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Financial crisis may worsen food crunch it eclipsed

Although commodity prices for a wide range of crops have fallen by as much as 50 percent from record highs in June, the financial crisis is expected to make food shortages dramatically worse.

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Farmers in turn, after borrowing heavily for fertilizer, are operating at a loss.

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For farmers elsewhere in the world, the financial crisis is creating a similarly sobering equation: it costs more money for them to grow, but they receive a lower price for their products at market – making growing food a risky venture.

"I could see some declines in production because of falling prices," says David Dawe, a senior economist at the FAO in Rome, adding that the credit crunch might also cut into production, although not as much as lower prices.

In Brazil, for example, production of corn may drop by 20 percent, while wheat production globally may drop by more than 4 percent, Bloomberg recently reported.

Solutions to the food crisis remain the same as before the financial crisis: massive investments are needed in agriculture and food aid programs. But now, it's more urgent.

The irony, experts say, is that many new grain technologies that can help expand food production are ready for implementation. But it will require money to get those technologies to farmers – money that may now be diverted to rescuing ailing banks.

"Research is a pipeline, and a lot of the products we've developed are ready and we have to get them out to farmers," says Zeigler. "It would be a shame for that not to happen."

Responses so far have resulted in governments restructuring finances to invigorate agricultural development and ease inflation. The African Development Bank recently augmented its agricultural portfolio by $1 billion, allocating a total of $4.8 billion. In Senegal, investments in agriculture will rise to $106 million, up from $58 last year. From Vietnam to Ethiopia, governments have slashed grain prices and fuel prices, and allocated money for school food programs.

Lending agencies have moved fast to disburse cash. The World Bank reports that, as of September, it had approved $83 million for 10 African countries, including money for school food programs and medical supplies.

Emergency food is being delivered, by the WFP and others. In Ethiopia, 6.6 million people are already beneficiaries of WFP food aid, and 2 million in Sudan. In Cambodia, school food programs, which were earlier cut back, have been resumed, targeting 250,000 children. In Afghanistan, nearly 200,000 metric tons of food are being delivered to assist 4.5 million people.

There is still a long way to go, experts warn. Some $20 billion will be needed to stave off the food crisis, the UN estimates. Money is coming in, but not fast enough. "Despite enthusiastic speeches and financial commitments, we have received only a tiny part of what was pledged," Jacques Diouf, the head of the UN food agency, said at a gathering for World Food Day in late October.

Lending agencies respond to ongoing global food crisis

The United Nations estimates that $15 billion to $20 billion will be needed to address the food crisis affecting 923 million malnourished people worldwide. Only some $1 billion has been disbursed so far. Some of the largest pledges from lending agencies include:

• The Word Bank created a $1.2 billion rapid-financing facility and pledged to increase support for global agriculture and food from $4 billion to $6 billion in 2009.

• The UN World Food Program pledged an extra $1.2 billion a year toward helping 75 million people who are starving worldwide.

• The International Development Bank pledged to provide $1.5 billion in food aid across the next five years.

• The Asian Development Bank pledged $500 million to member nations most affected by food prices.

• The Islamic Development Bank pledged $1.5 billion for agriculture projects in poor countries.

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