The State of Food Security in the World Reducing price volatility and improving nutrition Shenggen Fan Director General International Food Policy Research

The State of Food Security in the World

Reducing price volatility and improving nutrition

Shenggen FanDirector General

International Food Policy Research Institute

1st Brussels High-Level Lecture on Food Security and Development 21 November 2011

Shenggen Fan, November 2011

Key messages

Undernutrition and micronutrient deficiencies remain pervasive

High and volatile food prices hurt consumers and producers

A changing global landscape presents challenges and opportunities

Urgent policy actions and innovative approaches are needed to go beyond business as usual


925 million people are hungry?

Number of hungry, 1969-2010 Number of hungry by region, 2010

Source: FAO 2010

Methodology for measuring hunger is being revised to include: • household expenditure surveys• indicators to capture multidimensional nature of food insecurity

(FAO, 2011)

Source: FAO 2010

946

584


GHI components:• Proportion of undernourished• Prevalence of underweight in

children• Under-five mortality rate

Source: von Grebmer et al. 2011

26 countries with extremely alarming/alarming levels of hunger (2011 GHI)


Sub-Saharan Africa and South Asia are hotspots of child undernutrition

Prevalence of underweight in children under-5, 2003-08

Prevalence of stunting in children under-5, 2003-08

Source: UNICEF 2009

Source: UNICEF 2009


Prevalence of micronutrient deficiencies

“Hidden hunger” remains pervasive…

Source: HarvestPlus 2011


Iron deficiency anemia • Africa and South Asia have the highest prevalence

• In some parts of India, 90% of girls suffer from this deficiency

Vitamin A deficiency• 163 mil. are vitamin A deficient in developing countries

• 44.4% of children in South Asia suffer from this deficiency

Iodine deficiency• 1.7 bil. people worldwide are affected by iodine deficiency,

and 1.3 bil. of them are in Asia

…2 billion+ suffer from micronutrient deficiencies

Source: UNSCN 6th Report and Bharati et al. 2009


Food security crisis in Horn of Africa

Crop & livestock loss(3 consecutive poor rainy

seasons) +

Poor governance (Somalia)

+Pre-existing refugee crisis

(e.g. Dadaab at full capacity pre-crisis) =

Increased malnutrition, death, and refugees

Urgently need immediate and long-term solutions to crisis

Source: UNHCR and USAID, 2011


Rising food price volatility


Sep-9

0

Mar

-92

Sep-9

3

Mar

-95

Sep-9

6

Mar

-98

Sep-9

9

Mar

-01

Sep-0

2

Mar

-04

Sep-0

5

Mar

-07

Sep-0

8

Mar

-10

Sep-1

150

100

150

200

250

300

FAO Food Price Index

Meat

Dairy

Cereals

Sep-0

6

Mar

-07

Sep-0

7

Mar

-08

Sep-0

8

Mar

-09

Sep-0

9

Mar

-10

Sep-1

0

Mar

-11

Sep-1

1100

300

500

700

900

Global Cereal Prices (US$)

Maize

All-time high of 238 points reached Maize up 99% since June 2010

Source: Data from FAO 2011Note: For Food Price Index 2002-2004=100

Two food price spikes in 3 years…


…and increasing variability in food prices

Source: Authors calculations with data from FAO 2011.

Jan-0

5

Apr-05

Jul-0

5

Oct-0

5

Jan-0

6

Apr-06

Jul-0

6

Oct-0

6

Jan-0

7

Apr-07

Jul-0

7

Oct-0

7

Jan-0

8

Apr-08

Jul-0

8

Oct-0

8

Jan-0

9

Apr-09

Jul-0

9

Oct-0

9

Jan-1

0

Apr-10

Jul-1

0

Oct-1

0

Jan-1

1

Apr-11

Jul-1

10

5

10

15

20

25

Maize

Wheat

Rice

Coefficient of variation, 2005-11 (%)


