Download - Ofab Kenya June-2011
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Persistence of high food prices in Eastern Africa: What role for
policy?
By
Joseph Karugia,
Coordinator
ReSAKSS-ECA
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Outline
• Introduction
• Food Price Situation in ESA
• Regional Dimensions
• Recommended Policy Options
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Introduction (1)• Global food price index (FPI) embarked on a
downward spiral by July 2008 and remained low and stable for some time
• Domestic FPI in Eastern Africa (EA) region on the other hand continued to increase after food crisis, notably in Kenya, Tanzania, Uganda, Ethiopia and Djibouti
• In the first half of 2010, global and domestic food prices eased but remained higher than their historical trends
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Introduction (2)• The decline did not present any immediate
relief to the food crises – largely influenced by good weather conditions
• Both global and domestic food prices have risen to historic highs beginning January 2011
• Significant challenge to reduction of poverty and hunger
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Comparing FAO Global and EA countries FPIs
Source: FAO, 2011; country statistics offices
Jan-07
Mar-07
May-07Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-08
May-08Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-09
May-09Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-10
May-10Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-11
May-110
50
100
150
200
250
300
Ethiopia- Food Total FAO GLOBAL- Food Kenya- Food & Non-Alcoholic Drink
Rwanda- Food And Non-Alcoholic Beverages Tanzania- Food Uganda- Food
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Objective and Approach
• Effective policy action requires evidence based information on the magnitude and implications of price changes at the country and regional level
• Approach– Data – continuous update of trends– Consultations among policy advisers, analysts and
researchers from national, regional and international organizations
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Data Source: a) FAO Commodities and Trade Division; b) Ethiopia: Central Statistical Agency; c) Tanzania: Bank of Tanzania; d)Uganda: Uganda Bureau of Statistics; e)Rwanda: RATIN; h) Kenya: Ministry of Agriculture
Maize price indices in EA and global 2007=100
Jan-07
Mar-0
7
May-0
7Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-0
8
May-0
8Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-0
9
May-0
9Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-1
0
May-1
0Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-1
1
May-1
10
100
200
300
400
500
600
Kenya - dry maize bag 90kg bag Uganda - Maize grain Kg
Ethiopia- Maize (white) kg Tanzania Wholesale Prices TZS/ 100 kg
Rwanda- Price Data in USD/MT FAO GLOBAL- Maize (US No.2, Yellow, U.S. Gulf (Friday)) US$/Ton
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Jan-07
Mar-07
May-07Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-08
May-08Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-09
May-09Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-10
May-10Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-11
May-110
50
100
150
200
250
300
350
Rwanda - Rice (Price Data in USD/MT)Ethiopia - Rice Imported KgUganda- Rice 5Kg/KgFAO GLOBAL - Rice (White Rice, Thai 100% B second grade, f.o.b. Bangkok (Wednesday)) US$/Ton Tanzania- National Average Wholesale Prices TZS/ 100 Kg
Data Source: a) FAO Commodities and Trade Division; b) Ethiopia: Central Statistical Agency; c) Tanzania: Bank of Tanzania; d)Uganda: Uganda Bureau of Statistics; e)Rwanda: RATIN; f) Zambia: Central Statistical Office (CSO) ; g) Madagascar: Institut National de la Statistique
Rice Price Indices in EA and Global 2007=100
