By Dr. Shenggen Fan
Dr. Shenggen Fan has been director general of the International Food Policy Research Institute (IFPRI) since 2009.
A severe and extensive drought—the worst in 60 years—has affected more than half of the United States in recent months. With nearly 80 percent of agricultural land experiencing drought conditions and roughly 75 percent of maize and soybean production impacted, national maize and soybean production estimates for August have subsequently been lowered by 27 and 16 percent, respectively, from forecasts made in May. As a result, global prices for these two crops have risen rapidly and could increase further depending on the degree of severity and extent of the drought. Since the beginning of June, US export prices for maize and soybeans have increased by 25 and 19 percent respectively, with daily prices for both crops reaching record highs.
The effects of high and volatile food prices on poor and vulnerable groups in developing countries can be immense, as seen during the 2007-2008 crisis. Price movements in domestic markets can have significant impacts on global markets, and vice versa. As the world’s leading producer and exporter of maize and soybeans, the United States plays a key role in international commodity markets. As of 2011, US production of maize and soybeans accounted for more than 30 percent of total world production, and US exports of these crops represented more than 40 percent of total world exports. Accordingly, reduced production in the United States can significantly affect global prices of these commodities and undermine the ability of individuals in developing countries to access food, as well as compromise their overall purchasing power. Rising maize and soybean prices can also contribute to increases in the prices of other commodities as consumers shift their consumption to other staple foods. Diet deterioration is also a concern since increased food prices reduce the ability of consumers to purchase more nutritious, but more expensive, foods like meats and fruits. For many poor in developing countries, access to adequate animal protein and micronutrients remains a great challenge.
When food prices become higher and more volatile, it is vital to help the poor in the short term and build their resilience to shocks in the longer term. Productive social safety nets can play this dual role, protecting the poor while enhancing their capacity to build productive assets. Agricultural policies and interventions should ensure that smallholders have opportunities to increase their productivity and incomes through measures that boost access to inputs (such as improved seeds and fertilizer), irrigation (including small scale water conversation and micro- irrigation projects), extension services and finance, markets, and risk-management tools (such as weather-indexed insurance). Efforts to improve access to non-farm jobs must also be scaled up, and special attention must be paid to the needs of pastoralists, especially in the Horn of Africa.
The US drought has exposed the continuing vulnerability of the global food system. As prices of key staple crops climb, the international community is once more assessing the possibility of another food crisis. While the long-term effects of the current drought remain to be seen, national governments and international actors can and should take lasting steps to build the resilience of vulnerable groups, prevent future food crises, and enhance global food security.