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This article is from the In-Depth Report The Global Food Crisis

Back from the Brink: Global Financial Meltdown Relieves Food Crisis

But to feed the world's growing population, long-term challenges remain



courtesy sara via Flickr

Just seven months ago, the global food crisis had reached a flash point. Prices of staples such as corn and rice had more than doubled over a year, and, by April, riots had broken out in Haiti, Bangladesh and Egypt. On May 1, Pres. George W. Bush pledged $770 million in new food aid for the 2009 fiscal year, an amount on top of the $200 million worth of emergency food he promised through the U.S. Department of Agriculture's Emerson Trust. The situation was desperate.

But on September 14, the financial firm Lehman Brothers filed for bankruptcy, triggering the worst financial crisis since the Great Depression. As one firm after another toppled, shock waves rippled from Wall Street around the globe with one consequence being the precipitous drop in the price of food and the fuel needed to transport it. As John Hoddinott, an economist at the International Food Policy Research Institute in Washington, D.C., put it, "It's fair to say that the financial crisis is not unambiguously bad."

Although we've been granted a brief respite, Hoddinott is wary of declaring an end to the world's food supply problems. At the most basic level, he says it is inevitable that fuel prices will creep up again—and with them, the price of having a full stomach.

But things are more complicated than just the oil market, experts say. The supply of food in impoverished nations is determined not only by global food prices, but also local political instability, natural disasters, the generosity of rich nations, and investment in agricultural development projects.

"We're not out of the woods yet," says Jennifer Parmalee, spokesperson for the United Nations World Food Program. "We have challenges that may not be as dramatic as they appeared six or eight months ago, but they are still with us."

The drop in global food prices does not always translate to a decrease in prices in places where they matter most. For instance, the global price of rice has dropped from $1,000 per metric ton in April to less then $500, but Parmalee says that in Haiti it was still hovering at $1,000 in October because the Caribbean island nation was devastated by four hurricanes this year. War-torn regions like Afghanistan and occupied Palestine are still facing prices some 40 percent higher than in 2007. Moreover, the downturn in prices could even discourage food production in the coming season, which would provoke another food crisis.

Even in the U.S. the impact of the financial downturn seems on course to outweigh any benefit of price decreases. From 2003 to 2007, the number of people turning up at soup kitchens increased from one million to 1.3 million per year. During that same period, the number of full-time workers showing up at those kitchens increased 75 percent. And that's not all, says Áine Duggan, vice president of research, policy and education at the Food Bank for New York City. "The populations we serve with the safety net will not see the full impact of this crisis for the next three to four months, and likely not until the middle of next year," she says. "The numbers will get worse before they get better.”

Late last month, Jacques Diouf, director general of the Food and Agriculture Organization of the United Nations (FAO), called on world leaders to pony up $30 billion per year for a new agricultural system—a fraction of the $3 trillion dollars that have gone to stem the global financial meltdown. "The reduction in food prices should not be interpreted as the end of the food crisis," Diouf said. He suggested a first line of attack eliminating "international market distortions" that result from agricultural subsidies, customs tariffs and technical barriers to trade. But he also stressed the importance of increasing agricultural productivity in developing nations, which has leveled since the Green Revolution, which began in the 1960s.

Outside of Brazil, few developing countries are making necessary investments to improve agricultural productivity, and the financial crisis is not going to encourage rich nations lend a helping hand. According to the FAO, we need to double the world's agricultural production by 2050 to feed a population of nine billion. To meet this need, Diouf proposed setting up a network of 400 to 500 food and agriculture experts to provide "science-based analysis" using the U.N Intergovernmental Panel of Climate Change as a model.

"We need to devise a global system," he says, "that is better suited to the new challenges of food security."

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