What are the reasons behind the high food prices in the international market?

Is mismanagement or greed behind the rising food prices in the international market?

According to the statements of Qu Dongyu, Director-General of the Food and Agriculture Organization (FAO), what is produced in the world of food is sufficient for everyone, yet 14% of the food produced is lost, and the percentage of food waste worldwide reaches 17% of the volume of production .

What is worse is that with the world producing enough food for everyone, the number of people suffering from hunger by the end of 2020 reached 811 million.

In light of the aggravation of the crisis of high food prices, this number is expected to increase, unless social protection programs are activated.

Although the estimates of the Director of the FAO to end hunger by 2030 requires 40 to 50 billion dollars, these amounts are insignificant compared to the value of the world's gross domestic product, which the World Bank database estimates at 84.8 trillion dollars.

Undoubtedly, the smallest wars waged in many regions of the world cost many times the investment needed to eradicate hunger.

However, the expected crisis that may exacerbate hunger worldwide is the continuous increase in food prices.

FAO estimates indicate that the average food price index in September 2021 increased by 32.8% on an annual basis, i.e. compared to the price level in September 2020. The FAO attributes the rise in the food price index to the increase in prices in most cereals and vegetable oils. Dairy, sugar, and wheat.

This increase in food prices threatens to repeat the crisis that the world experienced in 2006 and 2008.

One of the strange approaches is that the expected crisis of rising food prices is accompanied by a crisis in rising energy prices, as happened in 2006 and 2007.

But will the crisis of high fuel prices lead to what happened in 2006 and 2007, when some countries - especially producers of agricultural commodities - turned to the production of what is known as biofuels?

That is, the production of green fuels from corn and other agricultural commodities, which will further exacerbate the crisis of high food prices.

The FAO average food price index increased by 32.8% year on year (Al Jazeera)

Is the crisis likely to get worse?

In light of the reality reading, the nearby evidence indicates that food prices will continue to increase - at least - in the medium term, i.e. within a year from now, due to the successive rises in the oil markets, and it is expected that they will reach 90 percent in the first half of 2022 In fact, some estimates believe that the price of oil will approach $100 a barrel.

If the scenario of continued high oil prices is realized, this will be reflected in many requirements for food production, transportation and distribution worldwide.

Consequently, developing and least developed countries will be in trouble, especially countries that depend on imports for food security, and unfortunately all Arab countries fall under this classification.

Another factor that contributes to raising food costs during the coming period is the rise in shipping costs, due to the stumbling and slowing of transport and supply lines since the start of the Corona crisis.

Some experts believe that shipping prices have now increased by 4 to 5 times compared to what they were before the Corona pandemic.

The 40-foot container used to cost about $2,000 to ship, while it now costs more than $10,000 to ship.

The rise in freight prices - without a doubt - will greatly affect food prices, as well as securing strategic stocks of it in developing and least developed countries.

Impact on Arab countries

The title of the food gap is not lost on anyone familiar with the food situation in the Arab world, over the past decades, despite studies and conferences that indicated the danger of this situation to Arab national security.

According to the figures of the Unified Arab Economic Report for the year 2020, the food gap at the level of the Arab world reached 33.6 billion dollars.

The report states that the structure of the food gap has not changed over the past two decades, with cereals accounting for 60.1%, sugar 9.3%, and oils and fats 3.8%.

In general, the Arab world suffers from a deficit in the agricultural trade balance;

Arab agricultural exports in 2018 amounted to $29.8 billion, while agricultural imports amounted to $91.9 billion, and therefore there is a deficit in the agricultural trade balance of $62.3 billion.

It is worth noting that during the global food crisis during 2006 and 2007, the Gulf states and other Arab countries rushed to announce their intention to invest in the agricultural field in Sudan, due to the great agricultural potential of the State of Sudan, but these announcements - whether something was achieved or not. - It did not change the reality of the agricultural and food deficit of the Arab world. Rather, what is worse is that the State of Sudan itself imports wheat and flour.

The percentage of food waste in the world amounts to 17% of the volume of production (Getty Images)

The future globally and in the Arab world

The international arena is witnessing a state of muffled conflict between the major powers - especially between China and America - and the issue of food and the challenges it poses may not be a priority on the agenda of these powers, as they are able to secure their food needs, but the cost of agricultural production will rise, and thus rates will rise inflation.

There are common interests of these major powers, which may contribute to alleviating the costs of providing food, such as working to reduce the cost of shipping, by providing a greater number of containers and tanker ships, which leads to the transportation of food and other goods at lower prices than they currently have.

And if the world is still suffering from the negative repercussions of the Corona virus pandemic, in terms of an increase in the number of poor people, as well as the number of people suffering from hunger and lack of food, the realization of the scenario of high food prices will threaten the goals of the United Nations in terms of reducing the number of people who suffer from hunger, or malnutrition.

At the Arab level, as usual, there will be no movement on a regional level that reflects a state of interdependence between the Arab countries, but each country will act in its own way, and everyone will pay a high bill to obtain its food requirements.

The Arab oil-producing countries may have the financial capacity to bear this cost, but the non-oil Arab countries will show negative effects of this crisis in their balance of payments, as well as high rates of inflation, as well as an increase in poverty rates.

Back to Cooperatives

One of the mechanisms that can alleviate the crisis of high food prices in the world, and in the Arab region, is to activate the role of cooperatives, whether at the level of consumers or producers.

Under the cooperative system, input prices can be reduced through group purchase at various levels, including international or local, and down to the smallest geographic area, the village, as well as consumers.

The crisis may be lighter in America and the European Union for providing tangible support to their agricultural sector, as well as social protection systems, which help in facing these crises.

As for the Arab countries, their situation will be more difficult after most of them canceled subsidies to the agricultural sector, as well as adopting policies to almost completely eliminate subsidies, and neglecting the cooperative sector.