World Bank ‘Food Price Watch’ paper on interaction between food prices and the the food crisis in the Horn of Africa

Over 12 million people are in need of humanitarian assistance in the Horn of Africa due largely to drought, displacement and conflict. However, the World Bank notes that increasing food prices are also compounding the situation, with world prices as of July 2011 approaching the levels seen in 2008 (but down slightly since February). They identify low maize stocks (stock-to-use ratio of about 13%, the lowest in over 30 years) as increasing potential price volatility, and note in passing that maize use for biofuels is also exerting upwards pressure on prices.

However, the report notes that domestic prices in Africa and other regions have been extremely volatile (more so than global prices), and that linkages between domestic and global markets are not simple. Somalian maize prices are up by as much as 240% since June 2010 in the worst affected region (Baidoa), raising the cost of living and driving inflation. As it is not entirely clear how strongly connected these local maize prices are to global maize markets, it is similarly unclear whether and to what extent biofuel demand may have been influential in the current crisis.