Aftershocks from the Global Food Crisis - Unicef

SOCIAL AND ECONOMIC POLICY WORKING BRIEFS APRIL 2010 UNICEF POLICY AND PRACTICE

Aftershocks from the Global Food Crisis •

A full two years since the food prices shocks began, international food prices remain well above their 10 year average. Domestic food prices in many countries have remained “sticky” and in some countries have continued their ascent

When the global economic crisis began to unfold in full force in 2009, high food and fuel prices received much less attention. Nevertheless, an analysis of international and national data suggests that a food crisis persists in many countries a full two years since food price shocks began to unfold in early 2008. This spells more difficult days ahead for many poor households whose purchasing power continues to be squeezed, first by high food prices and later by a decline in income as a result of the global economic crisis. This has particularly intense impacts on children as the foundation of health and well-being is laid in childhood. Evidence shows that where children and mothers have poor health, nutrition and education the consequences can last a lifetime. Children and poor households will continue to face severe stress, as many of the factors that

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Policies specifically targeted at children and women (notably mothers) to help ensure their nutrition security are urgently needed, including policies to boost social protection interventions, strengthen social services, and provide food and cash transfers To help secure the rights and wellbeing of future generations of children, policymakers must also respond to the longstanding challenges related to food security and poverty, through national policies and international collective action

contributed to high and volatile food prices remain unaddressed.

International food prices have fallen, but remain well above their long-term average levels While international prices for major food grains have decreased significantly since the initial food price shocks, they remain high compared to their historical ten year averages: • • • •

Rice fell from its May 2008 peak by 48%, but remains 75% above its ten-year average; Maize fell from its June 2008 peak by 46%, but remains 28% above its ten-year average; Soybean fell from its July 2008 peak by 41%, but remains 32% above its ten-year average; Wheat fell from its February 2008 peak by 57%, but remains 22% above its tenyear average.

Figures 1 through 3 illustrate these changes, while Figure 4 shows that even the present price of oil appears to be above its ten-year average by about 54%.

National food prices remain “sticky” In response to the international food price spikes in 2008, many governments

intervened in food markets—notably through

compared to Bunia (close to the Uganda

export controls (for food exporters), import

border). FAO monitoring of the prices of

tariff reductions (for food importers), and

17 food products in 23 cities reveal that

food price subsidies—in an effort to blunt the

the average price for all markets/food

impact on domestic food prices (Dawe, 2008).

products covered (or national average)

These policies put a heavy strain on public

was 41 percent higher than 12 months

sector budgets, and it remains to be seen

earlier.

whether governments will be able to sustain

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many of them in the context of tighter public budgets in the medium term as a result of the global economic slowdown. A brief review of the recent price trends for main staple crops in selected countries (and regions) also suggests that domestic food prices in many countries have remained high, and in some cases—for example maize in Dar es Salaam, Tanzania and rice in Hanoi, Vietnam—prices have actually headed upward again in recent months. Compared to their three-year averages, national grain prices remain high. At the time of writing, the price

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of: •

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Retail Rice in the Philippines is over 11% above its three-year average (see Figure 5); Wholesale Maize in Dar es Salaam, Tanzania is almost 62% above its threeyear average (see Figure 6); Retail Rice in Hanoi, Vietnam is 36% above its three-year average (see Figure 7); Retail Maize in Zambia is almost 38% above its three-year average (see Figure 8).

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Selected excerpts from recent (October 2009 to February 2010) FAO reports indicate that large numbers of people still face high and volatile domestic food prices, with a significant degree of variation in food access across and within countries: •

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Congo, DR. There is a good deal of variation in food prices across the country—Kisangani for example appears to have lower commodity prices

