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How Falling Oil Prices Affect the Poor

oil prices
Decreasing oil prices directly correlates with the price of food. Fuel transports food and with lowered oil prices, the cost of food is dropping. The price of fuel is important to the global market, because it dictates how imports and exports are priced.

The cost of petroleum determines the cost of agricultural products, like corn and wheat. The price of these crops includes the cost of transportation, chemicals and pesticides – all of which are made from petroleum.

Impoverished citizens will often spend over 50 percent of their budget on food. For instance, in Vietnam, parents will spend 65 percent of their budget on food for themselves and their families. With decreased prices in food, families living in developing countries will be able to purchase larger quantities.

While many living in developing countries are benefiting from the fall in oil prices, there is a population who is not benefiting from lowered oil prices. The fall in oil prices negatively affects independent farmers and crop growers.

These farmers do not use large amounts of pesticides or fuel to transport their goods. Therefore, the decreasing price in oil does not affect their cost in production and distribution. These farmers transport their food only a short distance. Disconnected from the global market, these small-holder farmers are at a disadvantage.

Overall, developing countries are benefiting from the decrease in oil prices, with the exception of small-holder farmers.

Lower oil prices can potentially benefit developing countries in another way, through investment. With lower oil prices, investment is possible because high oil importing countries have the opportunity to invest increased amounts into improving rural infrastructure and social services.

– Maxine Gordon

Sources: Yahoo, New York Times, Reuters
Photo: Inquisiter

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New Farming Recommendations for Poverty Reduction

FarmingThroughout the globe, there are 1.4 billion people living on less than $1.25 a day. Yet according to a new report from the International Fund for Agricultural Development, most of these people could easily be lifted out of extreme poverty if provided with the right support system.

The new report suggests that investments in agriculture, specifically in farms owned by smallholder farmers, are the most efficient way to see decreases in poverty throughout the world. Smallholder farmers own 500 million farms throughout the globe and produce nearly 80% of the world’s food supply. The study states that investment in smallholders is necessary because they produce a majority of the world’s food and play a significant role in poverty reduction. For every 10% increase in farm yields, a seven percent poverty reduction rate has been seen in Africa, and a five percent reduction rate has been seen in Asia.

Smallholder farmers have faced difficulties in the past through “underinvestment in agriculture, growing competition for land and water, rising fuel and fertilizer prices, and climate change.” The International Fund for Agricultural Development advocates for investing in smallholder farmers in order to overcome these challenges, potentially resulting in an increase in crop yields and a reduction in poverty.
The report also emphasizes the importance of using sustainable farming practices. Among its recommendations is the removal of subsidies on unsustainable fertilizers and encouraging farmers to use practices compliant with “fair or green certification schemes.”

The recommendations of the study, if implemented, could result in further fulfillment of the Millennium Development Goals. Among other things, the Goals seek to eradicate extreme poverty and hunger and to ensure environmental sustainability. Investing in smallholder farmers will potentially achieve these goals by increasing farm yields, decreasing poverty, and utilizing sustainable farming practices.

– Jordan Kline
Source: All Africa United Nations