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
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