Ganesh Thapa IFAD Presentation On Food Prices Bangkok Workshop

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Transcript of Ganesh Thapa IFAD Presentation On Food Prices Bangkok Workshop

  • 1. Annual performance review workshop Rising food prices: challenges and opportunities for smallholders 1-4 March 2009 Bangkok, Thailand

2. Food Price Crisis

  • Food price index rose from 155 in 2007 to 215 in June 2008; rice price rose from USD 305 per mt to USD 869
  • Rising food prices led to rapid acceleration of inflation
  • Food price crisis may slow down growth and poverty reduction in Asia/Pacific
  • Prices have eased since Aug 2008 but increased in January 2009
  • Despite decline in world prices in second half of 2008, domestic prices remain very high

3. Food price crisis

  • Cereal Export Prices (USD/mt)

172 160 229 206 Maize 256 240 308 381 Wheat 611 582 764 385 Rice Jan 2009 Dec 2008 Sep 2008 Jan 2008 Commodity 4. What led to rising food prices?

  • Rising living standards leading to improved diets
  • Maize-based ethanol (US) and biodiesel fuels from vegetable oils (Europe)
  • Deterioration of $increase in commodity prices quoted in $
  • Flow of capital into commodity markets for speculative gains
  • Underlying these demand drivers: high price of oil

5. What was the policy response?

  • Many countries resorted to protective measures
  • Food exporting countries eliminated export subsidies (China), and banned exports (India)
  • Importing countries inflated imports in response to tightening supply (Indonesia, Thailand)
  • Food importers increased demand by bidding for larger imports to dampen domestic inflation.
  • Rising food prices sustained by policies to protect domestic consumers; likely to deepen food crisis

6. Impact on nutrition and poverty

  • Differential impact on net food exporters (e.g. China) and net food importers (e.g. Indonesia)
  • In both rural and urban areas, the poorest quintiles are the worst affected
  • The poor landless are likely to be worse-off
  • Female-headed households fail to benefit due to limited access to land, credit and markets
  • No. of malnourished in 2007 is 923 million, up from 848 million in 2004

7. Policy priorities

  • Price and quantity restrictions make matters worse
  • Subsidised food distribution provides partial relief but does not mitigate food insecurity
  • Subsidies to and tariff protection of biofuel production need re-examination
  • The food system is global but the principal actors are national governments
  • International agencies can play a supportive role but improvements require sound national policies
  • In the long-term, higher agricultural growth needed for food security and to raise incomes of smallholders.

8. Constraints faced by smallholders

  • Low yields of food crops in most of Asia due to:
    • poor crop management
    • lack of rural infrastructure & post harvest technologies
    • inadequate funding for research and development
    • decreasing soil quality and diminishing water tables
    • weakening of supply elasticities of foodgrains
  • Magnitude of price incentives is lower than implied by the rise in global prices
  • Less than half of recent global price increases of rice transmitted to domestic economies due to:
    • Policies in procurement, distribution
    • Trade restrictions

9. Supply response in Asia

  • Elasticities of yield with respect to price changes are high: (0.3, 0.31 and 0.26 for rice, wheat and maize)
  • Prices matter but inputs matter more
  • Over a large range of output, small and large farmers sell the same fraction of additional output
  • If constraints to production are overcome, higher producer prices will lead to larger increase in market sales than output

10. How can we help the smallholders?

  • Need to support smallholders to expand their production and marketed supply through:
    • agricultural research in fragile regions
    • access to agricultural services (extension, finance)
    • securing access to natural resource
    • diversification of their sources of income including payments for environmental services
  • Strengthening livelihoods in conditions of greater climatic uncertainty (new forms of insurance)
  • Additional investments in market facilities
  • Cost-effective and pro-poor food aid