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Food and Financial Crises:Implications for Agriculture and the Poor
 

Food and Financial Crises:Implications for Agriculture and the Poor

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CGIAR Annual General Meeting, Maputo, December 1, 2008

CGIAR Annual General Meeting, Maputo, December 1, 2008

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    Food and Financial Crises:Implications for Agriculture and the Poor Food and Financial Crises:Implications for Agriculture and the Poor Presentation Transcript

    • Food and Financial Crises: Implications for Agriculture and the Poor Joachim von Braun International Food Policy Research Institute CGIAR Annual General Meeting, Maputo, December 1, 2008
    • Overview 1. Food and financial crises implications 2. What may happen? Recession scenarios 3. Addressing the turmoil comprehensively Joachim von Braun, IFPRI, December 2008
    • Food- and financial crises linkages Food crisis Financial crisis Strong and long-lasting negative impacts Joachim von Braun, IFPRI, December 2008 Source: von Braun; Dec 2008
    • Food price crisis, 2007-08 800 125 Corn Price bubble Wheat 100 600 Rice US$/barrel US$/ton Oil (right scale) 75 400 50 200 25 0 0 Food prices falling because of the financial crisis, not because the food crisis is over Joachim von Braun, IFPRI, December 2008 Source: Data from FAO 2008 and IMF 2008.
    • Maize and sweet potato prices Zambezia, Mozambique 2006-2008 12 10 8 6 mzpkg wspkg 4 2 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 06 06 06 06 06 06 06 06 06 07 07 07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08 08 08 Joachim von Braun, IFPRI, December 2008 Source: R. Labardo (CIP), A. de Brauw (IFPRI) HarvestPlus, 2008
    • Number of food protests by type and income group 20 Violent 15 Non-violent 11 7 10 5 2 9 8 8 4 0 Low income Low-middle Upper-middle High income income income Source: Protests – news reports; Joachim von Braun, IFPRI, December 2008 Income group classification – World Bank 2007.
    • The poor cannot afford healthy diets Corn-tortilla-based diets in Guatemala Tortilla and veg. oil Tortilla, veg. oil, carrots, orange, 200 200 beef, spinach, black beans Recommended nutrient density % 175 175 150 150 125 125 100 100 75 75 50 50 25 25 0 0 Vit A Vit C Folate Fe Zn Vit A Vit C Folate Fe Zn $0.40 $0.72 person/day person/day Joachim von Braun, IFPRI, December 2008 Source: Erick Boy, IFPRI, 2008.
    • Severe impacts on livelihoods of the poor Purchasing power: 50-70% of income spent on food and wages do not adjust accordingly Assets and human capital: distressed sale of productive assets, withdrawal of girls from school, etc. Number of undernourished: 75 mil. more from 2003/05 to 2007 (FAO 2008) Crisis not over for the poor; Nutrition is undermined for the long run Joachim von Braun, IFPRI, December 2008
    • Major pledges and investments to address the food crisis (2008) Donor organization/country Pledge (bil.$) Month World Bank 1.2 May EU (EC & national) 5+ May-July USA 5 June Increase in public budgets on agric. and social protection bil. $US % change China 23 +27% India 6 +24% Joachim von Braun, IFPRI, December 2008 Source: IFPRI, compiled from news sources and government budgets.
    • Output response forthcoming, but not from low-income countries Growth of cereal output in 2007-08: 11%: developed 0.9%: developing 1.6%: developing, excl. Brazil, China, India Not enough to bring stocks back up to sufficient levels Joachim von Braun, IFPRI, December 2008 Source: FAO 2008.
    • Derived demand for land and water is increasing In the past 12 months land prices in: • Brazil 16%; Poland 31%; USA 15% Large growth in water demand for agriculture expected in coming decades Overseas investment in land (with water) • China in Kenya, Nigeria, Philippines, Russia • UAE in Sudan • South Korea in Madagascar • Many others Joachim von Braun, IFPRI, December 2008 Source: IFPRI, News sources.
