1 school of oriental & african studies reducing food price volatility for food security &...
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1
School of Oriental & African Studies
Reducing Food Price Volatility
for Food Security & Development: G20
ActionDecember 2010
Andrew DorwardCentre for Development, Environment and
PolicySchool of Oriental and African Studies
University of London
Questions
What are the sources of food price instability? What has happened to food prices? What are the prospects? What to do, by/ with who, how, where? Why?
2Paris, 1st December 2010
Causes of the 2008 spike?
3
Paris, 1st December 2010
Environmental changes
Policy changes
Population growth
Economic growth
Causes of the 2008 spike?
4
Paris, 1st December 2010
Environmental changes
Policy changes
Population growth
Economic growth
Water scarcit
y Oil prices
Causes of the 2008 spike?
5
Paris, 1st December 2010
Environmental changes
Policy changes
Population growth
Economic growth
Biofuels
Reduced subsidie
sWater scarcit
y Oil prices
Reduced R&D
Causes of the 2008 spike?
6
Paris, 1st December 2010
Environmental changes
Policy changes
Population growth
Economic growth
Loss of
land
Biofuels
Reduced subsidie
sWater scarcit
y
Rising deman
d
Oil prices
Reduced R&D
Causes of the 2008 spike?
7
Paris, 1st December 2010
Environmental changes
Policy changes
Population growth
Economic growth
Higher prices Low
stocks
Stagnant productivi
ty
Falling supply
Loss of
land
Biofuels
Reduced subsidie
sWater scarcit
y
Rising deman
d
Oil prices
Reduced R&D
Causes of the 2008 spike?
8
Paris, 1st December 2010
Volatility: price spikes
Environmental changes
Stakeholder
stocking
Financial speculati
on
Production lags
Policy changes
Population growth
Economic growth
Higher prices Low
stocks
Stagnant productivi
ty
Falling supply
Loss of
land
Biofuels
Reduced subsidie
sWater scarcit
y
Rising deman
d
Oil prices
Reduced R&D
Causes of the 2008 spike?
9
Paris, 1st December 2010
Volatility: price spikes
Weather shocks
Environmental changes
Stakeholder
stocking
Financial speculati
on
Production lags
Policy changes
Population growth
Economic growth
Higher prices Low
stocks
Stagnant productivi
ty
Falling supply
Loss of
land
Biofuels
Reduced subsidie
sWater scarcit
y
Rising deman
d
Oil prices
Reduced R&D
Oil prices
Biofuels
Drivers of food price changes Long term drivers
Policies Environmental eg climate change Population Economic growth Energy prices Technical change / labour productivity
Short term drivers Weather shocks Policy shocks Stocks
Distinguish between Low, middle, high income economies / people? Long and short term food prices
What has happened to food prices?
10Paris, 1st December 2010
What has happened to food prices?
Long term trend
Decline relative to income, due to labour productivity increases
from energy substitution &
technical change
Short term spike
More expensive relative to other goods and services, relative
to inputs
11Paris, 1st December 2010
What has happened to food prices?
12Paris, 1st December 2010
What has happened to food prices?
Rich buyers, sellers
Long term trend
Decline relative to income, due to labour productivity increases
from energy substitution &
technical change
Short term spike
More expensive relative to other goods and services, relative
to inputs
13Paris, 1st December 2010
What has happened to food prices?
14Paris, 1st December 2010
What has happened to food prices?
15Paris, 1st December 2010
What has happened to food prices?
Rich buyers, sellers
Less / emerging
poor (buyers & sellers)
Poor (net buyers)
Long term trend
Decline relative to income, due to labour productivity increases
from energy substitution & technical
change
Always high relative to
income
Short term spike
More expensive relative to other goods and services, relative to
inputs
More expensive relative to
income, more difficult to
afford
16Paris, 1st December 2010
What is going to happen?
Impacts on labour productivity, incomes, equity, economies, food security, food stocks, price variability?
Implications for international policies: Increase stocks
Raise supply - productivity Whose productivity where?What constraints? Low productivity traps, price tight ropes?What policies, what technologies?
Reduce demand? Manage risk
17Paris, 1st December 2010
Rising energy prices? Population growth Water scarcity? Economic growth
Climate change impacts?
What to do, how, by/with who, where?
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Paris, 1st December 2010
Volatility: price spikes
Weather shocks
Environmental changes
Stakeholder
stocking
Financial speculati
on
Production lags
Policy changes
Population growth
Economic growth
Higher prices Low
stocks
Stagnant productivi
ty
Falling supply
Loss of
land
Biofuels
Reduced subsidie
sWater scarcit
y
Rising deman
d
Oil prices
Reduced R&D
Oil prices
Biofuels
Prevent Cope
Market
State
transparencyagricultural
R&Dinfrastructure
insurance, options
macro-economicmanagement
consistency
rules
inputsA
output markets
finance
insurance
safety nets
institutions
DC
B
Notes: Work in progress - stylised contents & location, instruments extend across & contribute to both prevention & coping; roles & providers differ between contexts (eg poor, less poor economies) & between levels (eg farm, national, regional, international) - especially for finance & insurance. Politicians are critical! Civil society?