Transmission of global food prices to local markets

0

20

40

60

80

100

120

140

160

180

200

32 CAMEROON

174 ETHIOPIA

39 GHANA

69 KENYA

158 MALAWI

53 MALI

78 MOZAMBIQUE

54 RWANDA

25 SOUTH AFRICA

78 TANZANIA

73 ZAMBIA

Increase in domestic price as % of the world price increase

100 = full price transmission

Price transmission of staple food crops in parts of SSA (June 07-08) 75% of global prices were

transmitted to African prices

(Minot 2011)

Positive price transmission also in East and South Asia and Latin America

Degree of transmission depends on trade policies and protection of domestic markets

(Fan, Torero and Headey 2011)

Per

cen

t

Data: from Minot 2011


Financial speculation on agriculture commodities?

Monthly volumes of futures trading 2002-11

Nu

mb

er o

f tr

ades

on

fu

ture

s co

ntr

acts

(m

illio

ns)

Source: Torero 2011 with data from CBOT 2011

• Volume of commodity futures traded have risen • Speculation may have played a role during the recent food price crises

(Robles, Torero, and von Braun 2009; Torero 2011)


Strong link between oil prices and food prices

Oct-0

5

Oct-0

6

Oct-0

7

Oct-0

8

Oct-0

9

Oct-1

0

Oct-1

150

100

150

200

250

Food Oil

20

05

= 1

00

Source: IMF 2011

Note: Oil = Ave. crude oil price of U.K. Brent, Dubai, and West Texas Intermediate

Biofuel expansion is driving food-fuel competition

Rising oil prices cause food prices to increase, rather than the reverse (Heady and Fan 2010)

Rising oil prices make biofuels more profitable, rather than agricultural production more expensive (Abbott, Hurt, and Tyner 2008)


Low global grain stocks

Low stocks can lead to large price increases and market breakdown

Record low grain stocks contributed to global food crises both in 1973 and 2007

(Torero 2011)

At the onset of the 2007 crisis, stock-to-use ratio for global grains hit its lowest point since the 1960s

(Schnepf 2008) Source: FAO 2011


Declining investment in agriculture

0

5,000

10,000

15,000

20,000

25,000

30,000

0

5

10

15

20

25

30

ODA to agriculture

% of total ODA (right-scale)

Co

nst

ant

2009

US

$ b

illi

on

s

Per

cen

t

Official development assistance to agriculture

Source: OECD 2011

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

0

5

10

15

20

East Asia & Pacific

Latin America & Caribbean

South Asia

Sub-Saharan Africa

Per

cen

t

Share of agriculture expenditure by region (% of AgGDP)

Source: IFPRI 2010


High and volatile food prices hurt poor consumers

Seneg

al

Camer

oon

Ghana

Niger

ia

Kenya

Mal

awi

Ugand

a

Zambi

a0

10

20

30

40

50

60

70

80

2006/20072007/2008*2008/2009*

% o

f h

ou

se

ho

lds

re

po

rtin

g p

rob

lem

s in

af-

ford

ing

fo

od

in la

st

12

mo

nth

s

Source: Headey 2011

Evidence of impacts based on household surveys remain limited

Ethiopia: More female-headed hhs suffered from food shortages - 67% compared to 58% of male-headed hhs(Kumar and Quisumbing 2011)

Ecuador, Haiti, Nicaragua, Panama, and Peru: Reduction in calorie intake (0.95% – 15%) (Robles and Iannotti 2011)

Self-reported food insecurity, SSA


• Majority of poor producers are also net buyers of food

• Increasing input and transport costs can reduce profit margins

• Excessive volatility hampers long-term planning and lower incentives to invest

High food prices hurt poor producers?

