July 10, 2018 | By Craig Robinson

Next Generation 2018 - How Can Diplomacy Prevent Food Price Shocks?

The Chicago Council on Global Affairs is pleased to present the 2018 Next Generation Delegates blog series. This year’s Delegation was comprised of 27 outstanding students from universities across the United States and around the world studying agriculture, food, and related disciplines. We were thrilled to feature these emerging leaders at the Global Food Security Symposium 2018, and look forward to sharing the exciting work of this extraordinary group.

It is easy to forget that 10 years has passed since the 2007-08 food price crisis, when over 130 million people were pushed into poverty (World Bank, 2009). In the absence of a full-blown international crisis, concerns linger that agriculture may yet again be slipping as an international priority. However, at a time in which world hunger is on the rise, with the estimated number of undernourished people increasing from 777 million in 2015 to 815 million in 2016, the world cannot afford another food price shock.

While food price shocks are typically rare events, they are beginning to occur on a regular, cyclical basis. The food price shocks seen between 1910 and 1980 occurred nearly every three decades (Gardner, 1979). Between the 1974 food price shock and 2007-08, thirty five years had passed. Timmer (2010) established that every time a shock occurs, there is an increased sentiment for governments to intervene in markets, as compared to leaving food security in the hands of market forces. These interventions however eventually come at a cost (Timmer, 1986) and donors and governments shift their priorities and financial resources to other more pressing priorities. Market forces, however, have resulted in a long-term trend of pushing food prices so low that further investment in agriculture, such as infrastructure, becomes unprofitable. Timmer (2010) found that the subsequent drop in investment results in supply falling behind demand, setting the pre-conditions for another food price shock. I see many echoes of these trends in today’s global agricultural outlook.

At the 2018 Global Food Security Symposium, I heard a lot about the importance of agricultural production and innovation to meet the projected food demand of 2050, with a particular focus on youth. This is undoubtedly a crucial area for global food security, particularly as we adapt to climate variability and surging food demand. However, one dimension this year’s symposium did not explore was the need for countries to cooperate on agricultural policy to avoid unintended and costly international consequences. Let me offer the view that diplomacy has a key role in this regard.

New frameworks for diplomatic practice are particularly apt to our consideration of food price shocks. Goh and Prantl’s (2017) Strategic Diplomacy framework offers a system perspective based on three key questions:

  • What are the entry points for strategic diplomacy?
  • What are the tipping points that may either maintain or change the system?
  • What are the endpoints of strategic diplomacy in addressing the issues?
     

In considering the issue of food price shocks, we need to consider when a crisis actually starts and the tipping points that led to this occurring. In the 2007-08 food price crisis, the first warning of the crisis emerged as far back as 2003, when the signs of pressure on agricultural commodity prices started to emerge. Fan and Hedley (2008) established three key long-run factors that contributed to this pressure: rising oil prices, particularly in the United States whose agriculture industry is particularly oil sensitive; excessive food stockpiles in the 1990’s that delayed global price transmission and acted as a barrier to agricultural investment; and biofuel production which significantly increased in the five years leading up to 2007-08.

These slow burn issues did not immediately result in the crisis, but they were given enough time to conflate with other short term factors. States missed opportunities for diplomacy to achieve crisis prevention by addressing these factors before they acted as tipping points. Two strategic endpoints remain elusive still today: a global agreement to shift away from food-based biofuel production and a global agreement regulating the size of domestic food stockpiles.

Under the perception that the global agricultural system was under pressure, the crisis took an abrupt turn in November 2007 when India imposed the first major export restriction in the global rice market. Export restrictions were soon implemented by Vietnam, Cambodia, and Egypt (Headey and Fan, 2008). Further instability emerged when countries caught in the middle of these decisions responded through panic buying (Headey, 2011). The Philippines, for example, imported 1.3 million metric tons of rice in the first four months of 2008 as precautionary purchases, exceeding their entire rice imports for 2007. Bangladesh, Saudi Arabia, Oman, the United Arab Emirates, and Nigeria imported an extra million metric tons of rice in 2007-08 (Headey, 2011). Suddenly, rice prices increased 140 percent from November 2007 to May 2008 (Headey and Fan, 2008). This happened despite rice production reaching an all-time high in 2007, and no major surge in demand and no significant changes in rice stockpiles.

Diplomats did not effectively manage the crisis as it quickly accelerated. A global agreement to not enact export restrictions or panic hoarding during agricultural market uncertainty would have played a pivotal role at this stage of the crisis. This is a key diplomatic agreement that remains elusive still today.

In my upcoming PhD thesis, I will be presenting an entire new crisis diplomacy framework for non-traditional security issues, applied to the 2007-08 food price crisis. This framework will incorporate a systems perspective based on advances in strategic diplomacy. These frameworks, which sit alongside the notable research already undertaken into the causes of food price shocks, can help illuminate the crucial diplomatic agreements necessary to strike a balance between national interest and global public good.

 

References

  • Gardner, B. L. 1979. Optimal Stockpiling of Grain. Lexington, Lexington Books.
  • Headey, D. 2011. Rethinking the Global Food Crisis: The Role of Trade Shocks. Food Policy, 36:2, 136-146.
  • Headey, D. & Fan, S. 2008. Anatomy of a Crisis: the Causes and Consequences of Surging Food Prices. Agricultural Economics, 39:1, 375-391.
  • Prantl, J. & GOH, E. 2016. Strategic Diplomacy in Northeast Asia. Global Asia, 11:4, 8-13.
  • Timmer, C. P. 1986. Getting Prices Right: The Scope and Limits of Agricultural Price Policy. Ithaca, Cornell University Press.
  • Timmer, C. P. 2010. Reflections on Food Crises Past. Food Policy, 35:1, 1-11.
  • World Bank, The. 2009. The World Bank Annual Report 2009. Washington, World Bank Publishing.

About

The Global Food and Agriculture Program aims to inform the development of US policy on global agricultural development and food security by raising awareness and providing resources, information, and policy analysis to the US Administration, Congress, and interested experts and organizations.

The Global Food and Agriculture Program is housed within the Chicago Council on Global Affairs, an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. The Council on Global Affairs convenes leading global voices and conducts independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

Support for the Global Food and Agriculture Program is generously provided by the Bill & Melinda Gates Foundation.

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Faltering Farm Incomes Threaten Indian Agriculture

We are pleased to announce a new occasional blog series, Cultivating Tomorrow: Indian Agriculture Challenged, by Marshall M. Bouton, president emeritus of The Chicago Council on Global Affairs. The series will examine the state of Indian agriculture today and its areas of progress and challenge.