WASHINGTON – October 16 – Small farmers in developing countries have not benefited from higher food prices, thanks in part to flawed trade and agricultural policies that have made them vulnerable and weakened their positions in markets, said international agency Oxfam in a new report released today, World Food Day.

In Double Edged Prices, Oxfam says that all governments, donors, and agencies, must learn the lessons from the crisis. These include the importance of investing in agriculture, having trade policies that ensure food security, and designing social protection systems that protect the poorest.

Teresa Cavero, author of the report and head of research at Oxfam in Spain, said: “The trend in agriculture, as in international finance, has been towards deregulation and a reduced role for the State. This has had devastating effects and innocent lives have been blighted by exposure to market volatility. It is time the world woke up to the need for developing country governments to support their poor farmers, and the obligation of developed countries to help them to do so.”

“In countries where governments have invested in agriculture, and put policies in place to target vulnerable or marginalized groups, the impacts of food price inflation have been less severe. In contrast, where there has been unmanaged trade liberalization, underinvestment in agriculture, and little support from government, the effects have been devastating,” she added.

The sharp rise in global food prices has pushed 119m more people into hunger, taking the global total to 967m. Higher food prices mean people are eating less and lower quality food, children are being taken out of school and farmers are being forced to migrate to cities to live in slums (see case studies below). Women are especially vulnerable because they rarely own land and have limited access to credit and other services, but they bear much of the responsibility for feeding and caring for families.

Meanwhile, some of the biggest international food companies have made windfall profits. Commodity-trader, Bunge, saw its profits in the second fiscal quarter of 2008 increase by $583m, or quadruple, compared with the same period last year. Nestlé’s global sales grew nearly 9% in the first half of 2008, and UK supermarket Tesco, has reported profits up 10% from last year. Seed company, Monsanto, reported a 26% increase in revenue to a record $3.6bn in the fiscal quarter that ended May 31, 2008.

“Misguided or inadequate national agricultural policies, coupled with unfair trade rules and poor economic advice, has created a situation where big traders and supermarkets are gaining from price rises, and small farmers and consumers are losing out,” said Cavero.

Oxfam criticizes the international community’s inadequate response – both in terms of money and coordination. At an emergency meeting in Rome earlier this year, $12.3bn was pledged for the food crisis, but little more than $1bn has been disbursed so far. This is in stark contrast with the response to the current financial crisis, where huge financial resources have been mobilized by the international community in a matter of days.

Cavero: “It is shocking that the international community has failed to organize itself to respond adequately to this. The UN taskforce produced a good plan – the Comprehensive Framework for Action – but there is still not clear leadership to implement it. Developing countries are being bombarded with different initiatives and asked to produce multiple plans for different donors. We need to see one coordinated international response, led by the UN, which channels funds urgently to those in need, and leads on implementation of the longer-term reforms.”

Download the report: Double-Edged Prices – Lessons from the food price crisis: 10 actions developing countries should take