Media release: Clear, long-term thinking needed to address food crisis

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Clear, long-term thinking needed to address food crisis
Thursday, 5 June, 2008
Governments around the world should resist the temptation to resort to protectionist measures in food markets if they are to help their populations through the current spike in food prices.
A new research report High Food Prices: Causes, Implications and Solutions, funded by the Rural Industries Research and Development Corporation (RIRDC), provides an analysis of food price rises and says government intervention could only make the problem worse.
The exception is where immediate humanitarian concerns outweigh fears about market distortions.
While higher prices have been welcomed by Australian farmers, they have led to food riots in at least 23 countries and increased poverty in some developing countries.
In the past 18 months, the world price of rice has tripled, maize has increased by two-thirds and wheat has doubled. Grain is a major input into meat and dairy production and these prices have also risen significantly.
The report finds that supply side factors causing the food price increase are:

weak recent production growth relative to demand that has seen reductions in stocks

rapid growth of real agricultural input prices, most notably oil and fertilisers

below average harvests in major exporting nations in recent years

government restrictions on production and trade in food.

It also highlights demand factors such as rising global population, increased wealth boosting demand for meat and dairy products, and government policies to encourage biofuels.
RIRDC Managing Director, Dr Peter O’Brien, said the report suggests that governments trying to find short-term solutions to the problem of rising food prices could cause more damage in the long-term.
“High food prices send signals to millions of farmers around the world to increase production and stimulate investment in capital and research and development.
“The report argues that protectionist policies in the developed world that drove down food prices in the 1980s and 1990s led to a reduction in R&D that is now resulting in slower productivity growth,” Dr O’Brien said.
“Similarly, taxes or other restrictions on exports also reduce domestic prices – which may produce short-term benefits for consumers, but will act as a disincentive for farmers leading to less production in the longer-term.
“The report suggests that with food stocks low, political pressure for barriers to exports intensifying and no change expected to biofuels policies, high food prices are likely to last another year or two. However if government’s remain calm and think long-term, the market will right itself,” Dr O’Brien said.
Media enquiries: Danny O’Brien – RIRDC Communications Manager – 02 6271 4175 or 0438 130 445

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