The Impact of High and Volatile Food Prices on Food and Nutrition Insecurity: What we know, how we know it; What is less understood, and why

Transcription

1 The Impact of High and Volatile Food Prices on Food and Nutrition Insecurity: What we know, how we know it; What is less understood, and why Daniel Gustafson FAO Office for North America

2 To recap: Soaring food prices have had devastating impact on millions of families and poorest economies Long decline and low prices had contributed to lack of investment in agriculture, especially for small farmers in agro-ecologically poor areas Higher agricultural prices can lead to higher ag incomes, more rural employment, higher wages As 3/5 of the world s poor work in agriculture, + 1/5 in rural non-farm employment, are higher prices good, bad or both?

3 Questions: High prices create winners and losers who are they? What was the real impact? How do we know? What don t we understand very well? Why? As higher and more volatile prices likely to continue, What does recent experience tell us about the future?

4 Negative impact The greater the vulnerability, the greater the impact of higher, more volatile prices The price increases were bad for food security and poverty in the short-term True both for households and for countries The poor spend a disproportionate amount of their income on food staples On average in developing countries, 70% of expenditures of the poorest 20% of households What about farm families?

5 For rural hh, net food buyers suffer Guatemala, poorest fifth earns 56% of income from ag and ag wages; 32% net sellers Bangladesh, 63% of income from on and off-farm income; 12% are net sellers Malawi; 6% are net sellers Both short and long-term impacts For countries, ability to cushion domestic prices or not determined impact Asia cushioned (and India and China are huge), Africa did not

6 150 The level of domestic prices increased substantially Domestic staple food prices, Jan 2007 to Dec Index (January 2007 = 100) Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Rice Wheat Maize Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

7 Policies matter (1) Domestic and world rice prices, China,

8 Prices increased less in large countries Domestic & world rice prices, Jan 2007 to Dec 2010

9 The impact of high prices Price transmission was far from complete, but it was rapid and substantial except in some countries that were not too dependent on imports and used trade policy to block transmission. Generally,farm prices increased whenever retail prices increased, and supply response was strong as a result The most vulnerable suffered a great deal the lower the dietary diversification, the greater the impact

10 What do we know about the global impact on food & nutrition insecurity and poverty? FAO s estimate of chronic under-nutrition--only calories uses national data, few variables, quite a few assumptions Has advantages and disadvantages, better at estimating availability than access issues Methodological changes underway to incorporate hh survey information, changes in income and consumption; a priority of Committee on World Food Security (CFS) Does not pick up safety net changes

11 Ex ante models of impact Simulations, World Bank, FAO and others Living Standards Measurement Study (LSMS) based on hh surveys, data plugged in to test what would happen if food prices rise Fewer ex post studies, less evidence of actual consequence, a very fragmented view

12 Radically different approaches, much different results Abdul Lafif Poverty Action Lab (J-PAL), Esther Duflo and Abhijit Banerjee: Look at the decisions, Ask the poor what they think -- More than 1 billion people are hungry in the world, But what if the experts are wrong? Self-reporting, Gallup World Poll (GWP), analyzed by Derek Heady IFPRI 2011: Was the global food crisis really a crisis? Was there a large decline in food insecurity?

13 India: A large illustration of what is poorly understood 32% of the world s poor, hugely important in global numbers, also the world s biggest food and nutrition security puzzle Fast growing economy, large malnourished population, outstanding hh surveys. The result: per capita calorie consumption at all income levels, declined over the past 25 years.10% lower in rural areas from How can this be? Food balance sheet national estimates show very small increase ( ) but no decline

14 Possible explanations Preferences for other goods, J-PAL Declining caloric requirements, Deaton and Drèze Underestimation of meals consumed away from home, Lisa Smith Methodological problems in each approach; small changes in assumptions lead to very large differences in final estimate Stay tuned for more research

15 Long-term impact? High prices, political unrest: a wake-up call for politicians More attention in general ag and nutrition link in particular More investment: infrastructure, research and extension, credit, etc More policy change: land, women s access, education, subisidies, biofuels New approaches.