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High Food Prices:
Impact and Recommendations for ActionsPresentation for FES/Global Policy Forum on The Right to Food:
How Can the UN Respond to the Global Food Crisis?By Henk-Jan Brinkman
April 23, 20081. Introduction
2. High food prices
Volatility
Higher, remain higher
Factors: Demand: emerging markets (changing consumption patterns), biofuels [Future food prices are surrounded by uncertainty: Supply shocks, mostly weather-related leading to low stocks leading to volatility
Oil price:
Old: whole value chain (fertilizer, mechanisation, transport);
New: output prices
Institutional investment
Export restrictions
Temporary factors: drought in Australia, disease in China, recession in US Structural: changing demand patterns, higher fuel prices, climate change] [skipped]
3. Impacts on countries
Net exporters vs importers of food
Almost all countries in Africa are net importers of cereals.
The total cost of food imports for Low-Income Food-Deficit Countries (LIFDC) was 24 percent higher in 2007 than in 2006, rising to $107 billion. The annual food import bill was more than twice the bill in 2000.
leading to ToT losses = 0.5% GDP in low-income countries since end 2004. In 29 countries: 1% of GDP. 5% in Eritrea.
Net-fuel importers
Imports are an important safety valve: impossible with export restrictions (Argentina, Cambodia, Egypt, India, Kazakhstan, Russia, Serbia, Ukraine and Vietnam)
Transmission relationship: size net food imports as % consumption, trade barriers, exchange rate movements (CFA), domestic taxes, market power
[Rising food prices leading to inflationary pressure. IMF calculates that between 2000 and 2006, the direct impact of food prices on headline inflation was on average 26.6 percent in the world, but was as high as 46.5 percent in Africa. The IMF also modelled the indirect effects of a wage response to higher food prices. This effect appeared particularly important in developing countries, where a 1 percent increase in food prices is estimated to lead to an increase in non-food price inflation of between 0.1 and 0.9 percent. ] [skipped]
Fiscal imbalances:
safety net programmes
lower taxes and tariffs
higher export taxes.
4. Impacts on household food security Vulnerable:
Net buyers, larges share of food in expenditures, few coping mechanism urban poor, rural landless, pastoralists and many small-scale farmers and agro-pastoralistsleading to Eat less and less well (less nutritious leading to nutritional status like underweight (underweight in Bangladesh; W/H and haemoglobin in Indonesia) Reduce expenditures on education and health
Sell productive assets
leading to Lifelong consequences
Effect on MDGs:
MDG1: poverty and hunger
MDG2: lower attendance, lower attainment
MDG4+5: malnutrition up, health decline, mortality up
MDG6: HIV/AIDS5. Recommendations for actions by UN
A. Immediate/Crisis responsei. Assessments, analysis and monitoringB. Medium and long-term interventions VAM
Targeting
Urban areas
WFP: Global vulnerability analysis leading to quintiles
Country level analysis, missions
Risk vs impactii. Emergency response and safety nets
Upscaling existing safety nets: increasing rations, increasing coverage
School feeding
MCH
CfW/FfW
Targeted, subsidized, food sales through selected or public stores
Vulnerable people (children, women, people with HIV, Tb), urban
WFP: $755m: higher cost food (and fuel $30m) of approved programmesiii. Balance of payment and budget support
$418m: new needs leading to budget from $3.1b to $4.3
??: new face of hungeriv. Policy advice to Governments [skipped]
Policy advice for short-term measures:
a. Food price policies: Reduce taxes on food, even if temporary. General food subsidies have high inclusion errors and are, or will become, quickly unaffordable, especially with high or rising prices.
b. Targeted subsidized food sales: Using existing food distribution systems or through partners, target food sales to vulnerable groups (targeting criteria could include geographical areas, nutritional status or through less-preferred food commodities).
c. Food reserves: Appropriate to reduce intra-annual price fluctuations and emergency shortfalls but less so for higher price levels that might last a few years.
d. Import policy: Cut import tariffs, quotas and other trade barriers, even if temporary, and facilitate imports, including through speedy clearances and licences. Tax breaks to importers could also be considered.
e. Export policies: Export bans and taxes are likely to do more harm than good, including to the private sector (producers and traders) and neighbouring countries. They also contribute to smuggling, bribery and higher prices, partly because of higher margins.
i. Opportunities to increase supply
Seeds, fertilizers, credit, market accessii. Strengthening social protection
iii. Changing aid:
More $ for nutrition (Guatemala: 0-2 year old boys leading to 46% higher wages)
More focus on agriculture
Vouchers and cash where and when possible
More Information on Social and Economic Policy
More Information on The Right to Food: How Can the UN Respond to the Global Food Crisis?
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