What to do, how, by/with who, where?
finance
Why?
Low stable food prices critical for Welfare of the poor – incomes, nutrition, health, child
development, education, …….. Development processes International relations & security Welfare / lifestyles of developed economies founded
on cheap mobile energy, cheap food, Technology & technical changeInstitutions & institutional change
A critical G20 issue
20Paris, 1st December 2010
higher labour productivity in
food production
Energy, materials, capital, technology,
knowledge, institutions
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
higher labour productivity in
food production
increased / constant per capita food availability
Energy, materials, capital, technology,
knowledge, institutions
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
higher labour productivity in
food production
increased / constant per capita food availability
releasing labour for production of other goods and services
falling food prices relative to wages/income,
Energy, materials, capital, technology,
knowledge, institutions
COORDINATION processes, scale, locations, populations,
timing
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
higher labour productivity in
food production
increased / constant per capita food availability
releasing labour for production of other goods and services
falling food prices relative to wages/income,
increased income available for purchase of non food goods &
services
Energy, materials, capital, technology,
knowledge, institutions
COORDINATION processes, scale, locations, populations,
timing
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
higher labour productivity in
food production
increased / constant per capita food availability
releasing labour for production of other goods and services
falling food prices relative to wages/income,
increased income available for purchase of non food goods &
services
Energy, materials, capital, technology,
knowledge, institutions
COORDINATION processes, scale, locations, populations,
timing
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
Increased demand for & supply of non-food goods
& services
higher labour productivity in
food production
increased / constant per capita food availability
releasing labour for production of other goods and services
falling food prices relative to wages/income,
increased income available for purchase of non food goods &
services
Energy, materials, capital, technology,
knowledge, institutions
COORDINATION processes, scale, locations, populations,
timing
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
increased / constant per capita ‘other’ availability
releasing labour for production of
other goods & services
falling ‘other’ prices relative to wages/income,
increased income available for purchase
of goods & services
Energy, materials, capital, technology, knowledge,
institutions
COORDINATION processes, scale, locations, populations,
timing
INDUSTRIAL, SERVICE, KNOWLEDGE REVOLUT-
IONS
Increased demand for & supply of non-food goods
& services
higher labour productivity in
food production
increased / constant per capita food availability
releasing labour for production of other goods and services
falling food prices relative to wages/income,
increased income available for purchase of non food goods &
services
Energy, materials, capital, technology,
knowledge, institutions
COORDINATION processes, scale, locations, populations,
timing
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
increased / constant per capita ‘other’ availability
releasing labour for production of
other goods & services
falling ‘other’ prices relative to wages/income,
increased income available for purchase
of goods & services
Energy, materials, capital, technology, knowledge,
institutions
COORDINATION processes, scale, locations, populations,
timing
INDUSTRIAL, SERVICE, KNOWLEDGE REVOLUT-
IONS
Increased demand for & supply of non-food goods
& services
Earlier(?) Positive feedbacks
Capital, Technology, Knowledge, Health? Poverty reduction,
Globalisation?
higher labour productivity in
food production
increased / constant per capita food availability
releasing labour for production of other goods and services
falling food prices relative to wages/income,
increased income available for purchase of non food goods &
services
Energy, materials, capital, technology,
knowledge, institutions
COORDINATION processes, scale, locations, populations,
timing
AGRI-CULTURAL REVOLUT-
IONS
higher labour productivity,
other goods & services
increased / constant per capita ‘other’ availability
releasing labour for production of
other goods & services
falling ‘other’ prices relative to wages/income,
increased income available for purchase
of goods & services
Energy, materials, capital, technology, knowledge,
institutions
COORDINATION processes, scale, locations, populations,
timing
INDUSTRIAL, SERVICE, KNOWLEDGE REVOLUT-
IONS
Increased demand for & supply of non-food goods
& services
Later (?) Negative feedbacks
Natural resource use,Waste, Environmental
degradation, Biodiversity loss, Health? Inequity? ?
Globalisation?
Earlier(?) Positive feedbacks
Capital, Technology, Knowledge, Health? Poverty reduction,
Globalisation?
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School of Oriental & African Studies
Reducing Food Price Volatility
for Food Security & Development: G20
ActionDecember 2010
Andrew DorwardCentre for Development, Environment and Policy
School of Oriental and African StudiesUniversity of London