Under water is a rotten place for maize (Image: David Greedy/Getty)

The world food price index is at its highest since 2008, when food prices rocketed and millions of people suffered. This year the crisis seems to be happening again. Prices for the staple grains that underpin the world’s food supply soared after forecasts for the US and Chinese maize harvests fell in October, Pakistan lost its wheat to floods, and crop losses to drought and wildfire led Russia to ban grain exports until 2011. Food prices have soared in India, Egypt and elsewhere and are being blamed for riots in Mozambique.

Are we having another food crisis? New Scientist investigates.

Is this another crisis like the one we had in 2008?


Not quite. Maximo Torero of the International Food Policy Research Institute (IFPRI) in Washington DC notes that oil, the real driver of food prices and of the 2008 crisis, is relatively cheap, at around $75 a barrel, not over $100 as it was in 2008.

In 2008, both immediate grain prices, and the prices offered for future grain purchases in commodities markets, climbed steadily for months, whereas now they are spiking and dipping more unpredictably, which economists call volatility.

“The market fundamentals – supply and demand – do not warrant the price increases we have seen,” says Torero. Not all harvests have been bad, and after 2008 countries rebuilt grain stocks. “There are enough stocks in the US alone to cover the expected losses in Russia.”

The food riots in Mozambique were not due to world grain prices, he says, but because Mozambique devalued its currency, making imported food more expensive.

So what has been happening this year?

Markets are responding nervously to incomplete information. First there was a series of shocks: Russia’s export ban, lower maize forecasts, then, days later, a US ruling to allow more bioethanol in fuel which seemed likely to further reduce the maize – the main source of bioethanol – available for food. Meanwhile there was no reliable information about grain stocks, which is strategic information that most countries keep secret.

The result was nervous bidding and sporadically surging prices in commodity markets. And that attracted the real problem: investors wielding gargantuan sums of speculative capital and hoping to make a killing. When speculation exacerbated the price crisis of 2008, Joachim von Braun of the University of Bonn, Germany, then head of IFPRI, predicted that it would continue causing problems. “We saw that one coming and it came,” he says. “Food markets have new design flaws, with their inter-linkages to financial markets.”

Volatility also makes it harder to solve the long-term, underlying problem – inadequate food production – by making farmers and banks reluctant to invest in improved agricultural technology as they are unsure of what returns they will get. “Investment in more production alone will not solve the problem,” says von Braun. As long as extreme speculation causes constant price bubbles and crashes, either farmers will not get good enough returns to continue investing in production, or consumers will not be able to afford the food.

“Without action to curb excessive speculation, we will see further increases in these volatilities,” he says.

What can we do?

This is where technology comes in. All the major producers already use remote sensing technology to watch each other’s fields. If countries would reveal just once what stocks they hold, says Torero, the satellite images can be used to calculate whether those stocks have risen or fallen, as growing conditions change. “All we need to know is the baseline,” he says. Reliable information about stocks could offset unwarranted jitters about crop failures, such as the ones that are contributing to the current market volatility.

Von Braun goes farther: he says there should be a global technical organisation that keeps track of world grain stocks and production, and which decides, using complex computerised models of world food markets, what range of grain prices are actually warranted by real supply and demand. Then if speculation starts to drive prices up out of this band, countries could intervene on markets, buying and selling just enough to counter speculative pressure. “This doesn’t stop speculation, just extreme speculation,” he says.

He thinks it would take a fund of $20-$30 billion to do the trick. In September the World Bank extended a $2 billion fund to respond to food price crises, but that is aimed at helping the poorest survive price spikes rather than intervening to stop them happening.

Even if we stop the volatility, don’t we still need to grow more food?

Yes. As well as stable markets we also need more research into increasing yields that will produce enough grain to sell, plus investment in getting research products into farmers’ hands, and the roads, markets and communications technology the farmers need to get it to market.

The more farmers are selling into the world market, says von Braun, the more stable it will be, as when one country falls short, another will have extra.