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Global food insecurity and price increase: Situation report #1 (FY 2008)

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BACKGROUND

In the past year, global food prices have increased an average of 43 percent, according to the International Monetary Fund. Since March 2007, wheat, soybean, corn, and rice prices have increased by 146 percent, 71 percent, 41 percent, and 29 percent, respectively, according to the U.S. Department of Agriculture.

A number of factors have contributed to the rapid spike in global food prices. In China, India, and other emerging markets experiencing rapid economic growth, consumers are increasing their demand for food, oil, and energy supplies. Rising energy costs have directly raised the cost of agricultural production. Adverse weather-related events have lowered crop yields, particularly affecting wheat harvests. Depreciation of the U.S. dollar accounts for part of the increase in U.S. food prices, while increased production of biofuel has raised the price of corn.1

Approximately 1 billion people-or one sixth of the world's population-subsist on less than $1 per day. Of this population, 162 million survive on less than $0.50 per day. At the household level, increasing food prices have the greatest effect on poor and food-insecure populations, who spend 50 or 60 percent or more of their income on food, according to the International Food Policy Research Institute (IFPRI). Overall, increased food prices particularly affect developing countries, and the poorest people within those countries, where populations spend a larger proportional share of income on basic food commodities.

Responses to global food price increases range from harmful to beneficial policy measures. The varied responses include restricting exports, imposing price controls on imports, eliminating tariffs, permitting genetically modified foods, and increasing food assistance to populations most in need. On April 14, President George W. Bush directed the Secretary of Agriculture to provide an estimated $200 million in international emergency food aid through USAID, in addition to other FY 2008 funds also allocated to the provision of food assistance. On May 1, President Bush requested that Congress approve an additional $770 million in food aid, for a total of nearly $1 billion in additional funding in 2008.