Recession May Lead To Another Food Crisis

Fears over global hunger are back, this time driven by both high food prices and plunging incomes. As the global recession deepens, unemployment is rising, but the price of staple foods is not falling with other commodities, like oil. Last week the ILO predicted that if current conditions persist, some 200 million workers, mostly in developing countries, will be pushed into extreme poverty by job losses or wage cuts this year. Given that the very poor already spend 50 percent of their income on food, officials worry that the number of hungry people could spike in the coming months (there are already 963 million, up from 923 million in 2007, before the last food crisis began).

The regions with the most working poor—sub-Saharan Africa and South Asia—also have the world's highest hunger levels. At a global food-security summit in Madrid last week, U.N. and government officials warned that hunger was likely to increase this year in these and other vulnerable places like the Caribbean and parts of Central Asia, due not only to deteriorating employment prospects at home, but also because of dramatically decreasing remittances from abroad (which account for as much as a quarter of GDP in some poor countries).

Worsening public finances won't help either. Historically, aid promises are often reneged upon in financial downturns. U.N. spokesman Tim Wall notes that while it's too early to make a call, very little of the record $18 billion in food pledges made by developed nations during the height of last year's food crisis has materialized. What's more, poorer countries will be less and less likely to continue subsidizing food prices for their own populations because of their deteriorating economies (IMF projections for emerging market GDP growth are down from 5 to 3 percent for 2009).

That's especially problematic, because food prices are likely to begin spiking again toward the end of this year or early next year. Unlike oil and metal commodities, agricultural goods are still more expensive now than they were 12 months ago. A Chatham House report released last week notes that even the recent fall from peak prices in July is only temporary, as future supply is likely to be constrained in part by a continuing lack of investment into agriculture. The economic downturn means small farmers can't afford to plant to full capacity, and there are early signs that the credit crisis has dried up some of the private investment that was supposed to spark a second green revolution. Instead, the world faces a renewed food crisis.

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