It’s interesting to look back a few years – to when the world was worried that food was too cheap, not too expensive.
In 2004, the UN Food and Agricultural Organization looked back on a long bear market for food: forty years in which real prices of agricultural commodities had fallen 2% per year, or 50% between 1961 and 2002.
Innovation had driven up yields and productivity; growing numbers of suppliers had flooded onto global markets; and subsidies were keeping production levels artificially high. It was good news for consumers, but bad news for farmers and for poorer countries reliant on food exports, where low prices had “battered income, investment and employment.”
In his introduction to the State of Agricultural Commodity Markets 2004, the FAO’s director general, Jacques Diouf, delivered a homily on the chronic oversupply of food. Prices in the mid-1990s were lower than at any time since the Great Depression, he complained, eroding the viability of rural communities and fuelling migration to cities.
There were winners and losers of course, but more of the latter than the former:
The main beneﬁciaries of lower food prices have been consumers in developed countries and in urban areas of developing countries.
However, for the vast majority of the world’s poor and hungry people who live in rural areas of developing countries and depend on agriculture, losses in income and employment caused by declines in the prices of the products they market generally outweigh the beneﬁts of lower food prices when commodity prices fall.
FAO wanted the problem of oversupply fixed. It called for rich countries to cut subsidies and take land out of production. Poor countries needed to stimulate demand for food, it said, and equip their farmers to export cash crops – preferably processed ones – to the West.
The next State of Agricultural Commodity Markets came out in 2006, by which time the FAO could see that times were a-changing. In real terms, food prices had bottomed out in May 2002, and had jumped 34% by the end of 2005. Good news? Well, no. Continue reading