Africa is particularly affected by high food prices and by price volatility. In 2010, a quarter of the global population suffered from malnutrition, with 30% of those affected coming from Africa. The continent’s population is growing so fast that cutting malnutrition rates in half by 2030 would not prevent the number of Africans suffering from hunger and from rising significantly. In addition, nearly 60% of people in Sub-Saharan Africa depend on agriculture, and at least 80% of them are small farmers with less than two hectares of land. Rising prices could present an opportunity for farmers to increase production and profitability. They are also a necessary signal from the market that more production is needed. However, in a situation of strong volatility, fear of dramatic price drop reduces producers’ capacity and willingness to invest. The large majority of producers in Africa are small farmers (family farms). Uncertainty may prevent them from moving towards the regular, scheduled production of marketable surpluses. For example, in Mali, although producers received 100% increase in retail prices, they were not able to respond to the incentive because they lacked the resources to do so.
As for consumers - particularly the most vulnerable, some of whom spend ¾ of their household income on food - food price inflation is pushing them to consume cheaper substitutes of low nutritional value, reduce their daily intake, forego certain expenditures for health and education. For those who are also small farmers, they even sell their means of production (including breeding animals for agro-pastoralists).
FAO research on the impact of the 2007/08 price spike in Eastern and Southern Africa shows that in Malawi, for example, a 50% increase in food prices led to a 9.7% increase in food budgets, despite an 8.5% decrease in daily corn consumption. Rising prices therefore pushed more vulnerable households into poverty and food insecurity; 5.4% more households faced food insecurity in Zambia, while 16% more were affected in Malawi.
For governments in net-food importing countries, exceptionally high prices adversely affect their balance of payments and public finances; the increase in import spending is combined with the cost of tax measures aimed at lowering retail prices (reduction in import tariffs, consumer subsidies, etc.). During 2008-2010, three African countries were among the top 10 global rice importers: Nigeria, in second place with 1.8 MT, Côte d’Ivoire, in eighth place with 1 MT, and Senegal, in 10th place with 0.8 MT.
On the other hand, exceptionally low prices have the sustained effect of discouraging producers from investing and affect the food security of vulnerable farmers, many of whom use their income – primarily from agriculture – to buy food and pay for social services. Countries whose economies depend largely on agricultural exports feel the negative impact on their balance of payments and investment capacity and ultimately on growth. This was the case of many cotton-producing African countries in the early 2000s.
For developing economies, particularly in Africa, volatility represents a double blow, as it both heightens consumer vulnerability and discourages producers from increasing production.