High Food Prices: Threats and opportunities Kostas G. Stamoulis Chief, ESAE/F

FAO Agricultural Development Economics Division ( ESA)FAO Agricultural Development Economics Division ( ESA)

High Food Prices:High Food Prices:Threats and opportunities Threats and opportunities

Kostas G. StamoulisKostas G. StamoulisChief, ESAE/FChief, ESAE/F


Key MessagesKey Messages High prices: Result of structural and High prices: Result of structural and

cyclical factorscyclical factors 75 million more hungry people as a result 75 million more hungry people as a result

of High Food Prices.of High Food Prices. The poorest, landless and female-headed The poorest, landless and female-headed

households the hardest hithouseholds the hardest hit Importance of smallholder responseImportance of smallholder response Turning threat into opportunityTurning threat into opportunity


High Food PricesHigh Food Prices


World Cereal Stocks and Stock-to-use Ratio World Cereal Stocks and Stock-to-use Ratio

Cereals Wheat

Coarse Grains Rice


Clearer linkages between commodity energy prices

FAO Food Price Index

80

105

130

155

180

205

230

2000

2002

2004

2006

M-0

7J

07S 0

7N 0

7J

08M

08M

08

J 08

1998-20...

With additional pressure puton feedstock prices because ofbiofuel policies in selected countries

Index for light crude oil


Ethanol production, 2005-2017Ethanol production, 2005-2017

0

20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Bill

ion

litr

es

United States Brazil EU China India Other

Source: OECD-FAO, 2008


High Food Prices Increase Hunger…High Food Prices Increase Hunger…numbers of undernourished in the developing world

1990-92 to 2007 (millions)

600

700

800

900

1000

years

mill

ion

s

Source: FAO


proportion of undernourished in the developing world (%)1990-92 to 2007

8

10

12

14

16

18

20

years

pe

rce

nt

Source: FAO

..and cancel progress in hunger reduction


……disproportionate impact on Africadisproportionate impact on Africa

Impact of high food prices by region(additional number of undernourished in 2007)

Asia / Pacific 41 million

Latin America / Caribbean 6 million

Near East / North Africa

4 million

Sub-Saharan Africa

24 million

Source: FAO


Poor countries are vulnerable to high food prices…

0

10

20

30

40

50

60

70

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

GDP per capita in constant PPP international dollars

Pe

rce

nta

ge

sh

are

of

foo

d e

xp

en

dit

ure

in

CP

I

USA

NORIR

CHE

AUT

HKG

JPN

ES

GBR

ITA

DEU

NGA

LKA

SEN

THA

IDNUGA

KEN

TZA

PAK JOR

GHA

BFA

ECU

KOR


..and so are poor households..and so are poor households Poor Households who are net buyers of staples

Country

Urban Rural All

Bangladesh, 2000 95.5 83.4 84.2

Pakistan, 2001 96.4 83.1 85.4

Viet Nam, 1998 100.0 40.6 41.2

Guatemala, 2000 98.3 82.2 83.1

Ghana, 1998 * 69.1 *

Malawi, 2004 99.0 94.8 95.0

Nicaragua, 2001 93.8 73.0 79.0

Tajikistan, 2003 97.1 76.6 81.4

Albania, 2005 * * *

Unweighted Average 97.2 87.9 78.5


The poorest are hit the hardest..The poorest are hit the hardest..Rural

-4

-3

-2

-1

0

1

2

Expendtiture quintiles

% c

hange in w

elfare

Poorest 2 3 4 Richest


..while women headed households are more vulnerable

-1.5

-1-.

50

.5%

Ch

an

ge

in W

elfa

re (

FH

H-M

HH

)

Bangladesh Ghana Guatemala Malawi Nicaragua Pakistan Vietnam

Rural UrbanNational


High food prices : An opportunity ?High food prices : An opportunity ?

Opportunity for what ?Opportunity for what ? Developing country responseDeveloping country response Poverty reductionPoverty reduction

From Prices to IncentivesFrom Prices to Incentives Pass throughPass through Net incentivesNet incentives


Source: Global Perspective Studies Unit, FAO

Cereal production: 2007 and 2008 supply response mainly in developed countries

200

300

400

500

600

700

800

900

1000

1100

1200

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

mill

ion

mt

Developed Developing

Developing countries:

1. export taxes & restrictions, import subsidies

2. subsistence: high input prices, no benefit from higher output prices

rationale for ISFP type interventions

Increase in cereal production

-20 0 20 40 60 80 100

Developed

Developing

million mt

2007/08 2006/07

Supply Response ? ..yes..but


Marginal recovery in cereal production of the 82 LIFDCs


Transmission of world to Transmission of world to international international pricesprices

Consumer price of riceCumulative percentage change (selected periods)

(world price in US$; country prices in real local currency terms)

-50%

0%

50%

100%

150%

200%

World Bangladesh India Philippines Thailand Viet Nam

Apr 2003 to April 2007

Apr/May 2007 toApr/May 2008


High food prices and production incentivesHigh food prices and production incentives

