xvi SUMMARY


price changes are partially transmitted to domestic markets, or they must simulate the effects of arbitrary price changes, such as 10 percent food infla- tion. And of course, most microanalyses have the usual limitations of simula- tion techniques, especially somewhat simple assumptions regarding consumer and producer responses. A further weakness of much of the microeconomic work is that it solely focuses on food prices, even though it is quite pos- sible that rising oil prices could have similarly large effects on poverty and national welfare. It is true that poor people generally spend much more of their income on food than on fuel. However, least-developed country (LDC) oil imports are 2.5 times larger than LDC food imports, and rising oil prices raise the prices and restrict the output of other goods. These facts indicate that the overall effects of rising oil prices could certainly be on par with the impacts of rising food prices in many cases and could thus further worsen the food crisis.


Despite these qualifiers, our review of local price trends in developing countries does show that real prices in 2008 were substantially higher than prices in 2007, often double, especially around the middle of 2008. The good news is that prices generally did start to decline in late 2008 as international prices fell. Had higher prices persisted, the crisis could have turned espe- cially severe. The bad news is that price rises were surprisingly high in a large number of countries. In Africa, prices rose especially high, particularly for imported products principally consumed by urban populations, but also for some local commodities that are not widely traded (indeed, commodities for which international prices are not even reported). In this monograph we can only speculate on why African prices rose so substantially, and ultimately the answer remains a matter for future research.


With the worst of the food crisis over, this monograph provides a timely discussion of how the 2008 food crisis compares to the previous food crisis of 1972–74. In many ways the two crises had similar causes, including rising energy prices, similarly sized shocks to U.S. cereal demand (from the Soviet bloc in the 1970s and from the biofuels industry today), low interests rates, and the devaluation of the dollar, as well as declining stocks and some adverse weather shocks. The most daunting aspect of the existing global food system is not only the strong possibility that food crises are an inherent aspect of the global food system—which is pervaded by various distortions of production, trade, and agricultural investment and suffers from a huge regional imbalance in cereal production—but also that this system may well be hit hard by several shocks in the future. These include adverse weather shocks and declining productivity related to climate change, and a recurrence of oil price shocks and surging biofuels demand. The real concern is that the precipitous fall in food prices over the second half of 2008 will once again lead to the wide-


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