The decision by Russia to respond to scorching heat and wildfires by restricting wheat exports is threatening to trigger a panic similar to what sent food prices soaring in the first half of 2008. Commodity experts argue that supplies are sufficient to meet needs, thanks to bumper crops and increased stocks in the U.S. and elsewhere, but panic in some countries and the increased role in commodity markets of financial speculators are causing prices to surge.
Given the role of weather and other natural catastrophes, the volatility in food prices will never be eliminated. It can be mitigated in a number of ways, however.
- First, completing the long-stalled Doha Round of trade negotiations would remove policy-induced distortions that contribute to volatility, especially if negotiators could agree to limit the use of export bans.
- Second, more flexible (untied) and longer-term donor commitments to the World Food Program would allow the WFP to buy food on future markets and avoid buying it when prices spike in the midst of a crisis, ensuring that WFP's resources stretch as far as possible.
- Third, over the longer run, a new and improved green revolution is needed to ensure that food supplies are able to keep up with increasing demand from rapidly growing, and richer, developing countries.
The recent surge in food prices is only the latest sign of the obstacles along the road to feeding a global population zooming toward nine billion. If we make smart choices now, we can win the race to keep ahead of these challenges.