The Hidden Link Between Food Prices and Overseas Development Assistance

Since 2020, people around the world have experienced a sharp rise in food prices, with inflation reaching a high of 22.8% in 2022. While prices have gone down since then, they still remain higher than pre-pandemic levels, putting households under continued financial pressure. Everyday staples like bread and coffee have now become symbols of rising costs.

COVID-19 undoubtedly disrupted global food markets, but it’s not the only reason behind these dramatic price increases. For example, coffee prices soared in 2021 due to weather disruptions in key producing regions like Brazil, while the cost of wheat also surged due to extreme weather patterns, as well as geopolitical conflicts.

This issue is a symptom of a larger set of interconnected global challenges. In an increasingly connected world, supply chains have become more vulnerable to disruptions from conflict, climate change and other crises. However, governments have a powerful tool to mitigate these impacts for their citizens: Overseas Development Assistance (ODA).

Let’s explore how these challenges impact food prices and how ODA can reduce the burden of food inflation.

Pandemic pressures

With economies so interdependent, disruptions in one part of the world have far-reaching consequences, and the pandemic was a prime example of this.

Supply chain disruptions, rising shipping costs and skyrocketing demand as governments stockpiled commodities, led to steep food inflation during Covid. Lockdowns, social distancing measures and travel restrictions caused labor shortages in agriculture, slowing production and creating bottlenecks in distribution.

Ports and processing facilities also faced delays, increasing transportation costs for key food items. Finally, the pandemic affected food access, with many countries experiencing higher levels of food insecurity due to the economic downturn.

Feeding the world in a changing climate

Agriculture is highly sensitive to shifts in climate patterns. Extreme weather events like droughts and floods can devastate crops. A recent study found that high temperatures “persistently” increase food inflation in both high- and low-income countries.

In major coffee exporting countries like Brazil, prolonged droughts have led to a shortage of beans, pushing prices higher for consumers around the world. Meanwhile in China, the world’s largest wheat producer, rising temperatures and unpredictable weather patterns are also putting a strain on food production.

The cost of conflict

Conflict is another key driver of food inflation, disrupting agriculture, supply chains and trade routes. Countries like Ukraine, a major wheat exporter, have seen production drop due to conflict. Locally, the effects are devastating, with farmers abandoning land, workers losing their jobs, and communities forced into displacement, further deepening food insecurity.

As displaced populations grow, the strain on food supply and resources intensifies, worsening the humanitarian crisis. In countries already grappling with poverty, this creates a vicious cycle, where food insecurity fuels further instability, leading to even more displacement and unemployment.

Why ODA matters 

ODA is government funding provided for the economic growth and welfare of low- and middle-income countries. While it’s traditionally viewed as a way to promote development abroad, it also plays a significant role in ensuring stability domestically, particularly for issues like food prices.

For example, the World Bank’s International Development Association (IDA) – the world’s largest source of grants and low-income loans for 75 low-income countries – is funded through ODA. Through IDA, 27,000 farmers in the Gambia received 500 tons of climate-smart seeds in 2022-2023. In Nigeria, around 125,000 people have benefited from improved irrigation and other climate-resilient IDA programs. Initiatives like these are essential for promoting food security in  climate vulnerable regions.

Additionally, ODA supports peacebuilding and conflict resolution initiatives. As geopolitical tensions increase around the world, ODA can fund programs that mitigate these tensions and foster stability in vulnerable areas. Addressing the root cause of conflict protects the lives and livelihood of farmers in agricultural regions, reminding us that their resilience is vital to our shared food security.

ODA: Makes total sense

By recognizing the link between ODA and issues like food inflation, governments can make informed choices about how to allocate resources in a way that benefits both the global community and their own citizens. After all, when we invest in solutions abroad, we help create a more stable, prosperous world – one where everyday essentials like coffee and bread don’t come with a growing price tag.

Makes total sense, right? We partnered with Max Klymenko to ask people on the street what they thought about this. Watch the video here and find out what they had to say!