Protecting Poor People Against Food Price Volatility
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Transcript of Protecting Poor People Against Food Price Volatility
Protecting Poor People Against Food Price Volatility
Shenggen FanDirector General
International Food Policy Research Institute
Panel discussion: Rising Global Food Prices: Causes, Impacts, and Response Strategies
Dakar, May 17, 2011
Shenggen Fan, May 2011
Key messages
Food price hikes and volatility are increasingly frequent.
A complex web of factors drive food price volatility.
High and volatile food prices hurt poor consumers and producers.
Urgent actions are needed to address food price volatility and protect poor people.
Shenggen Fan, May 2011
Global food price hikes and volatility
Source: Data from FAO 2011; Note:: *As of early May 2011
May
-05
Nov-0
5
May
-06
Nov-0
6
May
-07
Nov-0
7
May
-08
Nov-0
8
May
-09
Nov-0
9
May
-10
Nov-1
0
May
-11
0
200
400
600
800
Maize
Wheat
Rice
US
$/m
etr
ic t
on
Global hikes since June 2010*
• Maize: 100%• Wheat: 94%
Shenggen Fan, May 2011
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-110
200
400
600
800
Maize
Wheat (white)
Eth
iopi
an B
irr/k
g
Domestic prices are also high and volatile
Retail prices in Niger, Niamey Retail prices in Senegal, Dakar
Wholesale prices in Ethiopia, Addis Ababa
Source: Data from FAO 2011
Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11100
200
300
400
500 MaizeRice
CF
A F
ranc
/Kg
Retail prices in Yaoundé, Cameroon
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11150
250
350
450
550Rice (imported)
(CF
A F
ranc
/Kg)
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11250
350
450
550Rice (imported)
(CF
A F
ranc
/Kg)
Shenggen Fan, May 2011
Food price volatility drivers
Stronger link between oil and food prices
Extreme weather events—droughts, floods, and cyclones—lead to production losses
Trade restrictions
Market speculation?
Climate change (in the long run)
Shenggen Fan, May 2011
Stronger link between oil and food prices influence food security
Rising oil prices cause food prices to increase, rather than the reverse. (Heady and Fan 2010)
Rising oil prices make biofuels more profitable, rather than agricultural production more expensive. (Abbott, Hurt, and Tyner 2008)
Source: Data from IMF 2011
Note: Oil = Average crude oil price of U.K. Brent, Dubai, and West Texas Intermediate
Apr-0
5
Oct
-05
Apr-0
6
Oct
-06
Apr-0
7
Oct
-07
Apr-0
8
Oct
-08
Apr-0
9
Oct
-09
Apr-1
0
Oct
-10
Apr-1
10
50
100
150
200
250
Food
Oil
2005
= 1
00
Shenggen Fan, May 2011
Climate change will add pressure
Increased frequency and intensity of extreme weather events
Lower agricultural yields and production
Higher food prices
Source: Nelson et al. 2009.
Shenggen Fan, May 2011
High and volatile food prices hurt the poor
Source: Headey 2011
SenegalCameroon Ghana Nigeria Kenya Malawi Uganda Zambia0
10
20
30
40
50
60
70
802006/2007 2007/2008* 2008/2009*
% o
f h
ou
se
ho
lds
re
po
rtin
g p
rob
lem
s in
a
ffo
rdin
g f
oo
d in
las
t 1
2 m
on
ths
Self-reported food insecurity in Sub-Saharan Africa
Shenggen Fan, May 2011
Actions needed to reduce food price volatility and protect the poor
1 Invest in social protection, especially productive safety nets.
2 Establish global and regional strategic grain reserves.
3 Support transparent, fair, and open global trade.
4Promote agricultural growth, especially smallholder productivity.
5 Invest in climate change agricultural adaptation and mitigation.
6Establish an international working group to monitor world food situation and catalyze action.