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Data Source: a) FAO Commodities and Trade Division; b) Ethiopia: Central Statistical Agency; c) Zambia: Central Statistical Office; d) Kenya: Ministry of Agriculture
Wheat Price Indices 2007=100
Jan-07
Mar-07
May-07Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-08
May-08Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-09
May-09Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-10
May-10Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-11
May-110.00
50.00
100.00
150.00
200.00
250.00
300.00
Ethiopia- White Wheat Milled Kg Kenya- Wheat Bag
Zambia- Wheat (flour), Retail, Kwacha, 2.5 Kg FAO GLOBAL- Wheat (US No.2, Soft Red Winter Wheat , US Gulf (Tuesday)) US$/Ton
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Data Source: a) FAO Commodities and Trade Division; b) Ethiopia: Central Statistical Agency; c) Tanzania: Bank of Tanzania; d)Uganda: Uganda Bureau of Statistics; e)Rwanda: RATIN; f) Zambia: Central Statistical Office (CSO) ; g) Kenya: Ministry of Agriculture
Bean Price Indices 2007 = 100
Jan-07
Mar-07
May-07Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-08
May-08Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-09
May-09Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-10
May-10Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-11
May-110
50
100
150
200
250
300
350
Zambia- Dried Beans 1Kg Ethiopia- Hoarse Beans KG
Uganda- Dried Beans (yellow) Kg Kenya- beans canadian wonder bag (Whole sale) 90 kg bag
Tanzania- National Average Wholesale Prices TZS / 100 Rwanda- Beans (Price Data in USD/MT)
FAO GLOBAL- Soybeans (US No.1, Yellow, U.S. Gulf (Friday)) US$/Ton
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Data Source: a) FAO Commodities and Trade Division; b) Ethiopia: Central Statistical Agency; c) Zambia: Central Statistical Office; d) Rwanda: National Statistical Institute; e) Uganda: Uganda Bureau of Statistics
Meat Price Indices 2007=100
Jan-07
Mar-07
May-07Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-08
May-08Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-09
May-09Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-10
May-10Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-11
May-110
50
100
150
200
250
Rwanda - Meat Price Index FAO GLOBAL -Bovine Meat (Argentina, frozen beef cuts, export unit value) US$/Ton
Ethiopia -Beef kg Zambia -Mixed Cut 1Kg
Uganda -Meat (beef) Kg
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Data Source: a) FAO Commodities and Trade Division; b) Ethiopia: Central Statistical Agency; c) Zambia: Central Statistical Office; d) Uganda: Uganda Bureau of Statistics
Milk Price Indices 2007=100
Jan-07
Mar-0
7
May-0
7Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-0
8
May-0
8Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-0
9
May-0
9Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-1
0
May-1
0Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-1
1
May-1
10
50
100
150
200
250
Zambia- Fresh Milk (Pasteurised) Local 500Ml
Uganda- Milk (Fresh) Ltr
Ethiopia- Cow Milk (Unpasteurized) Ltr
FAO GLOBAL - Dairy_Whole Milk Powder (Oceania, indicative export prices, f.o.b.) US$/Ton
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Jan-07
Mar-0
7
May-0
7Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-0
8
May-0
8Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-0
9
May-0
9Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-1
0
May-1
0Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-1
1
May-1
10
50
100
150
200
250
300
Uganda - Sorghum Grains Kg Tanzana - Sorghum per 100 Kg
Kenya - sorghum 90 kg Bag FAO GLOBAL - Sorghum (US No.2, Yellow, U.S. Gulf (Friday)) us$/Ton
Data Source: a) FAO Commodities and Trade Division; b) Tanzania: Bank of Tanzania; c)Uganda: Uganda Bureau of Statistics; d) Kenya: Ministry of Agriculture
Sorghum Price Indices 2007=100
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Data Source: a) Tanzania: Bank of Tanzania; b)Uganda: Uganda Bureau of Statistics; c)Zambia: Central Statistical Office (CSO) ; d) Kenya: Ministry of Agriculture
