CASE Foundation, CASE Institute

            In his presentation on the world food crisis Dr. Luca Barbone’s appraisal can be discussed in three different categories, first the cause of the rise in food prices from both demand and supply side, the effect of price rises, and policy suggestions to ameliorate the situation.  Since 2002 the price food has increased two and a half times. This drastically has affected the global food crisis.

            Price rises have occurred because of several factors which have exacerbated each other as they occur simultaneously. Rising energy costs along with the falling dollar, rising demands for bio-fuels, increased demand in growing economies, export restrictions, and panic buying all have amalgamated to drive the cost of food up by this factor of two and a half times. The demand for bio-fuels is an ever increasing factor; fuel ethanol production tripled from 2000-2007, meanwhile bio-diesel production has gone up from 1 to 11 billion liters, and subsidies in 2006 were equivalent to 12 billion USD. On the supply side natural effects such as draughts coupled with the increased cost of fuel, which causes a rise in prices for all consumer goods, are also working to drive up the price and therefore the unavailability of food.

            The effect of this rise in prices on the average individual was also explained by Dr. Barbone. The most dramatic effect is on the poor. A five percent relative increase in food prices could increase poverty rates by two to three percentage points. This dramatic effect is possible because there are so many throughout the world who teeter just above the official poverty line, and for those already impoverished the situation can only get worse.

            Dr. Barbone’s policy suggestions included the reduction of import tariffs on food stuffs, grain and bread subsidies to poor consumers i.e. Bangladesh and Egypt, and the collection of strategic reserves. In the long term he also advocated international grain contracts with large producers. These propositions will help to alleviate the crisis but can not quash it. “Higher food prices are here to stay”, said Dr. Barbone but at least “inflationary trends should abate.”