0

50

100

150

200

250

300

350

400

450

2003

/1

2003

/5

2003

/9

2004

/1

2004

/5

2004

/9

2005

/1

2005

/5

2005

/9

2006

/1

2006

/5

2006

/9

2007

/1

2007

/5

2007

/9

2008

/1

Pric

e in

dice

s

Foodstuff price index

Fertilizers and crude oil price index


Agricultural response and poverty Agricultural response and poverty reductionreduction

Production in developing country agriculture has been Production in developing country agriculture has been increasingincreasing

Poverty and hunger reduction slow and concentratedPoverty and hunger reduction slow and concentrated Poverty concentrated in the rural areas of developing Poverty concentrated in the rural areas of developing

countriescountries A paradigm whereby agriculture contributes to poverty A paradigm whereby agriculture contributes to poverty

reduction: More attention to smallholder farmers reduction: More attention to smallholder farmers Smallholders: Short term and structural impedimentsSmallholders: Short term and structural impediments


Smallholder farm organization prevalentSmallholder farm organization prevalent

0 2 4 6 8 10 12 14 16 18 20 22 24 26

Congo, Dem. Rep. of

Malawi

Ethiopia

Egypt

Guinea Bissau

Lesotho

Guinea

Uganda

Namibia

Burkina Faso

Peru

Colombia

Viet Nam

Indonesia

Nepal

Korea, Rep. of

India

Philippines

Myanmar

Thailand

Pakistan

Iran

Turkey

(hectares)

Average size of land holdings in selected countries(FAO data from Agricultural censuses)


Patterns of rural developmentPatterns of rural development0

.2.4

.6

0 2 4 6 8 10Log of per capita income

Agricultural wage Non-agricultural wageAgricultural production Self employmentOther income


Fertilizer use per hectareFertilizer use per hectare

0 10 20 30 40 50 60 70 80 90 100 110

South Asia

East and Southeast Asia

Latin America

Sub-Saharan Africa

Developing countries

(kg / ha)

1962 1982 2002


Smallholders and structural constraintsSmallholders and structural constraints

Time distance to markets by geographical region


Access to infrastructure by rural Access to infrastructure by rural householdshouseholds

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80In

fras

truc

ture

inde

x

Poorest Richest


Short and long term response Short and long term response inhibited by..inhibited by..

Low price incentives ( low output..high Low price incentives ( low output..high input)input)

Access to essential inputs and marketsAccess to essential inputs and markets

Structural factorsStructural factors


Need short and long term Need short and long term responses: FAO proposes….responses: FAO proposes….

Safety nets and transfers Safety nets and transfers Urgent support to farmers in developing Urgent support to farmers in developing

countriescountries Increase investment in developing country Increase investment in developing country

agriculture agriculture Improve international policy coordinationImprove international policy coordination


FAO Response FAO Response Forum for exchangeForum for exchange : :

The HLC, June 2008The HLC, June 2008 The CFS 2008The CFS 2008

Information and analysisInformation and analysis Market information/intelligence SOFI 2008 SOCO 2008 SOFA 2008 FAO/OECD Outlook

Policy support and technical assistancePolicy support and technical assistance The Initiative for Soaring Food Prices ( ISFP)The Initiative for Soaring Food Prices ( ISFP)


FAO Initiative on Soaring Food Prices

THE CHALLENGETHE CHALLENGE

cereal import bill in Low-Income Food-Deficit Countries has gone up by 72% in 2007-08

high input prices which have almost tripled compared with August 2007


FAO Inititiave on Soaring Food Prices

ACHIEVEMENTS TO DATE

27 interagency assessment missions monitoring of global and domestic food

prices input supply, technical and policy

assistance in 79 countries (upon request)


input supply ongoing and planned ininput supply ongoing and planned in71 countries (TCP and other funds)71 countries (TCP and other funds)

Africa and Near East: 34Africa and Near East: 34 Asia and Southwest Pacific: 19Asia and Southwest Pacific: 19 Latin America and the Caribbean: 16Latin America and the Caribbean: 16 Eastern Europe: 2Eastern Europe: 2 53 countries targeting the 2008 planting 53 countries targeting the 2008 planting

seasonseason

FAO Initiative on Soaring Food PricesACHIEVEMENTS TO DATE



FINANCING

FAO financing to date: close to USD 69 million sources: TCP, donor countries (the Netherlands, Spain, the United Kingdom, the United States, the UN's Central Emergency Response Funds )

additional commitments: USD 70 million(EC, Japan, Switzerland, UNOCHA, World Bank)



ISFP IN ACTION - Mozambique

project funded by TCP and Spainproject funded by TCP and Spain distribution of cassava cuttings and seeds of high-distribution of cassava cuttings and seeds of high-

yielding, resistant varietiesyielding, resistant varieties training of farmers in processing and marketing training of farmers in processing and marketing

techniques (transforming raw cassava crop into flour techniques (transforming raw cassava crop into flour that can be used to make bread, pastries and chip that can be used to make bread, pastries and chip snacks) snacks)


Thank you!Thank you!

High Food Prices: Threats and opportunities Kostas G. Stamoulis Chief, ESAE/F

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