In the wake of rising commodity prices, there’s been quite a bit of talk in the newspapers and blogosphere arguing both sides of the debate. While most of the attention focuses on the negative impact food prices have on the poor, Tim Wiggins, at ODI argues that rising commodity prices can provide an export boon for low-income countries.
Let’s consider five countries: Burkina Faso; Ghana; Indonesia; Kenya; and Nicaragua; then see the likely impact through changes in the value of their trade in 10 of the most commonly traded items – maize, rice, wheat; palm oil; tea, coffee, cocoa; sugar; cotton, and rubber.
When you look at the data and it is clear that all five countries get a large boost to their export revenues – by around 20% in two cases, by 40% in another two, and by more than 100% in Burkina Faso – the latter thanks to it being so heavily dependent on cotton, the price of which has risen dramatically over the past six months.
The argument here is sensible and should be taken into consideration by those seeing the price rises as negative alone. However, this school of thought tends to ignore the real problems of vulnerability created by price hikes.
His solution for those negatively affected by the price rises mirrors others in the same school of thought: target countries with high rates of hunger that are also net importers of cereals.
The problem with this sort of thinking is that it looks at food security as a problem of food production. Today, increasing proportions of the worlds hungry are located in countries without food defecits. In 2008, India was the world’s second largest producer of both wheat and rice. Yet in the same year, it was also home to the world’s largest number of undernourished people.
Likewise, Chad, which only has a 2% food deficit is currently seeing Global Acute Malnutrition rates of 27% in its western provinces.
Food is an issue primarily about distribution. Focusing on deficit producers or net importers alone will hardly be sufficient to address the problem posed by price hikes. To assume that food-deficit countries is to ignore intra-country inequality: generally regarded as a bad move.