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Annual performance review workshop
Rising food prices: challenges and opportunities for smallholders
1-4 March 2009Bangkok, Thailand
Food Price Crisis
• Food price index rose from 155 in 2007 to 215 in June 2008; rice price rose from USD 305 per mt to USD 869
• Rising food prices led to rapid acceleration of inflation
• Food price crisis may slow down growth and poverty reduction in Asia/Pacific
• Prices have eased since Aug 2008 but increased in January 2009
• Despite decline in world prices in second half of 2008, domestic prices remain very high
Food price crisis
Cereal Export Prices (USD/mt)
Commodity
Jan 2008
Sep 2008
Dec 2008
Jan 2009
Rice 385 764 582 611
Wheat 381 308 240 256
Maize 206 229 160 172
What led to rising food prices?
• Rising living standards leading to improved diets • Maize-based ethanol (US) and biodiesel fuels from
vegetable oils (Europe)• Deterioration of $ increase in commodity prices
quoted in $• Flow of capital into commodity markets for
speculative gains • Underlying these demand drivers: high price of oil
What was the policy response?
• Many countries resorted to protective measures
• Food exporting countries eliminated export subsidies (China), and banned exports (India)
• Importing countries inflated imports in response to tightening supply (Indonesia, Thailand)
• Food importers increased demand by bidding for larger imports to dampen domestic inflation.
• Rising food prices sustained by policies to protect domestic consumers; likely to deepen food crisis
Impact on nutrition and poverty
• Differential impact on net food exporters (e.g. China) and net food importers (e.g. Indonesia)
• In both rural and urban areas, the poorest quintiles are the worst affected
• The poor landless are likely to be worse-off • Female-headed households fail to benefit due
to limited access to land, credit and markets • No. of malnourished in 2007 is 923 million, up
from 848 million in 2004
Policy priorities
• Price and quantity restrictions make matters worse• Subsidised food distribution provides partial relief but
does not mitigate food insecurity• Subsidies to and tariff protection of biofuel production
need re-examination • The food system is global but the principal actors are
national governments• International agencies can play a supportive role but
improvements require sound national policies• In the long-term, higher agricultural growth needed for
food security and to raise incomes of smallholders.
Constraints faced by smallholders
• Low yields of food crops in most of Asia due to:– poor crop management– lack of rural infrastructure & post harvest technologies– inadequate funding for research and development– decreasing soil quality and diminishing water tables
– weakening of supply elasticities of foodgrains • Magnitude of price incentives is lower than implied by
the rise in global prices • Less than half of recent global price increases of rice
transmitted to domestic economies due to:– Policies in procurement, distribution– Trade restrictions
Supply response in Asia
• Elasticities of yield with respect to price changes are high: (0.3, 0.31 and 0.26 for rice, wheat and maize)
• Prices matter but inputs matter more
• Over a large range of output, small and large farmers sell the same fraction of additional output
• If constraints to production are overcome, higher producer prices will lead to larger increase in market sales than output
How can we help the smallholders?
• Need to support smallholders to expand their production and marketed supply through: – agricultural research in fragile regions– access to agricultural services (extension, finance)– securing access to natural resource – diversification of their sources of income including
payments for environmental services• Strengthening livelihoods in conditions of greater
climatic uncertainty (new forms of insurance)• Additional investments in market facilities• Cost-effective and pro-poor food aid
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