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

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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

    1. 1. Protecting Poor People Against Food Price Volatility<br />Shenggen FanDirector General<br />International Food Policy Research Institute<br />Panel discussion: Rising Global Food Prices: Causes, Impacts, and Response Strategies<br />Dakar, May 17, 2011 <br />
    2. 2. Key messages<br />Food price hikes and volatility are increasingly frequent.<br />A complex web of factors drive food price volatility.<br />High and volatile food prices hurt poor consumers and producers.<br />Urgent actions are needed to address food price volatility and protect poor people.<br />
    3. 3. Global food price hikes and volatility<br />Global hikes since June 2010*<br />Maize: 100%<br />Wheat: 94%<br />Source: Data from FAO 2011; Note:: *As of early May 2011 <br />
    4. 4. Domestic prices are also high and volatile<br />Wholesale prices in Ethiopia, Addis Ababa <br />Retail prices in Niger, Niamey<br />Retail prices in Senegal, Dakar<br />Source: Data from FAO 2011<br />
    5. 5. Food price volatility drivers<br />Stronger link between oil and food prices<br />Extreme weather events—droughts, floods, and cyclones—lead to production losses<br />Trade restrictions<br />Market speculation?<br />Climate change (in the long run)<br />
    6. 6. Stronger link between oil and food prices influence food security<br />Rising oil prices cause food prices to increase, rather than the reverse. (Heady and Fan 2010) <br />Rising oil prices make biofuels more profitable, rather than agricultural production more expensive. (Abbott, Hurt, and Tyner 2008)<br />Source: Data from IMF 2011<br />Note: Oil = Average crude oil price of U.K. Brent, Dubai, and West Texas Intermediate <br />
    7. 7. Climate change will add pressure<br /><ul><li>Increased frequency and intensity of extreme weather events</li></ul>Lower agricultural yields and production <br />Higher food prices<br />Source: Nelson et al. 2009.<br />
    8. 8. High and volatile food prices hurt the poor<br />Self-reported food insecurity in Sub-Saharan Africa<br />Source: Headey 2011<br />
    9. 9. Actions needed to reduce food price volatility and protect the poor<br />
    10. 10. Invest in productive social safety nets<br />Bangladesh Vulnerable Group Development Program<br />Increased per capita food consumption by 45-66 kcal per taka transfer (Ahmed et al. 2009)<br />Ethiopia Productive Safety Nets Program (PSNP)<br /> With access to safety nets and agricultural support, beneficiaries are more food secure and productive. (Gilligan, Hoddinott, and Taffesse 2009)<br />Nigeria Fadama II Development Project<br />Increased the value of individual productive assets by about 50 percent (Nkonya et al. 2008)<br />
    11. 11. Establish global and regional strategic grain reserves <br />Global emergency reserve<br />Created with grain donations from large food exporters and producers (for example, United States, France, China, India)<br />Located in these countries and also in poor food-importing countries (for example, Horn of Africa) <br />Owned and managed by an institution such as WFP <br />Strong global food management system including logistical capability<br />
    12. 12. Establish global and regional strategic grain reserves <br />Some regional initiatives are emerging:<br />Asean+3 Emergency Rice Reserve<br />Sahel and West Africa Regional Food Stocks (RESOGEST)<br />SADC Regional Food Reserve Facility<br />Properly managed reserves can address food crises, but<br />operating costs need to be low.<br />moral hazard and other challenges must be overcome. <br />
    13. 13. Support transparent, fair, and open global trade<br />Eliminate harmful trade restrictions and prevent new ones to:<br />increase market efficiency, and<br />reduce price fluctuations.<br />Potential costs of a failed Doha Round could be high (Bouët and Laborde 2009):<br /><ul><li>11.5 percent loss of developing country exports
    14. 14. US$353 billion loss in world welfare</li></ul>Quick completion of the Doha Round is crucial.<br />
    15. 15. Promote agricultural growth, especially smallholder productivity<br />Invest in agricultural R&D and infrastructure<br />Agricultural research and new technologies<br />Access to high-quality seeds and fertilizer<br />Rural infrastructure<br />Promote innovations for smallholders <br />Financial services (community banking)<br />Risk-management mechanisms (weather-based index insurance) <br />Institutional arrangements (producer cooperatives)<br />
    16. 16. Investment in agricultural R&D has higher returns <br />Source: Fan, Mogues, and Benin 2009 Note: “n.e.” indicates not estimated<br />
    17. 17. Investment in new technologies has high payoffs<br />Smallholder cassava production, Nigeria<br />Improved cassava varieties, advances in pest control, processing technology, mid-1980s to early 1990s<br />Tripled production in less than a decade<br />Farmer net profits were 18 times higher <br />Returns to labor increased by more than 60 percent<br />Increased income and gender equity<br />Generated significant technology spillovers to Ghana<br />Source: Nweke and Haggblade 2010<br />
    18. 18. Invest in climate change agricultural adaptation and mitigation<br />Adaptation: change of planting dates, adoption of more resilient crop varieties, improved water storage<br />Mitigation: improved land management, appropriate fertilizer/manure use, incorporation of crop residues<br />For win-win-win: agricultural investments should target measures that provide mitigation, adaptation, and productivity benefits (Bryan et al. 2011)<br />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)<br />
    19. 19. Establish international working group<br />Regularly monitor the world food situation and provide analysis on:<br />food supply, demand, stocks, prices, trade, and policies<br />energy prices, input prices, and market speculation<br />Provide guidance on:<br />optimal level of global emergency grain reserves to be held<br />when and how to release them<br />at what prices<br />Catalyze action and intervention<br />The working group must be composed of key institutions in collaboration with major stakeholders.<br />
    20. 20. Proactive steps must be taken now toreduce food price volatility and prevent recurring food crises.<br />Developed and developing country governments and international institutions must lead the way.<br />