Food prices have a crucial impact on hunger and food security, which is a focus of this year’s G20 Task Force on Food Security. Food prices present a double-edged challenge: while high prices can hurt low-income consumers and benefit food producers and low prices offer the reverse effect, there are also more complex factors at play. The extent to which producers gain from high prices depends on market governance, while low prices often conceal hidden costs that may outweigh their short-term advantages for consumers. While the issue of food prices is well recognised by the G20 Task Force, the studies proposed in its Concept Note to improve knowledge about how prices impact food access lack an equity perspective. Such a perspective would bring to light the structural challenges to the affordability of nutritious food for low-income consumers and to fair remuneration for small-scale farmers and farmworkers. We argue that food prices are key to food system equity and sustainability and suggest a role for policy to build equity into these systems.

Food prices reflect a broken food system

Food prices determine food and nutrition security, as well as the social and economic wellbeing of those who work in food systems. Low food prices are a symptom of a broken food system – one marked by persistent poverty, deep inequalities, the marginalisation of food producers and workers and environmental challenges. We highlight three aspects of this flawed system that reflect social and environmental imbalances.

1. Simplified diets centred on energy-dense commodities

Worldwide, our diets are dominated by a small number of energy-dense commodities that have lower nutritional value. These commodities were the focus of traditional agricultural research and development (e.g, the Green Revolution) when needs for food security across the globe were different. The focus on grains led to a significant increase in agricultural productivity and, in turn, a reduction in grain prices. However, as farmers and food workers constitute the majority of the poor, low prices for consumers at the cost of low prices at the farm gate create a vicious cycle of food insecurity and poor nutritional intake. Governments need to support a more diverse diet and higher-value commodities that are nutritious to ensure affordable prices

2. Public policy is biased toward corporate-driven industrial food systems

Policies are often biased toward industrial food production systems, not least because of the political influence large corporations have on government policies. This leads to a neglect of smaller-scale (domestic) value chains. Small- and medium-sized farms provide locally embedded livelihood opportunities that include landless or land-constrained people, and are better linked to local input and service markets – as well as consumption – than large farms are. This highlights the need to support small- and medium-scale producers and enterprises to strengthen inclusive and equitable economic growth in rural and peri-urban settings.

3. Food prices do not reflect true costs

Food prices are often artificially low because of a failure to account for the social and environmental costs generated by globalised food systems. Many of the costs associated with the production, processing and trade of foods are not reflected in prices. These include negative impacts on the environment resulting from industrial food production, such as greenhouse gas emissions, biodiversity loss, and soil and water depletion. They also include the costs to human wellbeing linked to poor health (malnourishment and obesity), which result from excessive consumption of industrially grown and ultra-processed foods. According to one estimate, food is roughly a third cheaper than it should be if all externalities were included in retail prices.

Recommendations

As rising food inflation and global food insecurity heighten concerns about affordability, ignoring the true costs of the food system is no longer tenable. The issue of food prices sits at the intersection of equity and sustainability. We argue that governments, and the G20, have a role to play in ensuring that food producers and workers get a fair price for their produce and labour and that everyone is able to afford healthy food produced without damaging the environment. Based on this, we suggest the following actions:

• Increase support – monetary, political and research – for healthy and nutritious food items (fruits, vegetables, pulses, eggs and dairy) that are produced through sustainable practices, and gradually move away from promoting energy-dense commodities that have lower nutritional value (grains).
• Target policy interventions to the needs of small- and medium-scale food producers and enterprises. Governments need to tailor their actions – eg, innovation policies, infrastructure development, use of modern technology – to maximise the profit margins of food producers.
• Establish minimum price guarantees or living income benchmarks for small-scale farmers and food workers, ensuring they are compensated fairly for their labour and production costs. Public procurement programmes can prioritise purchases from marginalised producers at fair prices.
• Integrate true cost metrics into policymaking and build the evidence base – use ‘true cost accounting’ to guide agricultural subsidies, taxation and trade policies to promote sustainable and equitable food systems; and fund research institutions and agencies to assess the full economic, environmental and social costs of food.
• Implement income-based food subsidies or vouchers to make nutritious and sustainably produced food accessible to low-income consumers without driving down farm-gate prices. Governments can also reduce taxes on essential foods while taxing ultra-processed or environmentally harmful foods.

We recommend that these actions are incorporated in the G20 Policy Priorities on Strategies to Stabilise Food Pricing to Achieve Food Security and End Hunger that the Task Force on Food Security is expected to define.