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Guatemala. Households are depleting food reserves rapidly, and food shortages are occurring earlier than expected in drought-affected areas in the east of the Corredor Seco and the western highlands. Due to expected food shortages, February 2010 prices of white maize increased approximately 12 per cent over December 2009 prices. The end of the period of high demand for labourers to harvest coffee and cane sugar is expected to compound poor households’ challenges as seasonal income sources will also tend to decline. India. Due in part to poor crop performance for the main season crops, food price inflation is estimated at 17.40 percent. Prices of wheat and rice have been rising since June 2009 and in many parts of the country food price inflation is higher than overall consumer price inflation. There is also a strong import demand for rice even as international prices are rising. Kenya. There are reports of inflated transportation costs for imported maize, resulting in above average food prices. The wholesale price of maize was USD 408 per tonne in Nairobi in January 2010—much higher than USD 307 per tonne 12 months before and USD 223 per tonne 24 months earlier. Low-income families have restricted access to food, particularly in urban areas where wages have not caught up with food price increases. Malawi. Prices of maize have started to rise since late 2009. Southern areas like

Nsanje and Chikwawa have seen maize

central Tanzania. The high transportation

prices rise faster than in other areas—for

costs of moving food from surplus to

instance from MKW 29/kg in May 2009

deficit areas is reflected in high food prices,

to MWK 47/kg in early January 2010 in

negatively impacting households.

Nsanje. In the Southern Malawi districts

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of Balaka, Chikwawa and Nsanje, the estimated number of food insecure populations has increased from 147,000 in June 2009 to 275,000 in early 2010. These districts experienced a significant maize crop reduction due to a prolonged dry spell in 2009. In addition, households’

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income from cotton sales has dropped, reducing the purchasing power of •

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affected populations. Mongolia. Dzud weather conditions (an extremely snowy winter in which livestock are unable to find fodder through the snow cover) are a major factor behind food problems in the country. The ongoing Dzud has killed 1.7 million head of livestock, an estimated economic cost of about USD 62 million. An estimated 21,000 families roughly 12% of the total herder households have lost more than 50% of their animals. Although wheat flour prices have come down steadily since 2008, they remain well above the pre-crisis levels. Philippines. National retail prices of the main staple rice remain high, following international price trends. Since the peak in June of 2008, prices have dropped 14% but remain higher than the pre-peak period of late 2007-early 2008. Domestic markets have followed the international export market and experienced drastically fluctuating prices over the last year. Tanzania. The onset of the hungry season in Tanzania brought climbing maize prices. In the Dar es Salaam market, January 2010 wholesale maize prices hit record levels. Moderate food insecurity exists in parts of north-eastern and

Vietnam. Domestic rice prices remain high; in fact the retail price in the Hanoi market surpassed the previous peak reached in May of 2008. This recent increase in the domestic market is consistent with international rice price trends and is influenced by strong export demand. Zambia. In spite of increased domestic maize availability, the national average price remains high. With the lean season approaching, maize supplies are diminishing and prices have started to climb. Small-scale farmers have exhausted their own stocks and vulnerable populations in chronically food insecure areas may struggle. High transportations costs and slower pace of imports, compared to last year, are likely contributing factors to the high domestic price of maize.

Critical messages for policymakers In light of rising food prices, it is vital and urgent that policies are in place specifically targeting children and women (notably mothers) in order to help ensure their nutrition security, including: •

policies to boost social protection interventions such as school feeding and maternal health programs, as well as food and cash transfers,

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stronger social services as part of a broader policy response to protect the basic livelihoods and nutrition of vulnerable groups, as well as to help ensure that social and economic recovery is inclusive.

More broadly, ensuring food security in the longer-term requires policies to address unique challenges in each country, as reflected by the brief context-specific review earlier. Past episodes

AFTERSHOCKS FROM THE GLOBAL FOOD CRISIS

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of food crises—including the present case—

detached from immediate child-focused

are not just an issue of high prices, nor simply

policies, including social protection

addressed by boosting supply. The crises that

measures—in fact, the rights and

erupted in 2008-2009 are likely part of the long

wellbeing of future generations will hinge

standing challenges faced by many developing

on effective actions on all these fronts.

countries whose agricultural sectors—where most of the poor are—have contracted or have remained stagnant, and where overall incomes have remained low. To begin to address these, policymakers will need to respond through a combination of national and international policy reforms. This spans: •

addressing supply bottlenecks at the domestic level,

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increasing agricultural investments and promoting more lucrative and secure urban livelihoods,

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strengthening the incentives and capacity of farmers to engage in food production (e.g. through stable access to credit),

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undertaking a more pro-poor and more inclusive social and economic development strategy,

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cooperating internationally to address cross-border factors, such as climate change, reforming bio-fuel policies and pursuing possible reforms to mitigate the vicissitudes of commodity futures trade.

