A United Nations agency has warned of negative impact of the global financial crisis on agriculture in the developing countries and has called for an agricultural bailout package of $30 billion annually to ward off hunger and food riots.
“Proposing to commit such a sum to save humanity from hunger was not unreasonable given that it had taken only few weeks to find more than 100 times that amount to deal with a global financial meltdown,” Food and Agriculture Organisation (FAO) Director-General Jacques Diouf said in a statement.
“The amount ($30 billion) was modest compared to $365 billion of total support to agriculture in OECD countries in 2007 and $1,340 billion in military expenditure the same year by the developed and developing countries,” he added to strengthen the case for the farm bailout deal.
In a report on the global food scenario, issued in Rome on Saturday, the FAO pointed out that the prices of most agricultural commodities had dropped significantly and swiftly in recent months. The slide of over 50 per cent in the prices of farm goods from their recent peaks was much faster and steeper than could be explained through production gains alone.
It attributed the downturn in prices to factors like global financial crisis, halving of world crude oil prices and the appreciation of the US dollar.
“Lower food prices are good news for consumers but cannot be sustained if they only are an indication of market oversupply. Unless they reflect consolidated cost efficiency gains, low prices would only deter much-needed investment in the agricultural sector,” the report stated.
“In tandem with the ongoing retrenchment of bank lending, they could well undermine developing countries’ agricultural productivity growth and its commercialisation over the longer term. Other long-term concerns, such as resource constraints, also remain critically important,” the FAO report added.
Elaborating on the percussions of the negative effects of the world financial crisis on agricultural and rural sectors, the UN think tank said declining purchasing power could lower demand and increase the risk of a drop in food intake, particularly of the poor, thereby offsetting part or all of the positive impacts of falling prices on consumption. As a result, more people are likely to fall below the hunger threshold in 2008. This is of particular concern, as the number of undernourished people was estimated to have risen by 75 million in 2007, already bringing the world total to 923 million.
“Under the current gloomy prospects for agricultural prices, high input costs and more difficult access to credit, farmers may cut their plantings, which might again result in a tightening of world food supplies. If, indeed, production falls sharply next year, episodes of riots and instability could again capture the headlines,” the report has cautioned.
The FAO has urged the world leaders to meet next year to design a new agricultural world order to deal with the impending crisis as also to find $30 billion a year to eradicate hunger from the earth.
During the last food summit held in Rome in June, world leaders had pledged donations worth several billions of dollars towards agricultural development. But in the last few weeks, the world has witnessed trillions of dollars being lost in financial markets, forcing governments to spend even more money on propping them up.
“Overcoming the financial crisis is critical, but continuing the fight against hunger by realising those pledged billions is no less important,” the UN think tank has asserted. “This is because despite a rebound in world food production this year, the global cereal stocks still need to be replenished adequately.”
“With only 433 million tonnes in opening stocks, the cereals’ stocks-to-use ratio in 2008-09 is at its second lowest in three decades,” the FAO has pointed out.
