High Food Prices - Help or Hurt Poor Farmers?

When rising food prices caught the world's attention earlier this year, a question kept gnawing at me. For years, it was low prices, not high prices, of agricultural goods that hurt poor farmers. U.S. and EU subsidies made for cheap exports, which discounted world market prices to the disadvantage of poor farmers. Wasn't the Doha Round about limiting such trade-distorting subsidies so that farm prices weren't artificially low? Now, farm prices were high. So wasn't this a good thing for poor farmers? It couldn't be that simple, but I lacked for a good answer from the pros on this one. 

So my ears perked up this morning when NPR dived into this question. The opening to the segment nailed my quandry:

For many Third World farmers, the world has turned upside down. They used to complain about low prices, which made it hard to earn a living. They blamed, in part, farm subsidies in rich countries, which encouraged overproduction.

But now grain prices have gone through the roof all over the world. Which raises the question: If low food prices were bad for Third World farmers, are high prices good for them?

The answer? It depends.

No surprise that the answer is a bit complicated. According to the report, yes, high prices have spurred greater production and, in turn, profits for poor farmers. But for other farmers, the price of inputs like fertilizer and pesticide have gone up even more than food prices. Bad roads and lack of seeds, technical assistance, market access, and know-how also hinder poor farmers, no matter how attractive prices may be.

For NGOs and groups like the World Bank, Bill and Melinda Gates Foundation, and the Millennium Challenge Corporation, high food prices suggest that farming (at least for now) may be a path out of poverty. The Gates Foundation, for instance, is spending close to $1 billion in Africa to help poor farmers procure better, cheaper seeds and fertilizer.  And the MCC is helping farmers connect to bigger markets.

The NPR report ends on a fitting note, one that reminds us that there are almost always winners and losers in life, but especially so in the realms of international trade and ag policies.

Even the food crisis is helping. It's a two-edged sword: It's causing great suffering, but for some poor farming communities, it's also creating opportunities. 

To listen to the NPR report, click here.