FOOD SECURITYWhy the Food Crisis Will Pass
Even though the food crisis triggered by the war in Ukraine is now causing acute problems, there is no reason for panic, according to University of Copenhagen food economist Henning Otte Hansen. High food prices will not last because the agricultural sector is equipped to ramp up production and stabilize markets.
News of rising food prices has been in the headlines over recent weeks. However, while the food crisis triggered by the war in Ukraine is beginning to sting, and hurting developing countries in particular, there is no reason to panic, according to University of Copenhagen food economist Henning Otte Hansen.
“A great many people are having a tough time right now. But I do not believe that we are dealing with a paradigm shift and permanent new conditions – this is a temporary price bubble, and broadly comparable to previous historical experience,” states Henning Otte Hansen, a senior advisor at UCPH’s Department of Food and Resource Economics.
Several food crises have occurred over the past century – including in relation to the Korean War during the 1950s, after the oil crisis in the 1970s, in 2007 and again in 2010. Henning Otte Hansen points out that even though these crises were triggered by different events, the pattern is the same.
“Food crises usually have 1-3-year price bubbles. It’s rare that they last longer. Most recently, the 2010 food crisis was triggered by drought in Russia, Ukraine and Kazakhstan. As a result, prices rose by 40-50%. The bubble lasted for one year, until farmers elsewhere ramped up their production.”
The Market Self Regulates
The agricultural sector’s ability to ramp up production is the reason why food prices will retreat once again:
“As farmers worldwide can now fetch a high price for their agricultural commodities, they will start producing more by, for example, expanding the amount of area for grain cultivation or through more intensive cultivation. This mechanism is a kind of guarantor that we will never have persistently high agricultural commodity prices. In the longer term, the market tends to self regulate. Of course, there is an adjustment period, but this could take place within a year,” says Henning Otte Hansen and continues:
“As such, one shouldn’t begin making long-range panic actions, such as scaling back on environmental adaptations or taking agricultural land out of production, if the purpose is to solve the current food crisis. This would not be an optimal solution.”
However, the overall situation and course of the war in Ukraine could make this crisis last a little longer than the previous one, according to the food economist:
