Responding to Rising Food Prices in ESA

ASARECA

CGIAR

ReSAKSS-ECA

Outline

• Introduction

• Price trends– Consumer Price Indices (Total, food and fuel)– Agricultural product prices

• Explaining the trends

• Policy measures by countries

• Key messages

Introduction

• Global food prices increasing at unprecedented rates

• FAO food price index has increased by 57% between Mar 07 and Mar 08

• Prices of key cereals, dairy products, meat etc have increased substantially

Introduction…What is driving global price increases?

Demand side factors Supply side factors

Rising incomes Reduced exports

Alternative uses for grain – feed, biofuels

Low global stocks

Population growth High costs of inputs – oil, fertilizers

Urbanization Declining agricultural land, water, climate change impacts

Trends in Maize Prices in Capital Cities in East Africa

0

50

100

150

200

250

300

350

400

Time (month)

Mai

ze p

rice

(U

SD

/T) Kenya (Nairobi)

Rwanda (Kigali)

Tanzania (Dar esSalaam)

Uganda (Kampala)

Trends in Prices of Beans in Capital Cities in East Africa

0100200300400500600700800900

1000

Time (month)

Bea

n p

rice

($U

S/T

) Kenya (Nairobi)

Rwanda (Kigali)

Tanzania (Dar esSalaam)Uganda (Kampala)

ESA: Country Level Change in Commodity Prices (%)

Country Maize Beans Rice Wheat Meat

Year1 J-M 20082

Year J-M 2008

Year J-M

2008

Year J-M 2008

Year J-M

2008

Kenya 12 19 36 32 71 21 0Tanzania 81 8 38 2 13 18Uganda 3 -2 22 7 -2 0 14 7Rwanda -1 -14 32 -1 5 2 3 -6 -1 4Ethiopia 39 28 43 22Zambia 23 14 15 5 11 4

1: % change from Jan-2007 to Jan-2008; For Tanzania, % change is from May-07 to Jan-08; for Rwanda, % change for meat is Nov-06 to Nov-07

2: % change between January and March 2008

“Bureaucratic import/export procedures inhibit formal trade between. Inappropriate policy interventions in the commodity markets tend to distort relative prices thereby encouraging informal cross-border trade ( Rates, 2003)”

Regional Dimensions of food commodities in ESA…

•Most action happens at regional and domestic markets•Significant informal cross-border trade, crucial for food security

Busia-Uganda Busia-Kenya

What are the dominant factors associated with increasing food prices in

ESA?

• Demand side factors • Supply side factors

– Climatic variability– Rising input prices

• Declining investments in agriculture– Decline in ODA to African agriculture– Low public sector investments– Underinvestment in public agricultural research

Regional Variation in Harvesting Season

Source: Data: FEWSNET,2008

ESA harvesting timeline

Maize Production and Market Flows in the GHA

Source: FEWNET, 2007

Greater Horn of Africa (GHA) main Livestock Trading Routes

Source: FEWNET, 2007

ODA to agriculture: 1975-2005

Source: World Development Report, 2008

Declining investments in African agriculture….

• Low public sector investment in agriculture– Spending on agriculture relative to AgGDP is

low: in 2005, of 18 countries in Eastern and Southern Africa

• only Ethiopia and Malawi spent 10% or more of total expenditure in agriculture

• 7 countries spent between 5-9% of total expenditure in agriculture

• The bulk of countries in the region will not meet the Maputo Declaration to allocate 10% of government expenditure to agriculture by 2008

Yields are decreasing in most of the COMESA countries

Source: Authors’ calculation based on data from http://faostat.fao.org/site/567

 Maize (MT/Ha) Average 1997-1999 Average 2004-2006 % change

Burundi 1.18 1.06 -9.74

Comoros 2.20 2.28 3.66

Congo, Dem Republic of 0.82 0.78 -3.83

Djibouti 1.67 1.56 -6.67

Egypt 7.29 7.99 9.53

Eritrea 0.66 0.20 -69.35

Ethiopia 1.69 1.96 15.70

Kenya 1.54 1.76 14.43

Libyan Arab Jamahiriya 1.85 2.29 23.64

Madagascar 0.89 1.37 52.75

Malawi 1.39 1.14 -18.37

Mauritius 5.04 7.27 44.17

Rwanda 0.89 0.82 -8.02

Sudan 0.63 0.76 20.97

Swaziland 1.83 1.04 -43.19

Tanzania, United Rep of 0.80 1.65 106.27

Uganda 1.49 1.49 0.15

Zambia 1.37 1.87 36.98

Zimbabwe 1.18 0.60 -49.47

Change in Food Price Index (FPI) and Price of Main Staple

Country

% Change FPI % Change in Commodity

PriceSeverity2 Landlocked

Jan-05 to Mar-08

Mar-07 to Mar-08

Staple foodMar-07 to

Mar-08

Kenya 69.8 20.1 Maize 30.0 +++ No

Tanzania 38.8 11.2 Maize 93.7 ++ No

Uganda 9.7 8.6 Banana 6.7 + Yes

Ethiopia 96.4 40.8 Mixed teff 19.81 ++++ Yes

Zambia 28.4 9.1 White maize 33.8 + Yes

Rwanda 29.5 1.7 Beans 35.5 + Yes

1: For Ethiopia, Jan 07 to Jan 08

Number of countries

Reduce taxes on food grains (+ +) 7

Price controls/ consumer subsidies (- +) 4

Fuel subsidies (+ -) 1

Increase supply using food grain stocks (+ -) 4

Increase supply via imports (+ +) 2

Export restrictions (- -) 4

Cash transfer (+ +) 4

Food for work (+ +) 4

Food ration/ stamp (+ -) 4

School feeding (+ +) 5

What are countries doing?

(+ + ) Consistent with long run policies to improve food security

( + - ) Some concerns for food security; ( - + ) Likely to hinder food security

( - - ) Highly likely to hinder food security

Policy responses to rising food prices in COMESA and ASARECA Countries

Source: Adapted from World Bank

Main messages1. Protect food consumption of the poor

– Priority actions: • Targeted food subsidies; cash transfers where markets

are working

– By : • countries• Donors/humanitarian assistance organisations

2. Make agricultural inputs affordable– Priority actions:

• smart subsidies for fertilizers, seeds; innovative credit schemes, information packages

– By : • countries• Donors/humanitarian assistance organisations

Main messages3. Exploit regional diversity in production and

facilitate regional trade• Priority Action: avoid export bans during surplus• By: Countries, RECs:

4. Strengthen market information & intelligence e.g. RATIN,FEWSNET (Actors: REC:COMESA, EAC…..)

• By: Donors

5. Investment efforts to scale up agricultural research: Increase investment in R&D (ASARECA, NARs, IARCs)

By: Countries, Donors

• Contacts:

• m.waithaka@asareca.org

• J.karugia@cgiar.org