Table of Contents:
The Food Security Debate in a Shifting Market Environment
Agricultural price developments during the past decade have been by all accounts exceptional. From the beginning of the twenty-first century until 2011 commodity prices experienced the longest and broadest post-World War II boom, reversing a decline of nearly three decades, with prices of food commodities doubling (Fig. 2.1). This coincided with unprecedented growth in emerging economies, with low- and middle- income countries averaging annual growth above 6 per cent during 2004-13, the highest of any 10-year period since 1960. China and India, which by now account for more than a third of the world’s population, grew at nearly 10 per cent per year during this period.
Price spikes or periods of high price volatility have been witnessed in the past. Yet, when developments from the mid-2000s onwards, driven by a confluence of factors, led agricultural and food prices to move in
T. Haniotis (h)
© The Author(s) 2017
G. Mergos, M. Papanastassiou (eds.), Food Security and Sustainability, DOI 10.1007/978-3-319-40790-6_2
Fig. 2.1 Trends in real commodity prices. Source: World Bank
the same direction—higher and in parallel with the prices of other commodities—expectations emerged of a new, higher ‘price plateau’ at which commodity prices would trade in the future. These expectations have not materialised, as commodity prices have since been on a steady path of decline since then. In fact, today, expectations are of increased uncertainty about the future price path. What could be next?
Inevitably, extreme price movements were associated with major concerns of producers, consumers and policy makers alike, and brought to the forefront a debate about food security as, in both developed and developing countries, consumers felt the impact of higher food prices (especially in times of overall low inflationary pressures), while producers (especially in livestock) felt the pressure from higher costs. But at the same time all alike felt the impact of a generalised commodity roller coaster, one that many characterised as the ‘perfect storm’ while the commodity price boom lasted, while recent developments and their unexpected downward spiral seem to have discouraged attempts of any characterisation.
As Table 2.1, which summarises these developments, clearly demonstrates, twice in the span of just eight years commodity prices, including agricultural prices, increased substantially, collapsed and impressively
Table 2.1 Cumulative commodity price changes during specific periods
Source: Author's calculations based on World Bank data
recovered after the financial crisis, only to follow a prolonged and substantial decline again, with the latter’s low point still unclear.
Different explanations have been advanced about the causes behind these developments. This chapter takes these differences in recent interpretative approaches on commodity price movements as its starting point, and looks into the various factors that influenced recent agricultural price movements in order to address three issues. First, to summarise the role these factors played in agricultural price developments; second, to assess their relative contribution and, in contrast to the use of unidimensional approaches in interpreting price developments, to argue for the need to analyse them from a broader perspective; and third, to address the policy relevance of the analysed evidence in the food security debate.