Policy Brief 1: Food Price Volatility and the Right to Food

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RIGHT TO FOOD ISSUES BRIEF 1 Food Price Volatility and the Right to Food * It is generally recognized that high food price volatility has a negative impact on food security. This volatility affects particularly the most vulnerable groups; smallholder/family agriculture and low * income urban and rural populations.

Policy measures taken in 2006-2008 during the soaring food prices crisis were applied mainly to meet * the effects and not the causes. The sudden increase of food prices that started in the second semester of 2010 shows that a weak world food system equilibrium already existed.

Putting into practice Right to Food principles can help to enhance the efficiency and sustainability of the * majority of policy tools being implemented to confront and reduce prices volatility, by indentifying the possible negative effects of those tools on the most vulnerable, while suggesting the use of alternative policy measures to turn negative effects into positive ones for improvements in food security.

It seems evident that a medium-term solution to reduce the excessive volatility would inevitably have to * take account of better food security governance. It is in this field where the Right to Food approach has showed some significant value added experiences.

Right to Food approaches address the root of the problem: the structural causes that underlie price * volatility, and contributes to overcoming the social, political and cultural origins of hunger.

Volatility and the experience during and stable prices but the high levels occurring over the 2006-2008 last five years represent major concerns regarding the frequency, seriousness and depth of these events2. Volatility, in terms of significant and frequent changes in the direction and magnitude of food prices1, results FAO studied3 the different policy’s tools applied in 81 in harmful effects to producers, consumers and states. countries in the past food prices crisis during 2006 and This phenomenon puts at risk decisions made by 2008. Analyzing the measures used we realize that the producers about what and how much to produce. main part were initiatives addressed to mitigate the In the case of events provoking soaring prices, high level prices to the consumer. Governments turned people with low incomes have significantly reduced mainly to measures which could be implemented purchase capacity and the inequalities are expanded. in a fast and simple way. However, partly due to the During 2006 and 2008 period for example the increased low food prices which existed during the past decade prices were a major factor in the increase in the number (in real terms), there were no incentives to invest in the of hungry people to more than one billion. This situation agricultural sector and the public capacity to operate in may be a threat for the states also because they may the rural area was dismantled. Consequently the different confront high inflationary situations with unexpected measures implemented were not only insufficient, but fiscal and budgetary repercussions, thus generating also failed to achieve the expected results. The decrease considerable social tension. in food prices which occurred in the second semester of There is no clear evidence about future volatility trends. Past experiences showed that periods of high and volatile 2 FAO, IFAD, IMF, OECD, UNCTAD, WFP, the World Bank, the WTO, IFPRI and the UN HLTF. 2011. Price Volatility in Food prices are often followed by long periods of relatively low and Agricultural Markets: Policy Responses. Rome. FAO. 3 Demeke, M., Pangrazio, G.& Maetz, M. 2011. Country responses 1 FAO. 2010. Price Volatility in Agricultural Markets. Evidence, impact to turmoil in global food markets. In Safeguarding food security in on food security and policy responses. ES Policy Brief, n. 12. Rome. volatile global markets, edited by Prakash, A. Rome. FAO. RIGHT TO FOOD

ISSUES BRIEF 1

2008 provoked many governments to deactivate those levels, it is essential to analyze this and provide some measures thereby obtaining only short term results. recommendations under a right to food approach.

a) Sustainable production and Policy measures adopted by 81 countries in Asia, risk management Africa and Latin America and the Caribbean In a context of soaring food prices any structural answer during the 2006-2008 episode. to food price volatility must be linked to re-investment in the agricultural sector. Under a rights perspective, this production increase has to be sustainable and focus Number on public efforts for poor smallholder farmers and 4 Domestic Market Based Measures of countries agricultural wage-workers .

