the global food crisis and policy implications per pinstrup-andersen 2008 j.w. fanning lecture...
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The Global Food Crisis and The Global Food Crisis and Policy ImplicationsPolicy Implications
Per Pinstrup-AndersenPer Pinstrup-Andersen
2008 J.W. Fanning Lecture2008 J.W. Fanning LectureUniversity of GeorgiaUniversity of Georgia
October 17, 2008October 17, 2008
Extended Annual FAO Food Price Index 1998-2000 = 100
-- Nominal
-- Real
- -x August 2008
Wheat, Maize, and Rice PricesJuly, 2007 – December, 2008 ($/Ton)
0100200300400500600700800900
1000
Jul-
07
Aug
-07
Sep-
07
Oct
-07
Nov
-07
Dec
-07
Jan-
08
Feb
-08
Mar
-08
Apr
-08
May
-08
Jun-
08
Jul-
08
Aug
-08
Sep-
08
Fut
ures
*
WheatMaizeRice
Futures* - For December 2008 Delivery
Causes of Food Price Increases (1)
Supply Side Factors: Adverse Weather (Climate Change?) Rapidly Falling Prices 1974-2000 Green Revolution OECD Policies Limited Investments
Causes of Food Price Increases (2)
Demand Side Factors: Biofuel Meat and Dairy Products Demand Feed Demand
Causes of Food Price Increases (3)
Market Factors: Reduced Storage of Food Commodities Capital Market Transfers Falling Dollar Value
FAO Food Price Index Adjusted for Changes in the exchange Rates Between US
Dollar and SDR and CFA
Causes of Food Price Increases (4)
Public and Private Action Little action towards achieving MDG Export bans and restrictions Panic buying
Rice Prices and Recent Policy Responses
$/Ton; January 2004-August 2008
← 835 (July 2008)← 787 (August 2008)
Causes of Food Price Increases (4)
Public and Private Action Little action towards achieving MDG Export bans and restrictions Panic buying Reduced import tariffs
Causes of Food Price Increases (4)
Public and Private Action Little action towards achieving MDG Export bans and restrictions Panic buying Reduced import tariffs Price controls Rationing Food riots Hoarding
Causes of Food Price Increases (4)
Public and Private Action Little action towards achieving MDG Export bans and restrictions Panic buying Reduced import tariffs Price controls Rationing Food riots Hoarding Media frenzy
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Rural population groups Net sellers or net buyers
Percent of Rural Households that are Net Staple Food Sellers
Selected Countries
Malawi (2004) 12
Bangladesh (2000) 19
Zambia (1998) 30
Ghana (1998) 44
Vietnam (1998) 51
Average (12 Countries) 31
Source: FAO (2008).
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Rural population groups Net sellers or net buyers Length of run, induced innovation
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Rural population groups Net sellers or net buyers Length of run, induced innovation Price transmission
Estimated Rice Price Transmission Q4, 2003 to Q4, 2007 for Selected Countries (%)
Source: FAO (2008).
Country
∆ Domestic Price/
∆World Price ($)
∆ Domestic Price/
∆World Price (DC)Philippines 6 30
India 9 20
Vietnam 11 12
Indonesia 41 64
Bangladesh 43 44
Thailand 53 100
China 64 88
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Rural population groups Net sellers or net buyers Length of run, induced innovation Price transmission Production costs
Approximate Fertilizer Prices ($/Ton)
January 2007
January 2008
August 2008
Urea 280 400 800
Diammonium Phosphate
250 400 800
Potash 170 300 840
Source: IFDC
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Rural population groups Net sellers or net buyers Length of run, induced innovation Price transmission Production costs
National Welfare Change Net exporters and net importers
Percent of Major Grains Imported by Selected Countries (2001-2003)
Eritrea 88
Niger 82
Botswana 76
Haiti 72
Tanzania 14
Malawi 7
Source: FAO (2008).