• Poor producers benefit only if they are net sellers of food

• Poor producers will profit if input costs do not rise in parallel

(Fan, Torero and Headey, 2011)


Global food security challenges and opportunities


Global food security challenges are large

Poor governance

Poor policies

Thin and uncompetit

ive markets

Weak institutions

underinvestment in agriculture and rural

development

Climate change

Natural resource

constraints

Low capacity

High and volatile food

pricesPoor governance

Lack of evidence-based policies

Biofuel expansion

Population growth

Demographic changes

Conflict Gender inequality

Food

Securit

y

©H

ug

h M

cLe

od

Rising energy prices


Global population continues to rise

Population growth, 1960-2050

Source: CropLife International 2010

New projections show global population is not expected to stabilize as earlier forecasted

Global population projected to surpass 10 billion by 2100

Growth will come primarily from developing countries and urban areas

(United Nations 2011)


Natural resource scarcities will threaten food production

Source: Bai et al . 2007 (LADA, FAO/ISRIC)

Global loss of annual net primary productivity due to land degradation, 1981-2003

Source: World Resources Institute 2009

Physical and economic water scarcitySource: Cordell et al. 2009

With “business as usual,” high water stress by 2050 puts at risk globally:

• 52% of population

• 49% of grain production

• 45% of GDP


1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000EU-27

USA

Brazil

0

50000

100000

150000

0

50000

100000

150000

200000

250000

300000

350000

400000

450000EU-27 OilseedBrazil SugarcaneUSA Maize* (right-scale)

Biofuel expansion could add pressureon food prices

Total biofuel production (Mil. liters) Total crop production (‘000s kt)

Source: FAO-OECD, 2011Source: FAO-OECD, 2011

Biofuel production is expected to grow by 70-140% (2008-10 to 2020, OECD/FAO 2011)

* Maize and other coarse grains


Wheat Maize Rice0

50

100

150

200

2502010 2050 no CC 2050 CC

World food prices, 2010–2050 (2010=100)

Climate change will drive food prices up

Source: IFPRI IMPACT (Nelson et al. 2010) Note: Average of four GCM, A1B, A2 ,B1, B2 Scenarios


Foreign land acquisitions offer risks and opportunities

Potential to boost FDI, but have implications for food security and livelihoods

Need for:

Information systems at global and national level on land deals

Evidence-based research on impacts

Foreign farmland acquisitions in Africa, 2007-09

Source: Atlas des Futurs du Monde, 2010; IFPRI, 2009; FAOSTAT; WDI


EU and US economic crises have broad implications

Source: IMF 2011

Real GDP growth annual (%) Prospects for world GDP growth (%)

Source: IMF 2011

The probability of global growth below 2% is now substantially higher than earlier this year (IMF 2011)


Changing global landscape is creating windows of opportunity

Emerging countries play a bigger role in the global economy

Private sector is a growing partner for the public sector and development initiatives

Agriculture and nutrition are moving up on global agenda

Inclusive institutions, efficient markets and evidence-based policies are needed


2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

50000

100000

150000

200000

250000

300000

350000

Brazil

China

India

Emerging countries now play a bigger role in the global economy

Emerging countries outward FDI flows (US$ millions)

Source: UNCTAD 2011

2007 20100

20

40

60

80

100

120

58%63%

To developing economies To developed economies

To transition economies

Source: UNCTAD with data from Financial Times fDi Markets 2011

Distribution of FDI projects from emerging & developing countries (%)


Substantial role of private sector

Offer effective investment, unique expertise, and innovation at a greater scale

Public-Private Partnerships (PPPs):• lower transaction costs and risks• improve quality of innovation• accrual of abilities, skills and resources (Hartwich et al. 2008)

Examples of promising initiatives• Nestlé Popularly Positioned Products → Private initiative to

improve nutrition of poor consumers through fortification• Indian Rural Business Hubs → PPP to help rural entrepreneurs

access inputs, markets, training, etc.• Pepsico and China's Ministry of Agriculture → PPP to promote

sustainable farming


Transformation of supply chains

Agrifood industry transformed along entire supply chain: Socioeconomic factors, e.g. income growth/urbanization Policy reforms, e.g. market liberalization/privatization

