Mulualem Tegegn bought a donkey last year. As a hard-working Ethiopian farmer, aged 58, he saw the purchase of the beast as a return to better times after several seasons in which drought and high prices had forced him to sell his livestock and take his grandchildren out of school to work on the farm. This year, he will have enough grain left to buy a goat or two, and the donkey will help the children make the long trek again to school. This is how things are supposed to be.

World food prices soared in 2007-08, pushing hundreds of millions into poverty. But — said people at the time — there was a silver lining: high prices would be good for farmers, especially smallholders in poor countries such as Mr Tegegn. Higher returns would suck money into farming, leading to higher yields, bigger harvests and stable or falling food prices. Eventually, the argument ran, farmers and consumers would all be better off.

This happy state of affairs seemed to be coming to pass in the second half of 2008. Ethiopia reported a record cereals harvest this January, up 10 per cent on the previous year. Across the world, the picture was similar. After the price spike in the first half of 2008, farmers harvested 2.3 billion tonnes of cereals in 2008/09, the biggest crop ever seen. Big exporters began lifting the trade bans they had imposed to keep local prices from rising, so more food became available to world markets. The sharp fall in the price of oil, which occurred at the same time, increased food supplies further because, by making oil cheaper than ethanol, it encouraged farmers to sell for feed the maize they would otherwise have turned into biofuels. As food supplies surged (and demand, hit by the global recession, stagnated), prices plummeted. Between its peak in July and a trough in December 2008, The Economist’s index of food prices fell by 40 per cent.

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