Saturday, January 16, 2016

Can't Pay, Can't Have

Global food prices are at their lowest level in years, but thanks to the exceptionally strong US dollar poor people in developing countries suffering severe climate shocks are seeing no benefit. Several developing countries currently need to import as a result of poor agricultural seasons, and “what you pay for in food imports is a function of the strength of your currency against the dollar and its purchasing power,” noted FAO senioreconomist, Abdolreza Abbassian. “It’s a very alarming situation in southern Africa,” said Abbassian.

The food price shocks of 2007 and 2011, which squeezed family budgets and drove the poor deeper into poverty, are over. The major producers responded to the high prices by boosting output, leading to the current surpluses.

The US Dollar Index, which measures the dollar against major currencies, was up by around 10 percent at the end of 2015. “So far this year the dollar has gained against currencies of all description — developed market, emerging market, commodity currencies,” the Financial Times wrote yesterday. For southern Africa – and especially South Africa – the situation is particularly grim. South Africa is the maize basket for the region, but last year an El NiƱo-induced drought dropped output by 30 percent. It’s feared that more late rains again at the end of 2015 could see production fall by as much as 50 percent, at a time when the rand is trading at record lows against the dollar.

The fact that there are global food surpluses and yet people are still going hungry means the problem "is about access to food" rather than availability, said Abbassian. The world's ability to grow more food is not the solution to hunger, but its affordability in local markets.

They said it, not us. 

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