Irish Potatoes Price Indices 2007=100
Jan-07
Mar-07
May-07Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-08
May-08Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-09
May-09Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-10
May-10Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-11
May-110
50
100
150
200
250
300
Uganda - irish potatoes Kg Kenya - Red Irish Potatoes 110 kg bag Tanzania - Potatoes per 100 KgZambia - Irish Potatoes 1Kg
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Sweet Potatoes Price Indices 2007=100
Data Source: a)Uganda: Uganda Bureau of Statistics; b)Kenya: Ministry of Agriculture
Jan-07
Mar-0
7
May-0
7Jul-0
7
Sep-07
Nov-07Jan-08
Mar-0
8
May-0
8Jul-0
8
Sep-08
Nov-08Jan-09
Mar-0
9
May-0
9Jul-0
9
Sep-09
Nov-09Jan-10
Mar-1
0
May-1
0Jul-1
0
Sep-10
Nov-10Jan-11
Mar-1
10
50
100
150
200
250
300
350
400
Uganda - sweet potatoes Kg Kenya- Sweet potatoes 90 kg bag
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Data Source: a)Uganda: Uganda Bureau of Statistics; b)Kenya: Ministry of Agriculture c) Malawi: National statistical office of Malawi
Cassava Price Indices 2007=100
Jan-07
Mar-0
7
May-0
7Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-0
8
May-0
8Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-0
9
May-0
9Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-1
0
May-1
0Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-1
10
50
100
150
200
250
300
350
400
Uganda Cassava (Fresh) Kg Kenya Cassava Fresh 98.8 Kg Bag Malawi Cassava Dried Kg
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Bananas Price Indices 2007=100
Jan-07
Mar-07
May-07Jul-0
7
Sep-07
Nov-07
Jan-08
Mar-08
May-08Jul-0
8
Sep-08
Nov-08
Jan-09
Mar-09
May-09Jul-0
9
Sep-09
Nov-09
Jan-10
Mar-10
May-10Jul-1
0
Sep-10
Nov-10
Jan-11
Mar-11
May-110
50
100
150
200
250
Uganda - Matoke Bunch Kenya - Coodking bananas (Med bunch)
Data Source: a)Uganda: Uganda Bureau of Statistics; b)Kenya: Ministry of Agriculture
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Pattern of price changes is mixed
• Severity of the problem differs:across countriesacross commoditiestime of the year
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Change in food prices
Country
% change FPI Feb 2007-June 2007
% change FPI June 2008-Dec 2008
% change FPI Jan 2009-Dec 2009
% change FPI Jan 2010-Dec 2010
% change in commodity price
Staple food
June 2008-Dec 2008
Jan 2009-Dec 2009
Jan 2010-Dec 2010
Jan 2011-April 2011
Ethiopia 6.4 -5.6 0.1 8.7Wheat*** -9.2 -16.5 6.1 -
FAO GLOBAL 12.9 -34.0 21.7 24.1
Maize-44.2 -3.2 48.4 19.5
Kenya -1.1 5.6 4.9 7.6Maize
23.7 1.7 -35.9 66.8
Rwanda -6.3 12.5 9.0 -7.6 Beans 12.6 23.9 13.3 -2.5
Tanzania 1.0 10.3 9.2 -4.1*Maize
21.8 20.5 -26.823.5**
Uganda 1.5 11.5 20.0 0.2
Bananas
31.6 85.8 -10.3 22.6* Data available up to June 2010; ** Data up to march 2011; *** Teff is main staple food, data not available
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Domestic prices are more volatile than global prices...
Country Coefficient of Variation % (maize prices)
Kenya 23.55 Uganda 17.30 Ethiopia 3.73 Tanzania 22.07 Rwanda 33.46 Global (US No.2, Yellow, U.S. Gulf) 7.06
Data source: FAOSTAT (Global), Ministry of Agriculture (Kenya), Central statistics agency (Ethiopia), RATIN (Tanzania and Rwanda), UBOS (Uganda).
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Minimal transmission of global price changes to domestic markets...
Regional markets Correlation Coefficients
Nairobi: kenya -0.15
Kampala: Uganda 0.17
Dar es Salaam: Tanzania 0.14
Addis Ababa: Ethiopia -0.35
Kigali: Rwanda 0.64 Data Source: RATIN (Kenya, Uganda, Tanzania, Rwanda); Central
statistical agency (Ethiopia); FAOSTAT (Global).
Correlation coefficients vary between -1 and 1. The closer to 1, the better the integration between the markets. No global and domestic market integration
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Some transmission between markets in the region (maize prices)...
