“The most vulnerable are the most affected, and most of their income is spent on food,” commented Merritt Cluff, a senior economist at the UN Food and Agriculture Organization (FAO). “But agriculture has proven to be more resilient to the economic crisis because food is a basic necessity.”
The number of undernourished people hit almost one billion – 15 percent of the world’s population in 2008 – in the food and fuel price crisis. Agricultural growth is key to sustainable development and poverty reduction, because 75 percent of poor people in developing countries live in rural areas, according to the Agricultural Outlook for 2009-2018 by FAO and the Organisation for Economic Co-operation and Development (OECD).
Episodes of extreme volatility in food prices, similar to the sharp hikes in 2008, were a possibility in the next decade, the report warned, because weather conditions would be more erratic and food prices had increasingly become linked to fuel costs.
“Agriculture production costs have shot up because of the increase in fertilizer prices,” said Cluff. In some developing countries the prices of staple cereals went up fourfold in 2008. Lower oil prices and improved cereal production in developed countries have managed to bring prices down, but the forecast noted that global economic prospects were now more pessimistic than earlier in 2009.
The forecast’s authors suggested that the reduced agricultural prices, production and consumption associated with lower incomes were likely to be moderate, as long as economic recovery began within two or three years. The downside of lower prices is that “There will be less incentive to expand [into] new, less productive arable area in many countries, or in higher expenditures on yield-enhancing inputs,” said the Outlook.
“Instead, relative price changes will prompt mainly the reallocation of existing land and resources among grain and oilseed crops, with those crops offering the highest returns gaining the most ground.”