According to a report published by ICTSD, ACP states account for almost two-thirds of developing countries that have switched from being net food exporters to importers over the past decade. The report provides an ‘overview of the type of policies and mechanisms that poor, net food-importing countries could use to overcome food security challenges in periods of high prices, in the context of the evolving trade and food security trends affecting various country groupings’. It identifies the countries and groups that may be most vulnerable to high and volatile prices and analyses the evolution of agricultural and food trade in recent decades.
The report finds that 20 developing countries that used to be exporters have become net food importing states in the last decade. Twelve of these are ACP countries: Benin, Burundi, Chad, Dominican Republic, Madagascar, Mali, Mauritius, St Vincent, Solomon Islands, Somalia, Sudan, and Zimbabwe. Like those ACP states that have been net food importers for a longer period of time, these states are likely to be among the states exposed to world price shocks. The paper argues that ‘governments ought to be better prepared for future volatility and the next agricultural commodity price surge’ because of their experience of the 2007–2008 spike, but questions whether all of them are well prepared.
There is mounting evidence that prices will hit a high this year. The latest USDA projection lowers US corn production to 274 million tonnes (10.8 billion bushels), down almost 40 million tonnes (1.6 billion bushels) from last year, and the lowest production level since 2006.
The ICTSD paper reports that, while there have been several studies of governments’ response to the 2007–8 world food price spike, the welfare effects at the household level are largely unknown. Despite this, the paper identifies some measures that appear to be effective in offsetting the adverse effects of higher food prices. ‘Although untargeted’, it argues, ‘the easiest and quickest response for a net importer is to adopt a variable import tariff’. There is a trade-off between alternative policies to ensure that vulnerable households are able to obtain food. ‘Safety-nets are the most targeted response, but require preparation and effective management’, which means that lower income countries often struggle to administer them. Although, in practice, they ‘tend to benefit poorer more than richer consumers’, the report points out that ‘across-the-board food subsidies … tend to endure and are difficult to remove; distort price signals; are fiscally costly and likely unsustainable for most countries.’
On the other side of the coin, the report lists negative externalities of export restrictions ‘which have exacerbated global price spikes, and undermined the reliability and credibility of world food markets’. It underlines that ‘there is a vicious circle: less reliable food sources along with greater world price volatility reinforces the domestic political incentives to insulate national markets.’
Yet the temptation for net surplus countries to curb exports is high. The Zambian minister of agriculture, Emmanuel Chenda, is reported to have urged a curb ‘on illegal exports of maize following reports of a deficit of the crop in the South Africa Development Community (SADC)’. However, Mr Chenda says Zambia is still expected to produce 2.8 million tonnes of maize this farming season, against the domestic consumption of 1.5 million tonnes.
Many ACP states are likely to be among the worst affected by the forecast rise in world food prices this year. Kenya’s wheat harvest, for example, is estimated to be 37% below target. The ICTSD report calls on the international community to support poorer countries in mitigating the adverse effects of food shortages on vulnerable households. Poor states are caught between a rock and a hard place: general food subsidies are too costly for them, but targeted support requires levels of administration that many states do not have. The international community has had advanced notice of the very poor US harvest and has also established a number of arrangements under the auspices of the G20, seeking to build on the experience of the two recent price hikes. This suggests that vulnerable ACP countries could well expect more timely and effective assistance in dealing with the emerging 2012 food price crisis. However, ACP governments in food-surplus-producing countries also have an important role to play in ensuring that they maintain open trade policies vis-à-vis their regional neighbours who are likely to face serious problems of food procurement in the coming months.