Global Food Crisis Hits Ghana?

A recent report by Esoko about the increase in cereal prices in Ghana may very well be an indication that the global food crisis is starting to have an effect on the lives of Ghanaians.

The report indicated increases in prices of 10 out of 12 commodities in seven markets covered by Esoko Market Watchers for the week ended 11 March 2011.

The Esoko Ghana Commodity Index provides a range of applications that both push updates on agricultural information and prices out to the field, and pull data in from the field.

The years 20072008 saw dramatic increases in world food prices, creating a global crisis and causing political and economical instability and social unrest in both poor and developed nations.

Initial causes of the late 2006 price spikes included droughts in grain-producing nations and rising oil prices. Oil price increases also caused general escalations in the costs of fertilizers, food transportation, and industrial agriculture. Root causes may also be the increasing use of biofuels in developed countries and an increasing demand for a more varied diet across the expanding middle-class populations of Asia.

Many countries, including Ghana, reacted to the 2008 food crisis by reducing the import tariffs on certain foodstuff. The government of Ghana scrapped the 20 percent import tariffs on rice and other basic foodstuffs.

In 2008 the Kufuor administration scrapped certain duties on the importation of rice and other foodstuff to help consumers in Ghana amidst the world food crisis.

When the NDC led administration announced the 2010 budget the 20 percent tariff was re-introduced. The Finance Minister with the following words gave the motivation for this:

³The global conditions that necessitated the removal of those duties have abated and government finds it pertinent to restore the duties in order to encourage local production, create jobs and conserve foreign exchange. This development is not just welcome news and an incentive to our local farmers but also fits into the social democratic values of this government.² Statement from the Finance Ministry. Daily Graphic 23 December 2009

The above step and motivation for the reintroduction of the import duties was fully analysed by FSG and reported on its Blog (http://foodsecurityghana.com/issues/rice-in-ghana/import-duties/). The conclusion was that the step by the NDC government at a time when a new crisis was looming and the local industry was struggling to come to grips with many challenges was both immature and insensitive to Ghanaian consumers.

About one month prior to his announcement the World Bank issued a warning as follows: Food Crisis May Repeat, Warn Leaders in Global Hunger Fight.

³I worry we could be through another round of thisŠ we could see ourselves in 2010 repeating some of this problem,² World Bank President Robert B. Zoellick said at a panel discussion on the global food crisis at the Brookings Institution in Washington. 25 November 2009

Since then repeated warnings were issued about a new wave of food price hikes and a new food crisis. On 14 March 2011 Reuters reported that the head of the FAO, Jacques Diouf, repeated that surging global prices of basic foodstuffs raise the risk that the food crisis of 2007 - 2008 in developing countries will be repeated.

"The high prices raise concern and we've been quickly drawing down stocks," he said. "For years we have warned that what is needed is more productivity and investment in agriculture."

The most recent UN Food Price Index showed prices have risen to the highest levels since at least 1990, when the index began.

Although too numerous to quote, some of the warnings about the 2010-11 food crisis, as documented on the FSG website, were reported as follows:

* US food price rise is steepest in decades Food prices in America soared at their fastest rate since the 1970s last month, a sharp reminder of the pressures facing the majority of consumers in the US. * Food prices to soar: Deloitte Food will become much more expensive in the next decade thanks to a burgeoning middle class around the world, according to a new consumer report from Deloitte Touche Tohmatsu. * A Global Food Crisis Comes Home You wouldn¹t know it in the countries where most meeting professionals live and work, but much of the world has been in the grip of record-high food prices that have set off a crisis across the developing world and food riots in 30 countries. * World faces risk of another food crisis: FAO Chief Surging global prices of basic foodstuffs is raising the risk of another food crisis like the one that hit developing countries in 2007-2008, the head of the UN¹s Food and Agriculture Organization said on Monday. * World Bank chief urges global cooperation to tackle food security challenge Rising food prices are at a dangerous level, and global cooperation is needed to tackle the increasingly challenging issue, World Bank Group President Robert B. Zoellick said on Tuesday. * Africa, Caribbean urged to brace for food price shocks The World Bank and International Monetary Fund are warning poor regions that have so far not been hit by rising food prices, like sub-Saharan Africa and the Caribbean, to get ready to face them.

High food prices and food insecurity is partly blamed for the recent and ongoing turmoil in North Africa and the Middle East. FSG reported on the possible risk that countries such as Ghana may be facing in a recent article titled High Food Prices and Popular Uprisings Is Ghana at Risk? (http://foodsecurityghana.com/2011/03/08/high-food-prices-and-popular-uprisi ngs-%e2%80%93-is-ghana-at-risk/)

Most analysts agree that the building of food stock and increased investment in local production are essential steps that must be taken by developing countries to protect themselves from crises such as the 2007-2008 as well as the current 2010-2011 crisis.

The government of Ghana has indicated that these steps are high on the development agenda of Ghana. However, it is a well-recorded fact that local production of foodstuff such as rice only caters for 30 percent or less of local demand. In addition the local industry faces many challenges related to lack of promised support, failing irrigation systems and low quality of locally produced rice.

Industry analysts say that the steps taken by government must be commended, but that it will take considerably longer than the 2 to 3 years estimated by the government to become self sufficient in terms of rice production and that it may take as long as ten years.

In the light of the new food crisis and the signs that Ghanaians may start feeling the real impact of this soon, many analysts believe that it may be time for the government to again review its policy on import duties as an emergency step a policy decision taken by most governments in 2008 and one that will without doubt be repeated in 2011.

According to the analysts the high import tariffs (37 percent in Ghana compared to 12.5 percent in the Ivory Coast) not only places a burden on Ghanaian consumers, but also create market distortions that serves as motivation for the illegal smuggling of rice across the Western border of Ghana.

In February 2011 Kofi Amoabin, a consultant on commodities trading and the energy markets, reported that ³Tariffs on Food Imports Hurt Consumers², saying, ³Using tariffs to limit importation of agricultural commodities and poultry could exacerbate food shortages and worsen the plight of poor in our societies.²

It is common practice for countries that produce more than local demand to protect its local industry through high import duties. The converse is also true, namely that most countries who are dependent on high import percentages (such as Ghana in the case of rice) support local consumers through low import duties while its industry is in a developing phase.

The fact is that the world, and Ghana, is facing a new global food crisis that may be worse than the 2008 crisis. Although essential, long-term strategies will not help to alleviate the plight of consumers now. What is needed now are emergency initiatives, of which lowering of import duties is but one.

Ghanaian consumers are waiting and watching to see how caring their government is.

Food Security Ghana March 2011

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