the world food crisis: political and economic consequences and needed actions
DESCRIPTION
Ministry of Foreign Affairs, Stockholm September 22, 2008TRANSCRIPT
The World Food Crisis: Political and Economic
Consequences and Needed Actions
Joachim von BraunDirector General
International Food Policy Research Institute
Ministry of Foreign Affairs, Stockholm
September 22, 2008
Joachim von Braun, IFPRI, September 2008
The situation: Surge in prices
[As of August 2008]
0
20
40
60
80
100
120
140
0
200
400
600
800
US
$/b
arr
el
US
$/t
on
Corn
Wheat
Rice
Oil (right scale)
Source: Data from FAO 2008 and IMF 2008.
Joachim von Braun, IFPRI, September 2008
Production and Price Developments
2004/5 2005/6 2006/7 2007/8 2008/9
World grain
Prod. Mill.
Ton (excl.
rice)
1.646 1.604 1.585 1.685 1.718
(July est.)
Maize price*
$/ton (Dec.)
97 104 163 183 186 (Sept)
*U.S. Yellow No. 2 Corn (at the Gulf of
Mexico)
Joachim von Braun, IFPRI, September 2008
IFPRI’s scenarios[Models for changes in structural supply and demand factors
(2000-05 and 2006-15)]
Source: M. Rosegrant (prelim. results with IMPACT-WATER).
US$/ton
Joachim von Braun, IFPRI, September 2008
What Food Crisis?
• Political destabilization
• Macro-economic / inflation
• Poverty and hunger
• …its causes
• and what needs to be done
Joachim von Braun, IFPRI, September 2008
0
5
10
15
20
25
30
Violent
Non-violent
2
2007-08 timeline of food protests
1
42
1
4
8
21
2
29
Source: News reports.
Joachim von Braun, IFPRI, September 2008
Number of food protests
by type and income group
Source: Protests – news reports;
Income group classification – World Bank 2007.
8 8
4
9
11
7
2
0
5
10
15
20
Low income Low-middle income
Upper-middle income
High income
Violent
Non-violent
Joachim von Braun, IFPRI, September 2008
Government effectiveness 2007 &
food protests
Source: Kaufmann, Kraay, and Mastruzzi 2008.
= Food protest
Joachim von Braun, IFPRI, September 2008
Number of food protests
by type and gov. effectiveness
Source: Protests – news reports;
Gov. effectiveness classification – Kaufmann et al. 2008.
From low to high
68 8 8
7
8
31
0
3
6
9
12
15
18
0-25th 25-50th 50-75th 75-100th
Violent
Non-violent
Joachim von Braun, IFPRI, September 2008
What Food Crisis?
• Political destabilization
• Macro-economic / inflation
• Poverty and hunger
• …its causes
• and what needs to be done
Joachim von Braun, IFPRI, September 2008
Economic policy actions taken
• Trade policy (restrictions, and
liberalization)
• Consumer subsidies
• Social protection
• Increased investment for supply
• Monetary policy
Joachim von Braun, IFPRI, September 2008
Variety of government policy responses
Trade
restriction
Trade
liberaliz.
Consumer
subsidy
Social
protection
Increase
supply
AsiaBangladesh X X X X
China X X X X
India X X X X X
Indonesia X X X
Malaysia X X X
Thailand X X X
Latin AmericaArgentina X X X X
Brazil X X X
Mexico X X X
Peru X X X
Venezuela X X X X
AfricaEgypt X X X X
Ethiopia X X X X
Ghana X X
Kenya X
Nigeria X X X
Tanzania X X X
Source: IMF, FAO, and news reports, 2007-08.
Joachim von Braun, IFPRI, September 2008
Food putting pressure on overall inflation
-2
0
2
4
Jan-05 Jan-06 Jan-07 Jan-08
Overall
Food
China, y-o-y India, wholesale
-2
0
2
4
6
Jan-05 Jan-06 Jan-07 Jan-08
Overall
Food
Ethiopia
0
5
10
15
20
25
Jan-05 Jan-06 Jan-07 Jan-08
Overall
Food
-2
0
2
4
Jan-05 Jan-06 Jan-07 Jan-08
OverallFood
Mexico
Source: Data from government statistics.
Joachim von Braun, IFPRI, September 2008
Diversity in the change of food and non-
food prices inflation
No change Increase
High Ethiopia, India,
Indonesia
Madagascar,
Uganda
Medium Mexico China, Vietnam
Low Nigeria
Source: Data from government statistics.
Co
rr. in
200
7-0
8
Corr. in 2007-08 compared to 2005
Joachim von Braun, IFPRI, September 2008
What Food Crisis?
• Political destabilization
• Macro-economic / inflation
• Poverty and hunger
• …its causes
• and what needs to be done
Joachim von Braun, IFPRI, September 2008
Beneath the $1 a day poverty line (2004)
Poor
($.75 cents – $1)
485 million people
Medial poor
($.50 cents – $.75 cents)
323 million people
Ultra poor
(less than $.50 cents)
162 million people
Source: Ahmed et al. 2007.
Joachim von Braun, IFPRI, September 2008
Ultra poor mostly in Africa (2004)
$0.75 and <$1:
485 mln
<$0.50:
162 mln
$0.50 and <$0.75:
323 mln
SA
16 2 .9 mln
SSA
9 0 .2 mln
EAP
5 1 mln
LAC
16 .6 mln
MENA
0 .9 mln
ECA 1.1 mlnMENA
0.2 mln
ECA 0.4 mlnLAC
11.5 mln
EAP
8.8 mln
SA
19.7 mln
SSA
121 mln
LAC
19 mln
ECA
3 mlnMENA
3.3 mln
EAP
109.3
mln
SSA
87.0
mln
SA
263.6
mln
Source: Ahmed et al. 2007.
