Assembly/AU/ 7 (XI)I Page 1 High Food Prices: Accelerating Investments to Respond to Food and Nutrition Insecurity1 I. (a) CONTEXT OF THE HIGH FOOD PRICES IN AFRICA Current Status 1. The world is experiencing a dramatic increase in international prices of basic food commodities. In 2006, the FAO Food Price Index rose by 8 percent and by a further 24 percent in 2007. In the first three months of 2008, the Index average was 53 percent higher than for the same period in 2007. This food price increase has been rapid, sustained and across all major crops, dairy and livestock products. Africa is one of the most affected regions. For example, in Cote d’Ivoire, prices of rice in March 2008 were double their level of a year earlier, while in Senegal wheat prices by February 2008 were twice the level of a year earlier and sorghum was up 56 percent. In Nigeria, prices of sorghum and millet have doubled in the past five months. In Somalia, the price of wheat flour in the northern areas has almost tripled over 12 months, and in Sudan (Khartoum), it increased by 90 percent. The price of maize in Uganda was 65 percent higher in March 2008 than in September 2007. In March 2008, maize prices in Mozambique (Maputo) were 43 percent higher than a year ago. In addition, there has been much greater price volatility than in the past, which has lasted longer than in past high price events. Prices remain high today although world cereal production recovered, increasing by 4.7 percent in 2007 and 2.6 percent in 2008 (projected). Available medium-term projections by the International Food Policy Research Institute (IFPRI) and by OECD/FAO indicate that food prices will remain above their previous trend level for the foreseeable future. Prices of food commodities for the next ten years are likely to be higher than during the previous ten years, even though a small decline is expected in 2009 or 2010. 2. Due to increasing food prices, the balance of payments situations have worsened in Low-Income Food-Deficit Countries (LIFDCs). The total cost of food imports for developing countries was US$254 billion in 2007, some 33 percent higher than in 2006 which was already 13 percent higher than 2005. Annual food import bills for LIFDCs were more than twice their 2000 level. As a result, in some countries, the substantial deterioration in their current accounts reaches sometimes more than 3 percent of GDP. Thus, having to deal with higher food and energy import prices is placing a heavy burden on LIFDCs, especially as they have to tackle existing problems of under-nourishment. African countries have been particularly hard hit. In addition, the World Bank estimates that some 100 million people have been pushed into poverty as a result of high prices during the last two years. This has triggered demonstrations, riots and even contributed to political instability. Unrest linked to high food prices has already occurred in a number of countries in Africa, including Burkina Faso, Cameroon, Egypt, Guinea, Mauritania, Morocco, and Senegal. However, the hike of food prices can be looked at not only as a threat, but 1 The AU Commission wishes to acknowledge the inputs of the FAO, WFP and IFPRI in the preparation of this report.