BRC Global Price update (February 2009)

Here is the latest British RC update on the global price and financial crisis....

1. BRCS
- Discussions ongoing with BRC Learning & Development about funding BRC research proposal on global price & financial crisis. This research may link into research planned by UK Hunger Alliance and ODI (see below)

2. Global update
- Crisis increasingly referred to "triple F" crisis - i.e. Food, Fuel and Financial
- FAO warn that food price crisis of 2008 will continue into 2009 and may get worse

- Despite decline in international food prices in second half of 2008, prices remain high in most countries, with some countries continuing to experience very high prices...so affecting access to food of most vulnerable low income groups in these countries(FAO)
- In Southern Africa and Central America - prices of main food commodities have continued to rise or have not decreased in recent months
- In West and East Africa countries - prices have fallen significantly since start of harvest in Sept-Oct 08 but by Jan 09 they were well above their levels of a year ago. Imported rice and wheat, important staples, are still rising.
- Prices of rice and wheat still remain high in several poor countries in Asia, including Afghanistan, Pakistan and Sri Lanka

- Bumper record global harvest in 2008 means global cereal stocks at highest level since 2002.....BUT reduction in global cereal output in 2009 is predicted by FAO despite favourable climate. Areas planted declined, particularly in "low income food deficit" countries due to a reduction in expected returns and high input cost (the price of agric inputs more than doubled since 2006...poor farmers unable to afford). This means further likely hikes in food prices in 2009.

Global economic crisis may reverse recent employment gains for workers in poorest nations (ILO)

Some experts believe that financial trading in basic food commodities was the biggest factor in recent food price hikes. Global trading in futures and options in food has more than doubled in the last 5 years - with such trade increasing 30% in first 9 months of 2007

Fluctuations in US dollar has had devastating results for the poor as value of remittances fell at same time that cost of living went up, e.g. Bangladesh usually receives $4billion in remittances US annually

Other facts & figures
- There are "food crisis" in 32 countries, in addition Gaza is of particular concern (FAO)
- 18 m in the Horn and 8.7m in Southern Africa facing serious food insecurity BUT nearly 2/3rd of those living in hunger live in Asia. 65% of worlds undernourished live in India, China, DRC, Bangladesh, Indonesia, Pakistan and Ethiopia (FAO)

3. Agency & Policy activities
- High level UN meeting on Food Security for All (Madrid 26/27 Jan) - agreement on need for co-ordinated collective response to global crisis - Global Partnership for Agriculture & Food Security (GPFAFS).
- ODI planning research "High world food prices & their implications". UK Hunger Alliance may link into this research, and take recommendations and outcomes forward from an INGO perspective
- ODI & DFID supporting a network of organisations..."to inform research, advocacy, policy and action related to high and volatile food commodity prices"...IFRC a member. BRC may want to consider joining this too.- ACF published - "Feeding Hunger & insecurity: Field analysis of volatile global commodity food prices, food security & childhood malnutrition" - presented at ODI seminar in January.
- OGB - Briefing paper - "A Billion Hungry People. Governments and aid agencies must rise to challenge" released to coincide with Madrid conference
- IFPRI - Food Policy report - Food and Financial Crisis. Implications for Agriculture and the Poor - calls for reform of financial and agricultural commodity markets to reduce volatility, avoid price bubbles and respond to emergencies cause by price crisis


4. Regional/Country updates

East Africa
- High prices of key staples eased off in most areas in late Dec 2008 but prices still well above 5 year average in most countries, particularly Somalia, Ethiopia and Djibouti.
- In Kenya, significant harvest shortfall in 2008 and expected poor harvest this June/July mean that prices expected to rise in 2009 in addition, financial crisis led to 40% decline in remittances, 30% decline in stock prices and 30% decline in tourism bookings


West Africa
- generally good rains, harvest and pasture in 2008. Although food prices increasing since Jan 2008, prices generally still under the record prices reported during the 2005 crisis, although Sept prices of rice reached new records for that time of year. Livestock prices on rise and still above 5 year average (due to good market demand, favourable condition), so despite high price of grain, terms of trade (livestock for grain) still favouring pastoralists.
- Burkino Faso - despite a cereal surplus in 2008, price of maize in capital has increased 20% in Jan 2009 raising fears of rioting again. High prices due to traders from neighbouring countries buying up grain and local farmers and traders with holding cereal

Southern Africa
- Zambia - may face food crisis in 2009 as price of staples are rising due to physical shortages from lower harvest & ineffective government price controls. Also economy badly affected by large mining job losses as a result of copper prices falling by 50% over the last few months
- Malawi- food prices at historical high and may face food crisis in early 2009 due to an underestimation of 2008 harvest that led to over exportation of food and consequent current shortfall. Private traders now hoarding food.
- Swaziland - prices of essential food risen 10-40% in 2008. Food inflation 17.9%
- South Africa - tens of 1,000s facing unemployment from automotor sector as a result of reduced demand and increased costs of materials.
- Botswana - thousands of mining jobs in jeopardy as diamond and other mineral sales dwindle. Diamonds sales expected to reduce by 50%, production by 35%