Increasing Food Prices and Food Security: Diagnostic Issues and Policy Options

In spite of some moderation in recent months, increased food prices appear to be here to stay and continue to be a matter of grave concern. Especially worrisome are high cereal prices, as cereals make up a major and necessary part of the diet of poor households, and account for a principal part of their monthly expenditure. Increases in their price limit the ability of the poor to diversify their food intake and improve their nutrition. Consequently, prices at sustained high levels threaten to undo much of the gains in poverty reduction and nutrition made over the past years, with one estimate from the World Bank indicating that 105 million people have been pushed into poverty as a result. Matters are aggravated by high fuel prices that directly impact household well being through the share of fuel in the consumption basket, besides adding to the price of food through increased transportation and production costs.

ii. These effects are felt disproportionately by women and other disadvantaged members of society. Women are often charged with obtaining and preparing food for their families, and it is also often the case that women and girls eat last or eat different food than men and boys. When food is scarce, this increases the likelihood of their going hungry or having a less nutritious diet. Certain countries, too, are more vulnerable than others – those that import both food and oil face the problem of having to meet a suddenly escalated import bill. Conflict and post-conflict countries are among the most vulnerable due to their low levels of production, negligible stockpiles, limited ability for purchases in the global market, restricted access to food for parts of the population, and state capacities that are already stretched in dealing with rehabilitation and reconstruction needs. Even at the household level, little capability may remain for dealing with this additional shock - households may have been deprived of their assets, or may have already tapped into them.

iii. On the other hand, the price rises contribute to increasing incomes for producers, and can be significant incentives for increasing production. Such production increases can come from both large agri-businesses and, crucially, from smaller farmers provided the benefits of higher prices are passed through to them, and they have access to affordable inputs. Policies that expand the access of small farmers (and especially, women, in the many countries where they contribute significantly to agricultural production) to inputs and knowledge, and to competitive markets, could lead to a ‗pro-poor‘ benefit in many areas. Additional gains in poverty reduction may also be expected if these developments improve opportunities for employment and wages.

iv. Policy responses within countries, therefore, need to strike a balance between addressing the impact of these price increases on producers and consumers. They need to address the underlying structural reasons, along with taking care of their immediate fall-out. Across countries, too, self interests may not always coincide, so a policy response in one country may have an adverse impact on another. At the same time there are several responses that can be pursued most efficiently through collaboration across countries. This paper is intended to serve as a thinking piece that will stimulate policy discussion, and provide guidance to UNDP staff in country offices as they engage with national governments to address their key concerns.

Click on the image to view