+correlation coefficients = maize prices in various markets in EA region tend to move in the same direction, Domestic markets have some degree of integration among themselves, thus price changes will cause flow of food from surplus to deficit areas -exploiting a regional approach
Regional markets Kampala Nairobi
Dar es salaam Kigali
Addis Ababa
Kampala 1 0.69* 0.49* 0.38* 0.72*
Nairobi 0.69* 1 0.41* 0.61* 0
Dar es Salaam 0.49* 0.41* 1 0.55* 0.33
Kigali 0.38* 0.61* 0.55* 1 -0.12
Addis Ababa 0.72* 0 0.33 -0.12 1
Data Source: RATIN (Kenya, Uganda, Tanzania, Rwanda); Central statistical agency (Ethiopia)
*significant at the 5% significance level
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Factors affecting demand for food in EA
• 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 spikes and volatility
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Factors contributing to low supply of food in EA
• 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
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Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
0
50
100
150
200
250
300
Uganda Motor Spirit Premium (PMS) Uganda Diesel (AGO) Kenya -Motor Gasoline Premium (Ksh per ltr) Kenya - Light Diesel Oil (GASOIL) (Ksh per ltr)world Crude oil prices
Data Source: a) world: World: US energy information administration independent statistics and analysis; b) Uganda: Bank of Uganda; c) Kenya: Kenya National Bureau of statistics
Fuel Price Indices 2007=100
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Apr-Jun 2007
Jul-S
ep 2007
Oct-Dec
2007
Jan-M
ar 2008
Apr-Jun 2008
Jul-S
ep 2008
Oct-Dec
2008
Jan-M
ar 2009
Apr-Jun 2009
Jul-S
ep 2009
Oct-Dec
2009
Jan-M
ar 2010
Apr-Jun 2010
Jul-S
ep 2010
Oct-
Dec 2010
Jan-M
ar 2011
0
100
200
300
400
500
600
700
800
DAP Phosphate rock Potassium chloride TSP Urea
Data Source: World Bank
World Fertilizer Price indices 2007=100
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Yields are low and decreasing or stagnant
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Burundi Comoros Djibouti Ethiopia Kenya
Malawi Rwanda Sudan Swaziland Uganda
United Republic of Tanzania Zambia Zimbabwe
Mai
ze y
ield
Hg/
ha
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Differential impact on householdsPoor are hit hardest
Rural net buyers more affected
Net sellers less affected
Urban poor depend on markets for food supplies
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What levers to pull?
• Increase production?– Productivity decline, climatic factors,…
• Control demand?– Population growth, income inequalities, ...
• Many slow to respond; >3 years?
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Regional approach offers better prospects
• Exploit diversity in the region
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Heterogeneity in production
ESA harvesting timeline
Source: Data: FEWSNET,2008
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Most action is in domestic and regional markets…
• But, there are serious barriers to trade: wasteful, high transaction costs
Busia -Uganda Busia -Kenya
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On going policy response measures to high food prices in EA region
SAFETY NETS FOR THE VULNERABLE
Food subsidies Cash transfer Food for work and food for training Food ration/stamp; vouchers School feeding
FOOD SUPPLY AND FOOD TRADE
Increase supply using food grain stocks Increase supply via imports Reduce taxes on food Price controls/consumer subsidies Reduction of tariffs and custom fees on food imports Restricted or banned export
AGRICULTURAL PRODUCTION
Agricultural input subsidies, mostly fertilizer and seeds Increase administered prices for producers Incentives for expanding production (credit) Lower import tariffs for inputs e.g. fertilizer
Consistent with longer run policies to improve food security
Some concerns relating to longer run food security Likely to create problems for longer run food security depending on duration and targeting Highly likely to create problems for longer run food security and/or create serious
problems for neighbouring countries
Sources; World Bank, 2008; FAO, 2008; Karugia et al, 2009; Okello, J.J, 2009; www.wfp.org; www.fao.org
Despite the various policy actions adopted in EA region to curb rising food prices, the region has continued to experience persistent high and volatile food prices
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Conclusions
• Changes in global food prices are not transmitted to domestic markets
• Regional response offers opportunities to address the food price crisis
• Food price crisis offers opportunities for agricultural development through increased domestic production, regional trade and integration [Paul Romer: “A crisis is a terrible thing to waste”]
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Recommended Policy Options
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Protect the vulnerable
• Priority Actions– Targeted food subsidies and cash transfers where
markets are working– Targeted food aid where markets are not working– Reduce taxes on food grains– Design and targeting –key to success
• For rural poor, in addition provide production support – inputs, credit, technologies
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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
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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
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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
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THANK YOU