Impacts of Food Price Volatility on Food Security and MDG Goals

UAEDecember 2011

Context

MDG Impact ConcernsGlobal OverviewContext

High food and fuel prices reduce purchasing power of both the hungry poor and those who try to assist them

Unlike 2008 the price shocks of 2011 are not unexpected

Shocks not affecting all countries in the same way

Sustained increases in fuel prices may be more damaging than only food commodity prices.

Challenge is to identify regions and countries likely to be most affected both in terms of incidence and depth of food insecurity.

Which responses?

Global Overview of Most Vulnerable Countries Price Volatility

143 countries reviewed by WFP

Low income (40)Lower medium income (55)High medium income(58)All upper high income countries excludedAll oil exporting countries excluded

Two vulnerability indices developed

Price Shock and Hunger Index Food and fuel import levels and dependence, domestic

inflation, current account balances, foreign ex reserves, foreignexchange fluctuation

Global Food Security Index Food availability, access, utilization, stability

MDG ImpactConcerns Global OverviewContext

Global Overview of Most Vulnerable Countries Price VolatilitySeveral countries face chronic food security challenges

occupiedPalestinian

Territories

Haiti

SolomonIslands

Sao Tome and Principe

Comoros

Djibouti

Rwanda

Burundi

Swaziland

Lesotho

Guinea-Bissau

Undernourishment > 20%

Undernourishment < 20%

Many countries facing these challenges are in Africa

AfghanistanBangladeshBurundiCambodiaCentral African RepublicChadComorosCongo, Dem. Rep.DjiboutiEritreaEthiopiaGambiaGhanaGuinea

Guinea-BissauHaitiKenyaLesothoLiberiaMadagascarMalawiMongoliaMozambiqueNepalNigerPakistanPapua New GuineaRwanda

Sao Tome and PrincipeSierra LeoneSolomon IslandsSomaliaSwazilandTajikistanTanzaniaTogoUgandaWest Bank and GazaYemenZimbabwe

Note: Countries highlighted in red represent those with undernourished population > 20%

MDG ImpactConcerns Global OverviewContext

Global Overview of Most Vulnerable Countries to Price VolatilityRecent food price changes (Q3-2011) have moderate to high impact on the

cost of food basket in several countries

MDG ImpactConcerns Global OverviewContext

Major Concerns

Preparedness to respond

Price increases at local level

Interactions of price surges with other factors, such as unemployment, drought, and conflict

Irreversible nutritional impacts, especially in first 1000 days of life

Loss of hard-won gains on MDGs

Social cohesion

...

MDG ImpactConcerns Global OverviewContext

Central and Eastern Africa

Poor harvests due to below average rainfall in the HoA Poor short rains in 2010 affecting agro/pastoral areas in a number of

countries Below average rainfall in 2011

Food commodity export bans in the region Substantial increases of cereal prices in recent months in most

countries Severe deterioration of purchasing power especially among

pastoralists – selling twice as many animals in exchange of cereal

Increased levels of malnutrition esp. in pastoral areas Massive displacement of conflict affected populations Increased food insecurity and famine in the HoA

MDG ImpactConcerns Global OverviewContext

Major Concerns: Drought-Conflict-Price Volatility

Middle East and North Africa

• Most countries are major cereal importers, wheat• Erratic rainfall in 2010/11• High cost of living due to high food prices, high youth

unemployment rates and delayed political reforms resulting in civil unrests

• Safety net measures in place but sustainability in question despite subsidies

• Populations of particular concerns are displaced people

MDG ImpactConcerns Global OverviewContext

Major Concerns: Price Volatility-Unemployment-Political Instability

Southern Africa

• Bumper harvest in 2010 and large maize stocks • Favorable production in 2011 for most countries• Food not adequately accessed by selected population groups • Stable prices except for a few countries • Economic and financial crisis in some countries (e.g. Swaziland

and Malawi)• Chronic malnutrition extremely high in a number of countries –

rates of up to 50-60%

MDG ImpactConcerns Global OverviewContext

Major Concerns: Economic Instability-Price Volatility

West Africa

• Below average cereal production in Sahel countries in 2011• Upward trends of seasonal prices in most countries in recent

months• Prices of imported commodities – rice and wheat significantly

increasing in selected countries • Youth unemployment, high chronic malnutrition

MDG ImpactConcerns Global OverviewContext

Major Concerns: Drought-Price Volatility

MDG Impact of Food Price Volatility

Loss of hard-won gains on MDG1

Irreversible nutritional impacts, especially in first 1000 days of life, i.e. increased proportion of underweight among children under five

Increased proportion of population below minimum level of dietary energy consumption, i.e. increased undernourishment

Adverse impacts on other MDGs

Negative incidence on education (MDG2), gender equality (MDG3), child mortality (MDG4), maternal health (MDG5) through use of negative coping mechanisms.

MDG ImpactConcerns Global OverviewContext

Impact of Food Price Volatility on MDG1Case of Pakistan

Province Area % Change in real retail prices(2009/10 vs. 2005/06)

% Change in real producer prices

(2009/10 vs. 2005/06)

% Change in real wage rates

(2009/10 vs. 2005/06)

Wheat flour Rice Basmati Rice IRRI Wheat Rice

Sindh Karachi 50.6 51.7 47.7 60.3 60.9 7.6

Punjab Lahore 42.9 55.1 58.7 152.5 48.8 -6.2

Multan 52.5 65.3 35.0 152.5 48.8 10.7

KPK Peshawar 49.0 83.0 75.2 54.6 60.7 16.3

Balochistan Qhetta 52.4 59.9 58.8 - - -6.8

Retail prices of wheat and rice increased significantly in 2009/10 from their baseline levels of 2005/06

Producer prices of wheat and rice also went up significantly in 2009/10 compared to 2005/06

But real wage rates barely increased in 2009/10 compared to 2005/06

MDG ImpactConcerns Global OverviewContext

Impact of Food Price Volatility on MDG1Case of Pakistan

The yearly average per capita consumption (in wheat equivalent) dropped by almost 10% in 2009/10, from 124 kg to 112kg

The proportion of the population with caloric intake below 2350 Kcal/day increased

The proportion of the population undernourished increased, more so in urban areas

Geog. setting

Per capita consumption (Kg wheat equivalent)

% of Undernourished Population(<2350 Kcal/day)

Number of Undernourished People (<2350 Kcal/day) (million)

Baseline(2005/06)

2009/10 % Change

Baseline(2005/06)

2009/10 % Change

Baseline(2005/06)

2009/10 Change

Rural 135 123 -8.9 41.0 50.3 +22.7 45.7 55.7 +10.0

Urban 108 96 -11.1 50.6 55.4 +9.5 31.9 34.9 +3.0

National 124 112 -9.7 44.8 52.3 +16.7 77.6 90.6 +13.0

MDG ImpactConcerns Global OverviewContext

Concluding Remarks on Potential Actions

Strengthen early warning and preparedness systemsProduction, prices, availability on markets, stocks...Risk analysis, especially droughtRisk pooling and contingency fundsEmergency food reserves

Strengthen household-level vulnerability analysis and mapping

Develop targeted food safety net interventions

Support smallholder food production

Exempt humanitarian food from export restrictions