The global food system is a house of cards. Here’s how to fix it.
The global food system is a house of cards. Here’s how to fix it.
May 16, 2022
Today, a new generation is facing mounting food insecurity sparked by the third food price crisis in 15 years. But this crisis has not to this point been caused by a lack of food. The issue is getting it to the people who need it, at a price that’s affordable.
After Russia’s invasion of Ukraine, world food prices have hit all-time highs—and they were already mounting before the first tank rolled across the border, buoyed by rising oil prices and supply chain disruptions caused by the pandemic. Over 800 million people already faced chronic undernourishment in 2020. FAO modeling suggests that the war will increase the number of undernourished people by a further 13 million.
Wheat is one of the three crops—along with maize and rice—that together provide almost half of the calories consumed around the world. Many low-income countries rely on imports of these staples to satisfy their needs.
Higher food prices are already hitting some food-insecure countries hard. Twenty-six countries source over 50 percent of their wheat imports from Ukraine and Russia—for Eritrea, Somalia, and the Democratic Republic of Congo that number is 80–100 percent. Since the Ukraine invasion, the price of bread has doubled in Sudan and increased by 70 percent in Lebanon. The poorest populations in low-income countries spend over 60 percent of their income on food. As such, even small price rises can have devastating impacts. Food riots, civil unrest, and repressive government tactics could be likely.
At the center of this crisis is the fact that the production of the world’s staple crops destined for export is concentrated in a small number of countries, and they are shipped around the world by a handful of trading firms. Much of this globally traded food is grown from a narrow range of seed varieties, using uniform industrial agricultural methods.
So, is it any wonder that a war involving two countries that specialize in producing two of these staples should spark a major global food crisis?
As we detail in the latest report from the International Panel of Experts on Sustainable Food Systems (IPES-Food), the world’s food security is built on a house of cards—the whole edifice can tumble when one card falls. The concentrated nature of the global food system creates vulnerabilities, which can have cascading consequences when there are disruptions to any part of it. These economies of scale might be designed for profitable efficiency, when things operate according to plan. But they’re neither stable, resilient, nor dependable in the face of risks, especially for vulnerable people.
Add to this concentrated global food system the financial markets, which can further exaggerate the effects of price shocks.
The excessive price rises and fluctuations we are currently seeing are not based on market fundamentals. In just nine days in March 2022, the price of wheat on futures markets jumped 54 percent. This is despite global wheat stock-to-use ratios being similar to trends in recent years that did not see the same price gyrations.
Evidence suggests financial speculators are jumping into commodity investments and gambling on rising food prices. Since the Ukraine invasion began, there have been increased inflows of capital into agricultural commodity futures and investment funds linked to wheat and maize, risking excessive speculation distorting markets and prices. This is likely exacerbating food price spikes and volatility, and it’s pushing the world’s poorest people deeper into hunger.
Despite some faltering attempts at regulation, governments such as the U.S. and the EU have largely failed to curb excessive speculation and ensure transparency of food stocks and commodity markets. Governments must urgently address these regulatory weaknesses. Without stricter rules, the commodity futures markets will become more like a casino, as wealthy speculators make money off hunger.
On top of this are the “ABCD” giants that control the bulk of the world’s commercial grain trade—Archer-Daniels Midland, Bunge, Cargill, and Dreyfus. These global corporations hold large reserves of grain, but do not publicly report them, nor is there a requirement for them to do so. This lack of transparency makes it impossible to get a clear view of global stores of grain, which contributes to further volatility.
Layered on top of these dynamics are the vicious cycles of conflict, climate change, and poverty. These persistent and mounting perils are leaving hundreds of millions of people without the ability to adapt to sudden food shocks. Facing high debt burdens post-COVID, and rising food import bills, low-income nations face near insurmountable barriers to building social protection systems to assist their most vulnerable populations.
Climate change and conflict are locking in persistently high levels of poverty and hunger. Key agricultural regions are currently facing the worst droughts for decades, including in West and South Asia, North Africa, the Horn of Africa, parts of Brazil and Argentina, as well as North America.
The Ukraine war might have been the specific trigger of this crisis. But the persistent underlying flaws and precarities in our global food system were already in place. These are many of the same shortcomings that were apparent in the 2007-2008 food price crisis—but they were not adequately addressed by governments, in the face of lobbying pressure from corporate players that benefit from the status quo. Now, those same lobbies are advocating to further ramp up industrial food production, suspend environmental regulations, and even reduce organic farming. Such short-sighted responses to the crisis are purely opportunistic, and will only exacerbate current trends.
What’s to be done? For starters, canceling debt for food import-dependent countries is essential to help them to provide social assistance to those most affected and to rebuild their own domestic food production. A crackdown on excessive commodity speculation, combined with measures to enhance transparency and reduce concentration in markets, is needed to stop food prices being pushed up purely for profit.
Accelerating the development of regional grain reserves and food security response systems can help provide a buffer in times of hardship. Reducing the reliance on fertilizers and fossil energy in food production and scaling back the diversion of grain toward biofuel and livestock production will help to reduce the pressure on land and the demand for commodity crops.
Overall, diversity is key to more resilient food systems in the long term. It’s what provides alternative options when shocks occur—spreading the risk. This means ensuring that farmers in a wider range of countries and regions are producing a greater variety of foods and employing ecologically sound production practices, such as agroecology, delivered through more local and regional markets that provide sustainable livelihoods.
Such measures will provide a more stable foundation for the world’s food systems, and provide more dependable food security. And it can’t happen too soon, because whether from conflict or climate change, more shocks are certain to come. Next time, we must be ready.
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