Emergence of supermarkets and large wholesalers/processors

Higher quality supply chains

Potential food security impact: Lower food prices for urban consumers BUT lower market participation among poor producers

(Minten and Reardon 2008)


-10

0

10

20

5-year avg, 2005-2009 (unless otherwise noted)

CAADP 6% Target

Progress made towards CAADP target of 6% agricultural growth in SSA

Avg. Annual Agricultural GDP Growth (%)

8 countries have met

target

* 2004-2008** 2003-2007*** 2002-2006


The CGIAR is changing the way it does business

New vision and strategic objectives [Food for People, Environment for People, and Policies for People]

Broadened research mandate to include nutrition and health

Country-led approaches and inclusive partnerships

Results-oriented strategy


CGAIR Program 4: Agriculture for improving nutrition and health

1. Enhancing nutrition along the value chain

2. Biofortification

3. Prevention and control of agriculture-associated diseases

4. Integrated agriculture, nutrition, and health programs and policies


Urgent policy actions and innovative approaches are needed


Promote smallholder productivity

Invest in agricultural R&D and infrastructure• Agricultural research access to high-quality seeds and

fertilizer e.g. drought & flood resistant crops• Develop more nutritious foods e.g. biofortification

Promote climate-smart agriculture• Foster “triple wins” in adaptation/mitigation/productivity

e.g. soil nutrient management in Kenya

• Improve land and water productivity through sustainable farm practices and new technologies

Link smallholders to value chains and markets• Exploit innovative mechanisms e.g. producers’

associations, contract farming and PPPs, or pro-poor ITCs


Strengthen reach of productive social safety nets • Ensure secure and smooth food consumption e.g. conditional

food transfers

• Especially for young children and women e.g. maternal and child nutrition programs

• Enable savings, investments and assets build-up

Increase access to risk management tools • Provide poor farmers protection from weather, health and

price shocks e.g. weather index-based insurance for crops and livestock

• Improve affordability of insurance and investments in weather-tracking infrastructure

Improve smallholder resilience


Better-targeted and more productive social protection policies need to:• Secure basic livelihoods• Protect poor people from risk and vulnerability

Explore new approaches, e.g. cross-sectoral social protection, to reach poor more effectively• Ethiopia Productive Safety Net Program (PSNP):

Part of broad food security program Access to safety nets and ag. support more beneficial for

ag. productivity and food security than stand alone programs (Gilligan, Hoddinott, and Taffesse 2009)

Invest in productive social protection programs


Reform global food architecture

Support transparent and free global trade

• Eliminate harmful trade restrictions and prevent new ones

Create global and regional grain reserves

• Locate in poor food importing countries i.e. Horn of Africa

Minimize food-fuel competition

• Curtail use of grain feedstock to produce biofuels

Monitor global food prices and speculation

• Support global information system (G20’s AMIS) or IFPRI’s Excessive Food Price Variability Early Warning System


Country-led programs are crucial

Capacity building Policy dialogue

CSSPs*

Project offices

IFPRI offices

Guatemala City

Geneva

Johannesburg

Kinshasa

IslamabadKathmandu

HanoiDhaka

Bujumbura

Improved access to information Cross-country mutual learning

Note: * CSSPs = Country Strategy Support Programs


DRC Country Strategy Support Program

Assessment of institutional and capacity challenges in agric. policy planning process• Lack of sustainable funding and lack of demonstrated

benefits and impact of improved CSO participation

• Weak institutions and inadequate/aging staff in key public-sector organizations

Future research agenda includes:• Development domains combining agronomic potential,

infrastructure etc.

• Economy-wide analysis to assess potential impacts of investments on growth and poverty


In conclusion

The state of food security in the world remains precarious

A changing global landscape presents challenges and opportunities

Urgent actions are needed to promote an agenda with greater support for food security

Innovative approaches are needed to go beyond business as usual

Documents

The State of Food Security in the World Reducing price volatility and improving nutrition Shenggen Fan Director General International Food Policy Research