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Rural population groups Net sellers or net buyers Length of run, induced innovation Price transmission Production costs
National Welfare Change Net exporters and net importers Stability
Consequences of Food Price Increases
HH Welfare Change: Urban Consumers
Budget shares and value added Food security and dietary quality
Rural population groups Net sellers or net buyers Length of run, induced innovation Price transmission Production costs
National Welfare Change Net exporters and net importers Stability
Agri-business
Policy Response to Food Price Increases
Maintaining government legitimacy Emphasis on Short-term measures
Price controls, export bans, lifting import tariffs, rationing, food distribution
Emphasis on short-term transfers to urban lower middle class Continued neglect of the rural poor
Expanding food production Renewed interest in national self-sufficiency
Reserve stocks, acquisition or control of land across borders
Proposed Policy Priorities (1)
For short-run impact Food distribution targeted on rural and urban poor Poverty relief programs for rural and urban poor Safety nets for rural and urban poor Rural public works Time-limited input subsidies
Proposed Policy Priorities (1)
For short-run impact Food distribution targeted on rural and urban poor Poverty relief programs for rural and urban poor Safety nets for rural and urban poor Rural public works Time-limited input subsidies Discontinuation of export bans
Proposed Policy Priorities (1)
For short-run impact Food distribution targeted on rural and urban poor Poverty relief programs for rural and urban poor Safety nets for rural and urban poor Rural public works Time-limited input subsidies Discontinuation of export bans Release of Japanese rice stocks
Proposed Policy Priorities (1)
For short-run impact Food distribution targeted on rural and urban poor Poverty relief programs for rural and urban poor Safety nets for rural and urban poor Rural public works Time-limited input subsidies Discontinuation of export bans Release of Japanese rice stocks Postpone biofuel blending mandates Eliminate biofuel subsidies
Proposed Policy Priorities (2)
For long-run impact Improved land tenure
Proposed Policy Priorities (2)
For long-run impact Improved land tenure Expanded investment in:
Rural infrastructureAgricultural research and technologyAlternative energy sourcesRural education, sanitation and health care
Proposed Policy Priorities (2) For long-run impact
Improved land tenure Expanded investment in:
Rural infrastructureAgricultural research and technologyAlternative energy sourcesRural education, sanitation and health care
International trade agreementsCompletion of Doha RoundAvoidance of ad.hoc. export bans and restrictions
Proposed Policy Priorities (2) For long-run impact
Improved land tenure Expanded investment in:
Rural infrastructureAgricultural research and technologyAlternative energy sourcesRural education, sanitation and health care
International trade agreementsCompletion of Doha RoundAvoidance of ad.hoc. export bans and restrictions
International grain storage agreement
Future Perspectives
Significant supply response Falling real food prices
Approximate Wheat Prices
January 2000 $100/ton $2.50/bushel
January 2007 $200/ton $5.00/bushel
February 2008 $500/ton $12.50/bushel
August 2008 $300/ton $7.50/bushel
December 2008
(Futures)
$240/ton $5.95/bushel
Percent Decrease in Price Betweenthe Highest and October 6, 2008
Commodity Highest Month
Decrease Since Then (%)
Wheat February, 2008 54
Maize June, 2008 47
Soybeans June, 2008 44
Rice April, 2008 23
A Note on Arithmetic
A 100% increase is offset by a 50% decrease.
A 200% increase is offset by a 66% decrease.
A 300% increase is offset by a 75% decrease.
Future Perspectives
Significant supply response Falling real food prices Strong links between oil and food prices
Crude Oil – Maize Price Breakeven Points for US Ethanol Production (2007)
Crude Oil Price (US$/Barrel)
Breakeven Price for Maize Without Subsidies (US$/bushel)
Breakeven Price for Maize with Subsidies (US$/bushel)
40 0.96 2.56
60 2.01 3.62
80 3.08 4.68
100 4.14 5.74
120 5.20 6.81
2008: 1/3 of US Maize Used for Biofuel (12% of globalproduction)
60% of EU Rapeseed Oil (25% of global)
Source: Tyner and Taheripour (2008).
Future Perspectives
Significant supply response Falling real food prices Strong links between oil and food prices Continued urban bias in policy interventions
Future Perspectives
Significant supply response Falling real food prices Strong links between oil and food prices Continued urban bias in policy interventions Return to government complacency