Shenggen Fan, May 2011
Bangladesh Vulnerable Group Development Program
Increased per capita food consumption by 45-66 kcal per taka transfer (Ahmed et al. 2009)
Ethiopia Productive Safety Nets Program (PSNP)
With access to safety nets and agricultural support, beneficiaries are more food secure and productive. (Gilligan, Hoddinott, and Taffesse 2009)
Nigeria Fadama II Development Project
Increased the value of individual productive assets by about 50 percent (Nkonya et al. 2008)
1. Invest in productive social safety nets
Shenggen Fan, May 2011
2. Establish global and regional strategic grain reserves
Global emergency reserve Created with grain donations from large food
exporters and producers (for example, United States, France, China, India)
Located in these countries and also in poor food-importing countries (for example, Horn of Africa)
Owned and managed by an institution such as WFP • Strong global food management system including
logistical capability
Shenggen Fan, May 2011
Some regional initiatives are emerging:• Asean+3 Emergency Rice Reserve• Sahel and West Africa Regional Food Stocks
(RESOGEST)• SADC Regional Food Reserve Facility
Properly managed reserves can address food crises, but • operating costs need to be low.• moral hazard and other challenges must be overcome.
2. Establish global and regional strategic grain reserves
Shenggen Fan, May 2011
3. Support transparent, fair, and open global trade
Eliminate harmful trade restrictions and prevent new ones to:• increase market efficiency, and• reduce price fluctuations.
Potential costs of a failed Doha Round could be high (Bouët and Laborde 2009):
11.5 percent loss of developing country exports US$353 billion loss in world welfare
Quick completion of the Doha Round is crucial.
Shenggen Fan, May 2011
4. Promote agricultural growth, especially smallholder productivity
Invest in agricultural R&D and infrastructure• Agricultural research and new technologies• Access to high-quality seeds and fertilizer• Rural infrastructure
Promote innovations for smallholders • Financial services (community banking)
• Risk-management mechanisms (weather-based index insurance)
• Institutional arrangements (producer cooperatives)
Shenggen Fan, May 2011
Ghana Uganda Tanzania Ethiopia China India Thailand
Returns to agriculture or rural income(local currency/local currency spending)
Agric. R&D 16.8 12.4 12.5 0.14 6.8 13.5 12.6
Education -0.2 7.2 9.0 0.56 2.2 1.4 2.1
Health 1.3 0.9 n.e. -0.03 n.e. 0.8 n.e.
Roads 8.8 2.7 9.1 4.22 1.7 5.3 0.9
Ranking in returns to poverty reduction
Agric. R&D n.e. 1 2 n.e. 2 2 1
Education n.e. 3 1 n.e. 1 3 3
Health n.e. 4 n.e. n.e. n.e. 4 n.e.
Roads n.e. 2 3 n.e. 3 1 2
Investment in agricultural R&D has higher returns
Source: Fan, Mogues, and Benin 2009 Note: “n.e.” indicates not estimated
Shenggen Fan, May 2011
Investment in new technologies has high payoffs
Smallholder cassava production, Nigeria Improved cassava varieties, advances in pest control,
processing technology, mid-1980s to early 1990s
Tripled production in less than a decade
Farmer net profits were 18 times higher
Returns to labor increased by more than 60 percent
Increased income and gender equity
Generated significant technology spillovers to GhanaSource: Nweke and Haggblade 2010
Shenggen Fan, May 2011
5. Invest in climate change agricultural adaptation and mitigation
Adaptation: change of planting dates, adoption of more resilient crop varieties, improved water storage
Mitigation: improved land management, appropriate fertilizer/manure use, incorporation of crop residues
For win-win-win: agricultural investments should target measures that provide mitigation, adaptation, and productivity benefits (Bryan et al. 2011)
At least an additional US$7 billion in agricultural productivity investments are needed annually to offset adverse effects on
human well-being. (Nelson et al. 2009)
Shenggen Fan, May 2011
6. Establish international working group
Regularly monitor the world food situation and provide analysis on:• food supply, demand, stocks, prices, trade, and policies• energy prices, input prices, and market speculation
Provide guidance on:• optimal level of global emergency grain reserves to be held• when and how to release them• at what prices
Catalyze action and intervention
The working group must be composed of key institutions in collaboration with major stakeholders.
Shenggen Fan, May 2011
Proactive steps must be taken now to reduce food price volatility
and prevent recurring food crises.
Developed and developing country governments and international institutions
must lead the way.