Hunger is a global problem, and it is getting worse.1 The FAO estimates that more than one billion people—a full 15 percent of humanity—are hungry today.2 Until recently, however, policy makers and development workers largely agreed that the problem does not lie with the supply of food. As a result, investment in agriculture has been neglected. However, recent empirical studies suggest that such investment is essential to combating hunger. In addition to increasing food availability, it raises the incomes of the rural poor and enhances their access to food. Policy must shift to reflect this empirical reality.
More than one billion people—a full 15 percent of humanity—are hungry today.
Rising Hunger
According to FAO estimates, the number of people suffering from undernourishment has grown steadily since the mid-1990s, reaching approximately 850 million in 2005 (figure 1). Because the sharp rise in food prices in 2007–2008 led to a further increase in hunger, with the overall number reaching 915 million people, there was some optimism that the hunger situation would improve as prices fell during the financial crisis. Far from easing the problem, however, the crisis has only made it worse.
The crisis reduced incomes and, therefore, access to food in developing countries. This overshadowed any fall in prices and further exacerbated hunger. Furthermore, despite the crisis, domestic prices in many developing countries failed to fall as fast or as sharply as world prices (figure 2). Several factors contributed to this. First, demand for food is largely income inelastic, particularly among the poor—even in a crisis, people need to eat and, even without a crisis, poor people limit their food intake. As a result, demand in these countries held relatively stable. Second, because the crisis devalued the exchange rate of many developing countries, world prices became more expensive in domestic currencies by definition. Third, various government policies tend to insulate domestic food markets from global changes. Finally, the international price of food fell less than the prices of other commodities, minimizing any relative change. In fact, a survey of local market prices for staples in 58 developing countries at the end of 2008 indicates that domestic prices were on average 24 percent higher in real terms than two years earlier.
All regions of the world are now facing increased hunger (figure 3). Poor rural families and female-headed households have been most affected. Field surveys by the World Food Program in Armenia, Bangladesh, Ghana, Nicaragua, and Zambia found that households altered their expenditure patterns in response to the economic crisis. In some cases (e.g., Bangladesh and Zambia), poor households had to cut down on the number of meals they eat each day. In all cases, food expenditures have shifted towards cheaper, calorie-rich, energy-dense foods (e.g., grains), away from more expensive protein- and nutrient-rich foods (e.g., dairy products, fruits, vegetables).
Investment in Agriculture and Hunger Reduction
Enough food is already being produced to feed the global population. The FAO’s estimate for world cereal production in 2009—about 2.287 million tons—is high by historical standards, and only slightly below the 2008 record. However, given their low incomes, poor families are unable to access this production and buy enough food.
Far from easing the problem, the financial crisis has only made it worse.
Because global production levels are technically sufficient and because world food prices have long been low and stable, investment in agriculture has been steadily declining since the 1970s. As a result, the rate of growth of agricultural capital stock (ACS) in the world fell from 1.1 percent in 1975–1990 to 0.50 percent in 1991–2007. Similarly, the share of official development assistance going to the agricultural sector fell from 17 percent in 1980 to 3.8 percent in 2006, with the same downward trend observed in the national budgets of developing countries.
Instead, investment has focused on other sectors, hoping to ensure that poor people earn sufficient income to buy food. However, because the vast majority of poor people in developing countries live in rural areas, their livelihoods are tied to the agricultural sector. As a result, it is essential to invest in that sector, rather than others, if the goal is to bolster incomes. In fact, recent empirical evidence shows a correlation between countries investing in agriculture and successfully reducing hunger.
One study shows that more than 20 percent of the population was hungry in 2007 only in those countries where ACS per worker declined from 1975 to 2007. While this suggests that investing in agriculture decreases hunger, it may equally be the case that other factors that contribute to higher hunger lead to less investment.
Because the vast majority of poor people in developing countries live in rural areas, their livelihoods are tied to the agricultural sector.
Another analysis shows that the countries that have been most successful in reducing hunger3 are the same ones that have invested heavily in agriculture.4 Conversely, all of the least successful countries5 have reduced their agricultural capital stock. Clearly, we must increase investment in agriculture in order to fight hunger.6
A Long-Term Perspective
As one looks forward to 2050, when the world’s population will reach 9.1 billion, the need to increase investment in agriculture becomes all the more obvious. In addition to the population rise, the expected shift in demand towards higher value products of lower caloric content and the increased need for crop output as feed to meet the rising meat demand will only further stress the global food supply. The latest FAO estimates indicate that global agricultural production needs to grow 70 percent by 2050 in order to meet projected demand, and this is likely to be a lower bound estimate as it does not consider the increase in production that the growing bio fuel market will require.
The FAO expects a gap of $22 billion (constant 2009 prices) per annum between what needs to be invested in agriculture in developing countries to meet this need ($55 billion) and what was invested on average from 1997–2007 ($33 billion). Therefore, at current levels, we can expect an investment gap of roughly two-thirds.
Developing countries will need to invest an additional $46 billion in agriculture over the next three years.
Policy
A shift in global policy is clearly needed, and as the population grows and preferences change, this need is becoming increasingly urgent. The increased attention that international policy makers are now giving to agriculture—as shown by the decision at the G8 Summit in L’Aquila, Italy to mobilize USD 20 billion into the sector over the next three years—is very timely. However, this means that, in order to close the investment gap, developing countries will still need to invest an additional $46 billion over those three years. This can be achieved if governments reallocate public spending towards agriculture and increase incentives for private investment in the sector. Such action is needed to successfully fight today's hunger problem and to ensure a food secure future.
1 This note presents a summary of the work done by the FAO and WFP for the State of Food Insecurity in the World (SOFI) 2009 as well as of the background papers prepared for the High-Level Expert Forum on How to Feed the World in 2050.
2 Undernourishment exists when caloric intake is below the minimum required for light activity and a minimum acceptable weight for attained height. In this note, the terms hunger and undernourishment are used interchangeably.
3 Specifically, those that have had the most success in reaching the 1996 World Food Summit target of halving hunger by 2015.
4 Peru and Ghana are exceptions to this pattern. Peru’s progress towards hunger reduction despite negative rates of agriculture capital stock growth may be due to the resolution of internal conflicts during the 1990s that allowed for better agricultural performance. In the case of Ghana, an OECD study argues that public investments outside agriculture, in research, technology and infrastructure lead to strong growth in the rural economy.
5 DPR Korea is the only country that did not follow this pattern. This result may be due to problems with official data from that country, or to the fact that the incentive system did not encourage the most productive use of new investments.
6 The country experiences discussed here indicate that other factors such as peace and stability, an appropriate incentive system and investment in research and infrastructure are also necessary for success.