Release stock at subsidized price 35 It seems that a significant part of the solution could be found in small scale family agriculture and consequently Suspension/reduction VAT this has to be promoted on a scale large enough to obtain and other taxes 23 the amount of income and food to satisfy producer and Admin. Price control or restrict consumer demand. It is essential that this effort should private trade 21 not compromise future demands; it necessarily requires the provision to producers of the required resources Trade Policy Measures and capacities. Reduction of tariffs and customs Promoting this kind of more sustainable agriculture, fees on imports 43 resilient to climate and price shocks, on a large enough scale, requires public support in combination with the Restricted or banned export 25 private sector (smallholders are privates mainly). This Safety net could be achieved by giving priority to public goods like extension services, access to credit and risk insurances Cash or Food transfer 33 adapted to the specification of this kind or producers, Increase disposable income 16 research and innovation, capacity and support to producer’s organizations and cooperatives. On the other Non-Market Based Production hand, it is advisable to consider the externalities produced Support Measures by the more industrialized agriculture, incorporating in Production Support Programmes 35 their cost the use of natural resources (water, soil and biodiversity fundamentally) and promoting incentives to Fertilizers and Seeds Programmes 9 facilitate a transition to more efficient and sustainable production models with less impact on the weak food Market-Based Intervention 15 international system equilibrium. Source: Demeke, M., Pangrazio, G.& Maetz, M. 2011. Country responses Watching for the correct design, implementation and to turmoil in global food markets. In Safeguarding food security in volatile global markets, edited by Prakash, A. Rome. FAO. fulfillment of labor rules in the rural sector is also essential. Employees must be also able to take advantage Therefore, the high levels of volatility experienced in of the eventual agricultural sector growth through more global commodities prices during 2006 and 2008 bore accurate incomes and the correspondent social benefits witness to the weak equilibrium of agricultural markets, (health coverage and retirement pensions fundamentally). the limited public capacity to manage the situation in Putting into practice all these recommendations requires favor of general purposes, and the dramatic consequences an committed political will that could be translated over the increase of world hunger. This experience into increased financial resources for the state and more evidenced the necessity to consider the access to food efficient utilization of those resources. like a fundamental human right and consequently a priority issue to guarantee the countries’ social and b) Social safety net programs economic viability. Social and food safety nets serve as a method by which States may fulfill their obligation to provide for the Analyzing the new measures under implementation of the right to food for those who, a Right to Food Approach for reasons beyond their control, cannot provide for themselves. Social and food safety nets play a key role The problems resulting from excessive food prices in fighting transitory and chronic hunger, including volatility have brought about several policy measures reducing the gravity of food emergencies, and thus in the last years. Many of them are still proposals and in assuring the right to food. As all human rights are governments are looking for effective implementation interdependent and interrelated, safety nets must tools. Those initiatives are being discussed in many be designed and implemented with regard to other different forums, and their realization is presumed to be in the international agenda in the next months. Based on the importance of this issue for the future 4 FAO, CEPAL, OIT. 2010. Políticas de Mercado de trabajo y pobreza food security situation at global, regional and national rural en América Latina. Santiago de Chile. protect domestic markets, but it represented in many many supplies theinternational in reduction in a significant to cases represented order it but in markets, commodities domestic protect food of provoked restrictions export measures policy trade counterproductive of effects. 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ISSUES BRIEF 1 speculative initiatives as well as for the more correct developed countries could be to promote more healthy market functioning. The experience of the soaring diets that usually require less processing of food products. food prices in the second semester of 2010 shows that Industrial food frequently demands larger quantities of more and specific information related to possible shocks grains and water to be produced - the environmental (climatic mainly) would help to reduce the food price externalities provoked are also higher. In developing volatility phenomenon. countries under right to adequate food perspective the priority has to be focused to support conditions f) Biofuels to increase food consumption of the most vulnerable There is little doubt that biofuels are another component groups, assuring the amount of calories required and the that add stress to the weak supply and demand quality of their diets. equilibrium of world food market commodities involved and their substitutes. The narrow linkage between Conclusions biofuels and petrol prices result in the shocks occurring in the producer countries and policy decisions taken in Analyzing the main policy measures proposed to developed countries to support those alternative energies, confront the excessive volatility in food prices, it seems having a potential impact over food volatility prices. evident that a medium-term solution to reduce the excessive volatility would inevitably have to take into The promotion of biofuels without taking advice on account a better food security governance. It is in this their possible implication on food security is threatening field where the right to food approach has showed the achievement of the right to adequate food, not only some significant value added experiences. Not only due to the impact on prices and biodiversity, but because because it contributes to improving the efficacy and of the high land concentration that this kind of business sustainability of food security policies and programs, but requires (economies of scale). Nowadays biofuels it provides a coherent framework which also affects key profitability relies strongly on the use of vast land elements of governance, such as communication spaces surfaces and this frequently has directly implications on for the main stakeholders involved in food security vulnerable groups whose livelihoods could depend on issues and establishes principles for decisions takers to those lands. People who belong to these vulnerable groups implement processes based on participation, absence are traditionally marginalized with weak capacities and of discrimination, transparency and empowerment. resources to negotiate and defend their rights equitably

At the same time Right to Food is embedded in a photo: Cover © Flickr CC /A. Baron with biofuels’ promoters. legal framework based on rights and duties which • provides mechanisms to reinforce accountability and g) Decreasing Demand state of law. Besides the necessity to increase food production, there is also an increasing consensus on the need to reduce the The Committee on World Food Security (CFS) upward demand tendency. Although population growth is nowadays one of the main world forums where is not the most important component of the excessive governments, international institutions, private sector food price volatility, it is obvious that this factor adds and civil society organizations work together to improve Graphic designer:Verona D. pressure to the food equilibrium system. Some voices food security policies. Its reform is considered a very • claim measures to decrease demand through population important step to tackle the challenges under a dialogue control growth, but experience proves that when families, and coordination perspective linking all interested actors mainly women, are provided with capacities, tools and in a common effort to direct world food governance to opportunities to develop a free personal and professional the progressive realization of right to food6. According to life, the birth ratios decrease drastically. this document a right to food perspective into the CFS recommendations to face high volatility would be greatly In order to diminish the food demand curve it would help to address the root of the problem and its structural also be useful to support initiatives to reduce medium- causes for overcoming the social, political and cultural and high-income countries food losses and waste. origins of hunger. To download: www.fao.org/righttofood download: www.fao.org/righttofood To

It is estimated that roughly one-third of food produced • for human consumption is lost5. Another option for

5 FAO. 2011. Global food losses and food waste. Extent causes and 6 The progressive implementation of the Right to Food Voluntary prevention. Rome. Guidelines is in the Vision of the reformed CFS and in the Global Strategic Framework for Food Security and Nutrition. To order additional copies contact FAO To •

This product was developed in the context of the project “Coherent Food Security Responses: Incorporating Right to Food into Global and Regional Food Security Initiatives” funded by Spain. www.fao.org/righttofood/governance_en.htm For questions and comments, please contact: