Rising food prices and food security in

South and South West Asia: Policy

Options

Prof. S. Mahendra Dev

Director and Vice Chancellor,

Indira Gandhi Institute of Development Research, Mumbai

Contents Trends in food prices in South Asia

Reasons for increase in food prices

Impact of rising prices on macro variables,

poverty and food security

Response of South Asia on food price rise

Role of small farmers in South Asia

Policy options to mitigate the adverse

effects of rise in prices

Food Security in South Asia

There are challenges in all three components of

food security : availability, access and nutrition in

South Asia and also South West Asia

In South Asia, they are better off with cerela

production but diversification has to increase

It is known access to food is a problem in many

of these countries. Poverty is high.

Undernutrition is a problem. Nearly 45% of the

children in South Asia suffer from malnutrition.

The levels are almost double to those of Sub-

Saharan Africa

Increase in Food Prices Food prices increased significantly during 2007-

08 and 2010 and 2011

The food consumer price index shows most of

the countries in South Asia and South West Asia

showed double digit food inflation.

In 2011, Bangladesh (11%), Nepal (14%),

Pakistan (18%), Sri Lanka (11%)

During Jan 10 to Jan 11, Iran food inflation was

26%. Basically bread and cereals (46%) and fats

and oils (64%)

Over all and Food Inflation in India

Commo

dities

2006-07 2007-08 2008-09 2009-10 2010-11

All 5.42 4.66 8.1 3.8 9.6

Primary 7.85 7.61 11.0 12.7 17.7

Food

Articles

7.78 7.78 9.1 15.3 15.6

Fuel and

Power

5.61 0.93 11.6 -2.1 12.3

Manufac

ture

4.43 4.97 6.2 2.2 5.7

--Food

products

3.22 4.27 8.7 13.5 3.7

Inflation for food articles in India

0.00

5.00

10.00

15.00

20.00

25.00

Apr-

05

Aug

-05

Dec-0

5

Apr-

06

Aug

-06

Dec-0

6

Apr-

07

Aug

-07

Dec-0

7

Apr-

08

Aug

-08

Dec-0

8

Apr-

09

Aug

-09

Dec-0

9

Apr-

10

Aug

-10

Dec-1

0

Apr-

11

Food Articles

Reasons for price rise Global Factors

--Natural disasters; Export restrictions

-- Population growth and demographic changes

-- High growth in Emerging economies and demand for

food

-- Conversion of food into bio-fuels

-- Increasing financialization and speculation in

commodity markets

Domestic Factors

-- Structural and cyclical factors

--Structural: Consumption patterns away from cereals

to fruits, vegeta, dairy, meat, fish. Protein inflation.

--Neglect of agriculture, investments, technology etc.

Impact on Macro, poverty and food security Impact on macro economic aggregates directly or

indirectly

-- Consumption, investment, output, overall inflation,

trade balance, fiscal balance; rise in interest rate

negative impact on consumption and investment

Impact on poverty and food security.

--Most people pushed into poverty in Bangladesh 2.9

million; The country most people were prevented

from stepping out of poverty 8 million in India

-- Impact on malnutrition : poor consume less of

micronutrients and vitamins. Children are pulled out

of school.

-- Adverse impact on MDGs

Policy responses of South Asian countries Monetary policy: Increase in interest rates in India 13

times since early 2010; Reduction in rates in

Pakistan and Sri Lanka

Other measures

-- removal or cuts in import taxes or value-added taxes,

increases in buffer food grain stocks, export

restrictions, or price controls and consumer

subsidies

--Social protection programmes like cash transfers,

employment guarantee scheme in India, also in

Bangladesh. Strengthening public distribution

systems

--Regional cooperation better in 2010/11 compared to

2007/08; Bilateral export-quota arrangements

Policy Options to contain food price inflation

Increase in supply of agricultural

commodities by increasing productivity

Focus on small farmers

Strengthening social protection policies

Regional cooperation

Global level cooperation

Increase in Agri. productivity in South Asia Fatigue in green revolution areas: Technological

progress getting out of steam for the irrigated

system. Hybrid rice and better crop management

Yields of many crops are lower in South Asia

For example, world average yield of rice is 4.31

tonnes per hectare. In India, yield of rice is 3.4

tonnes per ha. compared to China’s 6.6 tonnes/ha

Agriculture investment in infrastructure: irrigation,

roads, communications, research and extension etc.

Credit, land and water management, institutions

Marketing and price incentives

Also focus on rainfed areas and small farmers

More than 80% are small and marginal holdings.

Constraints, challenges faced by small holders The average size of operational holdings : 0.6 ha. in

Bangladesh, 1.4 ha in India. The average size of farm

in Turkey is high

Generally, small farmers do not have level playing field

with large holding in accessing land, credit, inputs,

markets, technology etc.

Inadequate savings: It is one of the constraints for

sustainability of livelihoods and investment in agri.

Indian data shows that consumption is higher than

income for farmers upto 2 ha.( fig.)

Role of women

Lack of property rights and land issues

Low level of formal education and skills

Access to institutional credit is low and indebtedness

Constraints and challenges (contd.)

Globalization challenges: Increasing

globalization has added to the problems

faced by the small holding agri.

Globalization has exposed small farmers to

greater competition from trade.

Impact of climate change

Diversification challenges

Risk and vulnerability

Opportunities in Asia Dietary patterns are changing. due to urbanization

and income growth. High value agriculture has

emerged in several parts of Asia.

The major challenge faced by small farmers are

declining productivity, risks associated with

diversification to high value crops, environmental

constraints including those arising out of climate

change and idiosyncratic risks like floods and

droughts” ( IFAD, 2011).

There are many opportunities like producer

organizations, super markets and value chains, contract

farming in Asia for marketing.

Opportunities for Small holding agriculture

Technological innovations

--zero tillage

--Public sector led improved technologies

--Nutrient management

--Bio-technology

--Information technology

Institutional Innovations

--land and water management: institutions like

water user associations for water management

of canal irrigation

Institutional Innovations Women’s collectives: Women’s cooperatives, producer

women’s groups and other forms of group efforts

Institutions for Marketing of Small holders

--There are several models: Contract farming, self help

group model, co-operative model and producer co-operat.

--One of the most successful producer organization is dairy

cooperative in India with 12.3 million members.

--Contract farming is also successful in some cases; It is

context specific

Super markets and supply chains

FDI in retail : controversial?

Small Farmers and Information (India example)

Indian private companies and NGOs are global leaders in providing information to farmers, as a spinoff from India’s meteoric rise as a world leader in ICTs.

E-Choupal (Internet Kiosks) has expanded access to internet in rural areas. Up to 6,400 internet kiosks were set up between 2000 and 2007 by ITC Limited, one of the largest agricultural exporters.

It reaches about 4 million farmers growing a range of crops - soybean, coffee, wheat, rice, pulses or shrimp - in over 40,000 villages.

They get free information in their language about local and global market prices, weather forecasts, farming practices and crop insurance.

Mobile phone revolution also helped the farmers in South Asia

Regional level cooperation Every country having buffer stock is expensive.

Therefore, the proposal of regional cooperation like

SAARC food bank would be useful.

Joint agricultural research programmes for

development of abiotic stress tolerant improved

varieties and hybrids, and natural resource

management techniques (e.g.minimum tillage)

•Cooperation in new sciences such as GIS, remote

sensing, water forecasting, systems modeling

•Free exchange of technology and information such as

germplasm, improved animal breed, improved disease

management technologies and practices

•Capacity building through development of regional

training facilities (Hossain, 2011)

Global level cooperation Initiatives by G20 (agricultural minister’s meeting in

Paris. They commit five main objectives for action

“(i)Improve agricultural production and

productivity both in the short and long term in order

to respond to a growing agricultural commodities

demand

(ii) increase market information and

transparency in order to better anchor expectations

from governments and economic operators;

(iii) strengthen international policy coordination

in order to enhance confidence in international

markets and to prevent and manage food market

crisis more efficiently;

Global level cooperation (iv) improve and develop risk management tools for

governments, firms and farmers in order to build

capacity to manage and mitigate the risks

associated with food price volatility, in particular to

the poorest countries;

(v) improve the functioning of agricultural

commodities’ derivatives markets through the work

of Finance Ministers and Central Bank Governors”

(p.3).

G20 has to take initiative on reducing speculative

activities and conversion of bio-fuels.

South-South Cooperation CGIAR systems, ICRISAT

Conclusion Food price volatility is not new but we have to take

measures to mitigate the risks of adverse effects and

reduce price volatility it self.

In South Asia all three components of food secutity :

availability, access and nutrition have to be improved.

Apart from short term measures, long term solution is

increase in agricultural productivity and rising

incomes of farmers

Rural non-farm sector development is also important

for shifting people from agriculture

Strengthening social protection measures

Region level cooperation. Also Global cooperation

particularly in reducing speculative activities

THANK YOU