    • Food dominated inflation 2005-08: this contributed to the recession Ethiopia India 20 3 Overall 15 2 Food Overall 10 1 Food 5 0 0 -1 -5 -2 Jan-05 Jan-06 Jan-07 Jan-08 Jan-05 Jan-06 Jan-07 Jan-08 4 Overall Mexico Food 2 0 -2 Jan-05 Jan-06 Jan-07 Jan-08 Joachim von Braun, IFPRI, December 2008 Source: von Braun, Data from government statistics.
    • The financial market collapse 2007-08 Dow Jones World Financials Index, US$ 400 300 200 100 0 Joachim von Braun, IFPRI, December 2008 Source: Google Finance 2008.
    • Financial crisis and recession complicate food situation: the risks • Less capital for agriculture now and in the future • Higher debt burden for small farmers who already invested in agriculture expansion • Policy attention diverted away from agriculture leading to lower public investment • Reduced employment and wages of unskilled workers Joachim von Braun, IFPRI, December 2008
    • Overview 1. Food and financial crises implications 2. What may happen? Recession scenarios 3. Addressing the turmoil comprehensively Joachim von Braun, IFPRI, December 2008
    • Recession scenarios 2005-2020 Scenarios baseline: econ. growth as in past years 1: Recession: econ. growth falls by 2-3%, agric. investment maintained 2: Recession: econ. growth falls by 2-3%, agric. investment reduced Joachim von Braun, IFPRI, December 2008
    • Prices under recession and alternative agricultural investment scenarios Non-recession Maize 200 Same-investment Rice 300 Low-investment 150 250 100 2005 2010 2015 2020 200 2005 2010 2015 2020 Wheat 200 150 100 2005 2010 2015 2020 Joachim von Braun, IFPRI, December 2008 Source: Rosegrant, von Braun; IFPRI IMPACT, Dec. 2008.
    • Number of malnourished children rises by 16 million with recession and low investment 210 World (excluding SSA) SSA 180 150 Millions 120 90 60 30 0 2005 2020 Joachim von Braun, IFPRI, December 2008 Source: Rosegrant, von Braun; IFPRI IMPACT, Dec. 2008.
    • Overview 1. Food and financial crises implications 2. What may happen? Recession scenarios 3. Addressing the turmoil comprehensively Joachim von Braun, IFPRI, December 2008
    • Three priorities for action needed 1. Promote pro-poor agriculture growth 2. Reduce market volatility 3. Expand social protection and child nutrition action Joachim von Braun, IFPRI, December 2008
    • 1. Double agric. R&D to impact poverty R&D allocation  in # of + Agr. output (mil. 2005 $) poor (mil.) growth (% pts.) 2008 2013 2008-2020 2008-2020 SSA 608 2,913 -143.8 2.8 S Asia 908 3,111 -124.6 2.4 Devel.ing World 4,975 9,951 -282.1 1.1 CGIAR investment must rise from US$0.5 to US$1.0 billion as part of this exoansion Joachim von Braun, IFPRI, December 2008 Source: von Braun, Shenggen Fan, et al. 2008.
    • 2. Reduce food market volatility 1. An internationally held emergency reserve 2. A virtual global reserve against price “bubbles” - An institutional arrangement at international level - Implemented by G8+5 and other large grain exporting countries Joachim von Braun, IFPRI, December 2008 Source: von Braun and Torero 2008.
    • 3. Social protection and nutrition action Protective: - Cash transfers (conditional) - Employment programs Preventive: - School feeding - Early childhood nutrition programs Joachim von Braun, IFPRI, December 2008
    • 1872-2008 prices and population Are we living in unusual times? 1000 Wheat price 8 2000 US$/ton, 3yr averages Population (right) 800 6 Billions 600 4 400 2 200 0 0 1872 1876 1880 1884 1888 1892 1896 1900 1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 Sources: J. von Braun, based on data from NBER Macrohistory database, BLS CPI database, Godo 2001, OECD 2005, and FAO 2008; Joachim von Braun, IFPRI, December 2008 Population data from U.S. Census Bureau Int’l database and UN1999.