3. Introduction
• FAO food price index increased by 56%
between Mar 07 and Mar 08
• Food forms 40-70% of household
expenditures => large contribution to
inflation
• High Prices => incentive for farmers to
increase supply
4. Introduction (2)
• Magnitude and implications of price changes
in national and regional markets =>
appropriate policy action
• Approach
– Data
– Consultations among policy advisers, analysts
and researchers from national, regional and
international organizations
5. Comparing FAO and country FPIs
FAO global food
160 price index
150 Ethiopia
140
Food Price Indices
Kenya
130
120 Tanzania
110
Uganda
100
90 Madagascar
80
Malawi
70
Mar- Jun- Sep- Dec- Mar-
07 07 07 07 08 Rwanda
Source: FAO, 2008; country statistics offices
7. Pattern of price changes is mixed
• Severity of the problem differs:
across countries
across commodities
time of the year
8. Why are countries affected
differently?
• Food baskets are different:
Main staple internationally traded
Net importer or exporter of staple
• Integration of domestic to regional and
international markets
9. Changes in Prices of Main Staples
% % Change in
Change Commodity Price
Country FPI Severity Traded? L/locked?
Mar-07 to Staple Mar-07 to
Mar-08 food Mar-08
Kenya 20.1 Maize 30.0 +++ Yes No
Tanzania 11.2 Maize 93.7 ++ Yes No
Zambia 9.1 Maize 33.8 + Yes Yes
Rwanda 1.7 Beans 35.5 + Yes Yes
Uganda 8.6 Banana 6.7 + No Yes
Ethiopia 39.4 Teff 19.81 ++++ No Yes
10. Factors affecting demand for food in
ESA
• Population growth, rising incomes (though
inequalities in income distribution make the
poor very vulnerable), urbanization
• However, Demand factors change only
slowly and may not be responsible for the
recent spike and volatility
11. Factors contributing to low supply of
food in ESA
• Low investments in agriculture and rural
development
• High prices of inputs – fertilizers, fuel, feed
• Climatic shocks
• Impacts of trade: inefficiencies, expensive
imports, policies
• Disruption of supply – conflicts
13. Differential impact on households
Poor are hit hardest Net sellers less affected
Rural net buyers more
affected
Urban poor depend on markets for food
supplies
14. What levers to pull?
• Increase production?
– Productivity decline, climatic factors,…
• Control demand?
– Population growth, income inequalities, ...
• Many slow to respond >3 years
17. Most action is in domestic and
regional markets…
• But, there are serious barriers to trade: wasteful,
high transaction costs
Busia -Uganda Busia -Kenya
18. Some responses contributing to the
problem…
Reduce taxes on food grains
Cash transfers
Food for work
School feeding
Agricultural input subsidies
Increase food supply via imports
Reduce food import tariffs
Lower import tariffs for agricultural inputs
Food stamps or vouchers
Increase food supply using food grain stocks
Price controls and/or consumer subsidies***
Food export restrictions***
Good for food security Some concerns for food security
Likely to hinder food security Highly likely to hinder food security
Source: World Bank, 2008
19. Conclusions
• The rise in global food prices is not completely
transmitted to domestic markets
• Regional Response offers opportunities to
address the price crisis
• Food crisis offers opportunities for agricultural
development through increased domestic
production, regional trade and integration [Paul
Romer: “A crisis is a terrible thing to waste”]
21. Protect the vulnerable
• Priority Actions (for urban poor)
– Targeted food subsidies and cash transfers where
markets are working
– Targeted food aid where markets are not working
– Reduce taxes on food grains
• For rural poor, in addition provide production
support
22. Exploit regional diversity and facilitate
regional trade
• Priority Actions
• Remove export bans
• Eliminate NTBs
• Simplify trade
• Upgrade, maintain infrastructure and facilities on the
main trade corridors
23. Enhance supply response
• Priority Actions
• Make agricultural inputs affordable
• Build on best bet technologies
• Exploit economies of scale in input procurement and
facilitate trade in inputs
• Pilot innovative risk management strategies –
warehouse receipt system, index based insurance
systems
24. Strengthen and use regional institutions
for preparedness and response
• Priority Actions:
• Strengthen market information &
intelligence (e.g. RATIN,FEWSNET,
EAGC)
• Institutional frameworks for preparedness,
response, and learning