Food Security in an Age of Falling Commodity and Food Prices

Published date01 March 2016
AuthorStefan Tangermann
Date01 March 2016
World Food Policy - Volume 2 Issue 2/Volume 3 Issue 1, Fall 2015/Spring 2016
In recent years, international markets
for commodities and food have gone
through exciting if not worrying price
swings. e well-known secular decline
of prices in real (i.e., ination corrected)
terms and a period of several years of price
depression were suddenly interrupted by a
dramatic increase of prices in 2007. Food
prices, in particular those of cereals and
rice, reached a peak in 2008, far above the
real prices that had prevailed in the last
20 years or so. In a number of developing
countries food security was severely
threatened or actually undermined.
Several governments around the world
responded in panic and adopted measures,
both domestically and at the border, aimed
at keeping food prices under control. e
Stefan TangermannA
Food Security in an Age of Falling Commodity and
Food Prices
A Professor Emeritus, Department of Agricultural Economics and Rural Development, University of
Göttingen, Göttingen, Germany. Paper presented at the World Food Policy Conference, 17–18 De-
cember 2015, Bangkok.
International prices of food and agricultural commodities had reached an
extremely high level in 2007-08 and subsequent years, but have more recently
embarked on a declining trend. It is, though, not certain that they will reach the
lower levels again that prevailed before the price peak. It appears conceivable
that international markets have experienced a structural shi towards a longer-
term higher price level. While there is no certainty that prices will remain at
such a higher level it appears that the international community should at least
be prepared for such an outcome. High international food prices can undermine
global food security as developing countries overall, and low-income countries
in particular, are net importers of food and agricultural products. eir net
imports keep growing, above all those of cereals. In many developing countries,
even rural households are net buyers of food. An increase in food prices reduces
welfare and impacts negatively on food security in net importing countries and
among net-buying households. As far as policy implications are concerned, this
means that high-price policies, implemented through import taris and domestic
measures, cannot be recommended for developing countries. e international
community needs to invest more in agricultural development and food security
in developing countries. We must not repeat he experience of the mid-1970s,
when the promises to do more for agricultural development aer a similar
period of food price peaks were soon forgotten aer prices declined again.
Keywords: International food prices; global trends on food markets; net imports
of food in developing countries; welfare implications of changing food prices;
policies to improve food security
doi: 10.18278/wfp.
Food Security in an Age of Falling Commodity and Food Prices
international community was deeply
concerned about global food security
and the world’s capacity to feed a growing
population. Several high-level meetings
were held, all the way up to the ranks of
heads of state and government, to consider
programs that could improve the state of
aairs. And indeed, all sorts of promises
were made to assist countries in need, to
calm down the situation on international
food markets and to foster the productivity
of world agriculture.1
Aer their 2008 peak, food prices
on international markets as well as prices
of other commodities declined again
for some time, though by far not to the
much lower levels that had prevailed
before 2007. But then prices began to
rise again, and for a number of years
they uctuated around rather high levels,
with an extraordinary degree of volatility.
Beginning in 2014, though, commodity
and food prices embarked on a declining
trend that appears to continue, if not to
accelerate, until these days. While the
precarious situation of food consumers
was a major matter of concern in the years
following 2007, the fate of farmers around
the world has come into sharp focus as
agricultural commodity prices appear to
be ever declining. Yet, as many farmers,
in particular in developing countries, are
also poor food consumers, the pressure
that declining farm product prices impose
on farm incomes may also have negative
implications for their food security. is
complex web of relationships between
changing market trends and food security
was the theme of the presentation to the
Bangkok World Food Policy Conference
in December 2015 on which this article is
When discussing this theme,
three specic questions would appear
to be particularly relevant. (1) Is the
price decline experienced in the recent
past likely to continue? (2) What are the
implications for world food security?
(3) How should policies, both domestic
and international, respond? e article is
structured along the lines of these three
questions. e focus will be on prices
of food and agricultural commodity
prices, while other commodities will be
mentioned only in passing. Given the
limited time available for the presentation,
the treatment of the theme dealt with here
is necessarily somewhat selective if not
Is the Current Price Decline Likely
to Continue?
One of the most frequently cited
sources of information on
international market prices for
food and agricultural commodities is the
Food and Agriculture Organization (FAO)
of the United Nations. A frequently used
FAO graph showing price developments
is reproduced in Figure 1. A quick view
at the lines in this graph may suggest that
prices of major food commodities have
declined dramatically in recent months. A
naive observer might get the impression
that they are in free fall, possibly even
approaching zero. It is, though, important
1 For a discussion of the factors that had triggered the price spikes on international food markets as
well as an analysis of domestic and international policy responses that could potentially cure the re-
sulting problems for world food security, see Tangermann (2011) and the literature referenced there.

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