Should We Still Worry About Food Prices?

Food prices are finally coming down after a year of spikes and high volatility. But we must remain vigilant. Prices of certain foods remain very high, and millions of people around the world are still at risk of suffering from malnutrition and hunger.

Let's get to the numbers first. According to the World Bank's latest Food Price Watch quarterly report released this week, global food prices declined 8 percent between September and December of 2011 due to increasing supplies and continuing uncertainty about the global economy. So in December 2011, the World Bank Food Price Index closed 7 percent below the December 2010 levels, and 14 percent lower than its February peak. Yet, the 2011 index average is 24 percent higher than the year before, and domestic prices of key staples remain dangerously high in many countries.

Take the case of maize. In Mexico, for instance, maize was up 106 percent from December 2010 to December 2011, making tortillas more expensive. The price of wheat in Belarus went up 88 percent, and sorghum increased 57 percent in Burkina Faso. No matter where you look, someone somewhere is paying more money to put food on the table, whether it is Mexican quesadillas or Burkinabe "to" (porridge).

It's true that high food prices are not bad for everybody. While the poor in urban areas and rural net consumers of food are usually threatened the most, farm producers tend to benefit. Yet when there is so much price volatility -- as we experienced last year -- uncertainty very often gets in the way of reaping any gains. And when domestic prices of key staples remain high in certain countries, millions of people suffer.

Unseasonal increases in cereal prices could further deteriorate food insecurity in conflict affected areas in Africa and across Southern Somalia. And the coping mechanisms that poor families are adopting as a result of expensive food could have long-lasting negative effects: Some people are eating cheaper meals or borrowing money; others are pulling their children out of school altogether.

Nevertheless, let's not mistake these valid concerns with prophecies of doom. Prospects for food price decline in 2012 remain favorable as a result of a sluggish global economy, weaker consumer demand, and expected declines in the price of energy, among other factors. And at the same time, governments have the instruments at their disposal to help people affected by the price hikes, such as more and well-targeted school food programs, conditional-cash transfers, and food-for-work programs.

How about you? How are people in your country and your community coping? If you are interested in the topic, join the author of Food Price Watch, José Cuesta, for a live online discussion about food prices on Thursday, February 2 at 10:00 am EST (15:00 GMT) in English and at 2:00 pm EST (19:00 GMT) in Spanish. Participate and submit questions in advance here: (English), (Spanish).

This blog was originally posted on the World Bank Institute Growth and Crisis Website.