agricultural development economics division (esa) food and agriculture organization of the united...
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Agricultural Development Economics Division (ESA)Food and Agriculture Organization of the United Nations
How did international price movements affect domestic
economies and food security during the world
food crisis?
David Dawe, FAO
World Bank, 29 September 2011
Washington DC, 29 September 2011 2Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Rapid growth in emerging economies.
Population continues to increase.
Possible biofuels expansion.
Increasingly scarce natural resources in some regions.
Declining rates of yield growth for some commodities.
Stronger linkages between agricultural and energy markets
Increased frequency of weather shocks.
High and volatile prices are likely to continue
Washington DC, 29 September 2011 3Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Household surveys seem to indicate that the poorest quintile are net food buyers in most countries, although there are exceptions.
Benefits of high prices tend to accrue to farmers with ample land and water.
More research should be done in estimating the magnitude of labor market effects.
Higher food prices represent an opportunity to reduce poverty, but only if they induce investment that shifts out the supply curve.
High food prices generally hurt the poor
Washington DC, 29 September 2011 4Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Staple food prices are analyzed because the basket used to calculate food price inflation is not representative of the expenditure patterns of the poor.
All prices are adjusted for inflation.
All analysis is done in local currency terms so as to understand trends from the domestic point of view
Methods used
Washington DC, 29 September 2011 5Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Rice prices in the Philippines, Jan 2005 to Dec 2007
The choice of currency matters
Washington DC, 29 September 2011 6Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Only one dataset for any given country for each commodity.
Level of the marketing system (retail chosen before wholesale).
Quality (lowest quality was chosen).
Location (National average whenever possible).
There were 42, 27 and 34 datasets for rice, wheat and maize respectively.
Data selection
Washington DC, 29 September 2011 7Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic staple food prices, Jan 2007 to Dec 2010
90
100
110
120
130
140
150
Ind
ex
(Jan
uar
y 2
00
7 =
10
0)
Rice Wheat Maize
The level of domestic prices increased substantially
Washington DC, 29 September 2011 8Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic staple food price volatility
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Rice Maize Wheat
Domestic price volatility increased as well
Washington DC, 29 September 2011 9Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic and world rice prices, China, 2005-2008
Policies matter (1)
Washington DC, 29 September 2011 10Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic and world soybean prices, China, 2005-2008
Policies matter (2)
Washington DC, 29 September 2011 11Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic and world maize prices, Zambia, 2004-2006
Policies matter (3)
Washington DC, 29 September 2011 12Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic & world rice prices, Jan 2007 to Dec 2010
Prices increased less in large countries (1)
Washington DC, 29 September 2011 13Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic & world wheat prices, Jan 2007 to Dec 2010
Prices increased less in large countries (2)
Washington DC, 29 September 2011 14Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Domestic & world maize prices, Jan 2007 to Dec 2010
Prices increased less in large countries (3)
Washington DC, 29 September 2011 15Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Analyzed 32 commodity pairs in 11 African countries (one major cereal and one traditional staple in the same country)
The price ratio of major cereal to traditional staple increased an average of 21% between 2006 and 2008. The average price ratio increased in all 11 countries.
Over the period 2005-2010, domestic rice or wheat prices were always the least volatile.
Major cereals & traditional staples (sorghum, millet, cassava)
Washington DC, 29 September 2011 16Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Percentage increase in real prices, 2003-2008
Farm prices generally increased as retail prices increased
Washington DC, 29 September 2011 17Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Producer and consumer white maize prices, Burkina Faso, 2003-2010
Farm prices generally increased as retail prices increased
Washington DC, 29 September 2011 18Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Item 2007 2008 Percent increase
Seed 484 936 93
Fertilizer 3269 6691 105
Labor 3116 4765 53
Other costs 2928 2941 0
Yield (kg/hectare) 6100 5792 -5
Price (VND/kg) 2350 3700 57
Profit 4538 6097 34
VND is Vietnamese dong. Costs and profits are in thousand VND per hectare.
Higher output prices generally more than compensated for higher input costs
Input costs & profits for winter-spring paddy, An Giang, Viet Nam
Washington DC, 29 September 2011 19Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
Increase in cereal production by country groups
Country group Percent increase, 2007-
2008
OECD 6.2
BRICS 8.2
All others 7.2
Source of raw data: FAOStat (2011)
Supply response was strong
Washington DC, 29 September 2011 20Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division (ESA)
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 speaking, farm prices seemed to increase whenever retail prices increased, and supply response was strong as a result (even though input costs rose).
The price increases were bad for food security and poverty in the short-term, but if they provide the spark to increased long-term investment in agriculture, they may turn out to be positive.
Summary
Washington DC, 29 September 2011 21Regional Office for Asia and the Pacific
Food and Agriculture Organization of the United Nations
Agricultural Development Economics Division
Thank you for your kind attention