These policy recommendations are not

Selected References 1. Conceição, Pedro and Ronald U. Mendoza. 2009a. “Is the global food crisis over?” Article posted on the VoxEU.org Policy Portal, April 18, 2009. [http://www.voxeu.org/index. php?q=node/3459]. 2. Conceição, Pedro and Ronald U. Mendoza. 2009b. “Anatomy of the Global Food Crisis.” Third World Quarterly 30(6):1159-1182. 3. FAO. 2009. The State of Food Insecurity in the World 2009. Rome. [ftp://ftp.fao. org/docrep/fao/012/i0876e/i0876e. pdf]. 4. FAO. 2010. Crop Prospects and Food Situation, February 2010. [http:// www.fao.org/docrep/012/ak343e/ ak343e00.pdf]. 5. Mendoza, Ronald U. 2010. “Inclusive Crises, Exclusive Recoveries and Policies to Prevent a Double Whammy for the Poor.” Mimeo. New York. 6. UNICEF. 2009. “Tracking Progress in Child and Maternal Nutrition, November 2009.” [http://www.unicef. org/publications/index_51656.html]. 7. World Bank. 2010. “Food Price Watch, February 2010.” Poverty Reduction and Equity Group (PREM). World Bank.

About the Working Brief Series This Working Brief was compiled by Ronald Mendoza and Megan Torres of Economic and Social Policy Unit of UNICEF’s Division of Policy and Practice (DPP). For more information on this issue, or to share comments, please contact [email protected]. or [email protected]. Working Briefs are prepared to facilitate greater exchange of knowledge and stimulate analytical discussion on social policy issues. Their findings, interpretations and conclusions do not necessarily reflect the policies or view of UNICEF. The designations in this publication do not imply an opinion on legal status of any country or territory, or of its authorities, or the delimitation of frontiers. The editors of the series are Gaspar Fajth, Isabel Ortiz and David Stewart of the Policy, Advocacy and Knowledge Management Section. For more information on the series, or to submit a working brief, please contact [email protected], [email protected] or [email protected].

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Aftershocks from the Global Food Crisis Annex 1: Charts and Graphs, International Data

Figure 2: Maize, 2000-2010

Figure 1: Rice, 2000-2010 800

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US$/ton

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Note: Price for White Broken Rice, Thai A1 Super, f.o.b Bangkok.

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US$/ton

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Note: Price for US No.2, Yellow, U.S. Gulf.

Source: FAO International Commodity Price Database


[http://www.fao.org/es/esc/prices/PricesServlet.jsp?lang=en&ccode=2311].


Figure 3: Wheat 2000-2010

Figure 4: Oil, 2000-2010 160.00

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Note: Price for No.2, Soft Red Winter Wheat , US Gulf (Tuesday).

Note: Oil prices refer to Brent US dollars per barrel.


Source: US Department of Energy


[http://www.eia.doe.gov/emeu/international/prices.html].

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Aftershocks from the Global Food Crisis Annex 2: Charts and Graphs, national Data

Figure 6: Maize Tanzania, 2007-2010

Figure 5: Rice Philippines, 2007-2010 450

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Note: Price for regular milled rice in the Philippines (national average).

Note: Wholesale price for maize in Dar es Salaam, Tanzania.

Source: FAO Global Information and Early Warning System, National Database


[http://www.fao.org/giews/pricetool/].


Figure 8: Maize Zambia, 2007-2010

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Figure7: Rice Vietnam, 2007-2010

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Note: Retail price for rice in Hanoi, Vietnam.

Note: Retail price for maize in Zambia (national average).





AFTERSHOCKS FROM THE GLOBAL FOOD CRISIS

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