Protecting Poor People Against Food Price Volatility
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Protecting Poor People Against Food Price Volatility

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"Protecting Poor People Against Food Price Volatility" presentation by Shenggen Fan at the launch of IFPRI Office for West and Central Africa on 17 May 2011

"Protecting Poor People Against Food Price Volatility" presentation by Shenggen Fan at the launch of IFPRI Office for West and Central Africa on 17 May 2011

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  • The Bangladesh study examined two components of the Vulnerable Group Development (VGD) program: (1) Income-Generating VGD (IGVGD) and (2) Food Security VGD (FSVGD). Both target poor women. IGVGD has a built-in mechanism to provide credit and training on income-generating activities in agriculture; The FSVGD program provides a combination of food and cash to program participants.

Protecting Poor People Against Food Price Volatility Presentation Transcript

  • 1. 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
  • 2. 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.
  • 3. Global food price hikes and volatility
    Global hikes since June 2010*
    Maize: 100%
    Wheat: 94%
    Source: Data from FAO 2011; Note:: *As of early May 2011
  • 4. Domestic prices are also high and volatile
    Wholesale prices in Ethiopia, Addis Ababa
    Retail prices in Niger, Niamey
    Retail prices in Senegal, Dakar
    Source: Data from FAO 2011
  • 5. 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)
  • 6. 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
  • 7. 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.
  • 8. High and volatile food prices hurt the poor
    Self-reported food insecurity in Sub-Saharan Africa
    Source: Headey 2011
  • 9. Actions needed to reduce food price volatility and protect the poor
  • 10. Invest in productive social safety nets
    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)
  • 11. 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
  • 12. Establish global and regional strategic grain reserves
    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.
  • 13. 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
    • 14. US$353 billion loss in world welfare
    Quick completion of the Doha Round is crucial.
  • 15. 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)
  • 16. Investment in agricultural R&D has higher returns
    Source: Fan, Mogues, and Benin 2009 Note: “n.e.” indicates not estimated
  • 17. 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 Ghana
    Source: Nweke and Haggblade 2010
  • 18. 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)
  • 19. 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.
  • 20. Proactive steps must be taken now toreduce food price volatility and prevent recurring food crises.
    Developed and developing country governments and international institutions must lead the way.