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High Food Prices and Food Security
Dr Hafez GhanemAssistant Director General
Economic and Social Development, FAO
Study Days– EPP-ED Group Paris, 4 July 2008
The Issue: High Food Prices
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Nominal Real
Three Messages
• High prices are partly a reflection of a long run phenomenon of increasing demand for food products.
• High prices are leading to an increase in hunger in the world, we estimate an additional 50 million hungry people.
• International action is needed to increase investment and coordinate policies.
Explanations for High Prices
• Low Stock Levels• Bad weather (climate change?)• High oil prices• Increased demand from emerging countries• Bio-fuels• Financial crisis and speculation
Prices are Expected to Remain High
Low Level of Stocks
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100000
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250000
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To
nn
es
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perc
en
tag
e
stocks stocks-to-disappearance ratio
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Reuters-CRB Energy Index
FAO Food Price Index
Energy-food prices relationships at the aggregate level...
simple correlation coefficient
1990-08
r=0.62
simple correlation coefficient
2004-08
r=0.77
Cereal imports and exports from China and India
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15000
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25000
30000
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'000
to
nn
es
Imports Exports
Bio-fuels Demand is Increasing very Fast
0
20
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80
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120
1990 2005 2015 2030
Mto
e
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1
2
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5
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10
Per
cent
age
of to
tal d
eman
d fo
r tr
ansp
ort e
nerg
y
Trend in biofuel use Mtoe
Trend in biofuel use as percentage of transport energy
Food Prices Are Expected to Remain High
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1600
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Wheat Rice Maize Oilseed Veg Oil Sugar
Impact of High Prices
• THE NUMBER OF HUNGRY POPLE IN THE WORLD IS INCREASING
• Everybody is hurt but mostly the poor
• Women in developing countries are more affected than men
• Macro-economic implications for low income countries
An Increase in Undernourishment
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300
600
900
1990 1995 2000 2005 2010
HFP_DW
Non-HFP_DW
HFP_AP
Non-HFP_AP
HFP_LAC
Non-HFP_LAC
HFP_NENA
Non-HFP_NENA
HFP_SSA
Non-HFP_SSA
Number of undernourished in the developing world - projected impact of HFP
The Poor are More Affected by Food Prices
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10
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30
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70
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
GDP per capita in constant PPP international dollars
Pe
rce
nta
ge
sh
are
of
foo
d e
xp
en
dit
ure
in
CP
I
USA
NORIR
CHE
AUT
HKG
JPN
ES
GBR
ITA
DEU
NGA
LKA
SEN
THA
IDNUGA
KEN
TZA
PAK JOR
GHA
BFA
ECU
KOR
The Poor are Food Buyers
Share of dollar-day poor households
Urban Rural All
Bangladesh, 2000 0.0 9.2 8.6
Pakistan 2001 5.0 22.0 18.8
Vietnam, 1998 0.0 25.3 25.0
Guatemala 2000 7.9 11.9 11.7
Ghana 1998 29.2 46.5 43.6
Malawi 2004 2.6 7.8 7.6
Madagascar, 2001 15.4 59.6 54.4
Impact on household welfare of a 10 percent increase in maize prices in Malawi
Per capita expenditure quintiles
1 2 3 4 5 All
Rural -1.23 -0.57 -0.23 -0.02 0.53 -01.7
Urban -2.56 -1.95 -1.38 -1.19 -0.22 -1.12
Total -1.26 -0.64 -0.37 -0.23 -0.13 -0.35
Women Are more Affected than Men
-1.5
-1-.
50
.5%
Ch
ange
in W
elfa
re (
FH
H-M
HH
)
Bangladesh Ghana Guatemala Malawi Nicaragua Pakistan Vietnam
Rural UrbanNational
Coordinated International Action is needed
• Safety nets and food aid
• Urgent support to farmers in developing countries
• Increase investment in developing country agriculture
• Improve international policy coordination
Food Aid is Declining
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per
cen
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Share of food aid in ODA
Share of value of food aid in import bills of DVG countries
LDC Farmers Have no Incentive to Increase Production
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2003
/1
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/4
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/1
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/4
More Support to LDC Agriculture is Needed
• To meet growing demands for food and biofuels production needs to rise, especially in developing countries.
• Agriculture’s share in ODA fell from 17% to 4% over 25 years.
• Only 4% of cropped land in Africa is irrigated.• Investment in R&D in developing countries is
0.6% of agricultural GDP compared to more than 5% in OECD.
Diverse Policy Responses
49%
23%26%
55%
16%
0%
10%
20%
30%
40%
50%
60%
as % oftotal countries
in sample
1
Figure XX. Policy actions to address high food prices (of sample of 77 countries, by type of action)
Reduce taxes on foodgrains
Increase supply using foodgrain stocks
Export restrictions
Price controls / consumer subsidies
None
Thank you!
