidiaries handling everything from supplying farmers with grains and fertilizers to processing, transporting, and distributing grains. They possess comprehensive data on production processes and large storage facilities, allowing them to manipulate supply and prices, especially during crises. Their profits tripled between 2016 and 2020, with net earnings exceeding $17 billion.
Direct Relationship Between Imports and Food Security: IMF experts found that a 1% increase in international food prices correlates with a 0.3% rise in local prices. This conclusion was drawn from the analysis of monthly data from approximately 100 countries from 1991 to 2020. The study indicated that the price increase is exacerbated by countries’ reliance on imports, especially in developing nations; rising food prices accounted for more than half of inflation in Egypt, Kenya, Nigeria, and Uganda in 2023, while in Germany, food price increases accounted for a quarter of overall inflation during the same period.
Strategic Warehouses as a Winning Solution:
The research paper focused on several strategies and solutions that could yield results in both the short and long term to combat food insecurity, notably the establishment of strategic food warehouses, which were viewed as a winning option and a practical short-term solution to the problem of food scarcity and rising prices resulting from supply not meeting demand.
The concept of warehouses involves storing surplus production during harvest times of strategic goods, then injecting them into markets when there is a shortage or price hike. Usually, countries or governments manage these warehouses independently, but they may also collaborate with other countries or regional and international organizations, such as the United Nations, to implement the warehouses effectively, ensuring transparency and reducing corruption and profiteering from these stocks. Key recommendations for these food warehouses include:
- Providing information and financial support from international institutions (like the FAO) to the most food-insecure countries to establish their strategic warehouses. Successful initiatives have recently been implemented in Kenya and Ecuador.
- Assisting developing nations to break free from the structural adjustment policies of the IMF and the World Trade Organization, enabling them to plant cash crops like coffee, cocoa, and sugar, and thereby build local capacities to achieve food sovereignty in strategic food items.
- Providing cash and commodity financing pathways for strategic warehouses through the FAO, such as agreements with major grain-producing entities to support funding agendas without infringing on their rights.
- Seeking the establishment of regional strategic warehouses that could serve as a complementary element to local warehouses, amid international organizations’ initiatives to lay down a systematic foundation for these warehouses to mitigate regional conflicts or disputes. Notably, this idea has already been implemented in West Africa and Southeast Asia, with discussions underway for implementation in East Africa.
Integrated Solutions:
In addition to the idea of strategic warehouses, the research paper proposed other complementary solutions to tackle food insecurity in countries worldwide:
- Establishing committees to monitor food prices, granting them the authority to issue several decisions, such as setting profit margins in the food sector or enforcing legal bans on selling food commodities at prices below production costs. The role of these committees is beneficial to both sides of the purchasing process, as they protect sellers from price volatility while providing producers and farmers with better prices for their goods.
- Reducing speculation or investment in financial instruments related to food and essential raw materials by implementing regulations on investments in financial derivatives for agricultural products.
- Imposing progressive taxes on the net profits of companies in the food sector, similar to the progressive taxes levied on energy companies. Studies suggest that applying such a tax on the five major grain companies mentioned earlier would generate around $2 billion in revenue for 2022.
- Supporting the application of competitive principles in food markets by enhancing information transparency in the sector and providing governmental support to small farms and local markets, helping them transition towards implementing principles of environmental agriculture, which focuses on sustainable agricultural strategies while accounting for economic, environmental, and social dimensions.
In conclusion, countries with varying economic and geopolitical capabilities strive to provide food security for their populations, as it directly impacts the health and productivity of human resources. Hence, the research paper highlighted several international initiatives in both developing and developed nations, such as Spain’s enactment of a law in 2021 criminalizing the sale of products below purchasing costs to ensure price stability. Moreover, EU policies explicitly emphasized the need to establish warehouses for food products susceptible to price fluctuations, resulting in the creation of multiple warehouses for various goods, including butter and grains like barley, corn, rice, and wheat.
Additionally, Brazil’s National Supply Company (CONAB) under the Ministry of Agriculture buys specific proportions of rice, corn, and wheat to stabilize prices. Brazilian policies also stipulate that daily meals must be provided for children attending public schools. Meanwhile, China and India, which have the largest populations globally, have established important strategic food warehouses for years to confront food insecurity.
Source:
Isabella Weber & Merle Schulken, “Public Food Storage for Price Stabilization and Its Contribution to the Transformation of Food Systems,” Heinrich Böll Foundation, May 2024.