Joachim von Braun, IFPRI, September 2008
-31
-38
-27
5
29
-45
-30
-15
0
15
30
Developing World East Asia & PacificSouth Asia L America & Caribb.Sub-Saharan Africa
Mil
lio
nThe growing number of the poorest in SSA
Living below US$.50/day (1990-2004)
Source: Ahmed et al. 2007.
Joachim von Braun, IFPRI, September 2008
1981 1990 1992 1997 2003 2004
Proportion of
undernourished (%) 28.3 19.9 19.9 17.4 16.3 16.5
Underweight in
children (%) 36.6 32.8 32.0 27.1 26.3 26.0
Under-five mortality
rate (%) 13.0 9.9 9.6 8.9 8.0 7.9
Global Hunger Index 26.0 20.9 20.5 17.8 16.9 16.8
Global Hunger Index and its components
(for identical countries), 1981 - 2004
Source: Wiesmann, IFPRI.
Joachim von Braun, IFPRI, September 2008
New hunger estimates of FAO 2007
• undernourished people in 2007 increased
by 75 million, over and above 2003-05 (to
923 million in 2007)
• Asia / Pacific 41 million
• Latin America / Caribbean 6 million
• Near East / North Africa 4 million
• Sub-Saharan Africa 24 million
Joachim von Braun, IFPRI, September 2008
What Food Crisis?
• Political destabilization
• Macro-economic / inflation
• Poverty and hunger
• …its causes
• and what needs to be done
Joachim von Braun, IFPRI, September 2008
Sources and features of price increases
1. Energy and biofuels
2. Income and population growth
3. Slow agricultural response
4. Market and trade policy
5. Speculation and market fundamentals
Joachim von Braun, IFPRI, September 2008
(1) Biofuels: Fundamental change in world
food price determination
Energy prices now affect not just agric. input
prices, but also output prices strongly via
biofuel-land competition
Elastic energy demand creates price bands for
agricultural commodities
Increased biofuel demand in 2000-07 contributed to
30% of weighted average increase of grain prices
Joachim von Braun, IFPRI, September 2008
(2) Rising consumption
• Income growth (2005-07 per annum)
- 9% in Asia, 6% in Africa
- 2% in industrialized countries
- that force is slowing down 2008/9
• Since 2000, global cereal use for:
• Food 5%, feed 8%
• Industrial purposes 38%
Future grain consumption is driven by
income growth, population growth, and feed
for meat and dairy production, biofuels
Sources: FAO 2003 and 2008; IMF 2008.
Joachim von Braun, IFPRI, September 2008
0
1
2
3
4
5
6
1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003
Avera
ge a
nnual g
row
th r
ate
(%
)
maize
rice
wheat
Source: World Development Report 2008.
(3) Productivity growth is declining
Joachim von Braun, IFPRI, September 2008
(3c) Grain stocks: The world eats more
than it produces
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006 2007 2008*
Source: Data from FAO 2003, 2005-08.
* Forecast.
Million tons
Total cereal stocks
China
Joachim von Braun, IFPRI, September 2008
(4) Ad hoc trade measures add up to
policy failures
• Export bans/restrictions:
- Reduce global market size, increase volatility,
and harm import-dependent trading partners
- Stimulate cartel formation, undermine trust, and
encourage protectionism
• Price controls:
- Reduce farmers’ incentives to produce more food
- Divert resources away from those who need them
most
Joachim von Braun, IFPRI, September 2008
• 3 main categories of speculators: - Governments, farmers, households, small traders
- Commercial traders
- Non-commercial traders
• Low stock levels and ill-designed policies
promote speculation
• In Q1 of 2008, volume of globally traded grain
futures & options by 32%
(5) Speculation plays a role, but is mainly
a symptom
(Chicago Board of Trade)
Joachim von Braun, IFPRI, September 2008
What Food Crisis?
• Political destabilization
• Macro-economic / inflation
• Poverty and hunger
• …its causes
• and what needs to be done
Joachim von Braun, IFPRI, September 2008
The Food Crisis Tradeoffs and Effects
+ Mass protests in more than 50 countries
+ Inflation and macro-economic imbalances
+ Environmental sustainability consequences
Political security
risks
Energy security
risks
Food security
risks
Joachim von Braun, IFPRI, September 2008
IFPRI’s proposed policy actions
• Emergency package: for immediate food
assistance and availability needs
[Implement immediately]
• Resilience package: to meet ongoing and
future challenges in the food system
[Phase in now for future impact]
Joachim von Braun, IFPRI, September 2008
Policy actions: Emergency package
1. Expand emergency and humanitarian
assistance
- international (price indexed) and national
2. Eliminate agricultural export restrictions
- reduces price levels by up to 30%
3. Fast-impact production programs in key areas
- Poorest 50% of farmers in Africa - partly publicly
funded = US$2.3 billion per annum
4. Change grain and oil seeds bio-fuel policies
- reduces maize price 20%, wheat 10%
Joachim von Braun, IFPRI, September 2008
Policy actions: Resilience package
5. Calm markets with:
- market-oriented regulation of speculation
- establish global (virtual) grain bank
6. Invest in social protection
- focus on child nutrition, women, and poorest
7. Investments for sustained agric. growth
- global incremental public agric. investment for
MDG1 = US$14 billion, Africa: US$4-5 billion per
annum; with R&D in agriculture
8. Multi-lateral trade regime (WTO+)
- strengthen rule based trade
Joachim von Braun, IFPRI, September 2008
Implementation of actions must be sound
• Country-driven and -owned programs – with
prioritization and sequencing
• Costs: Face the high investment needed; the
benefits for people, growth, security are huge
• New international governance architecture of
agriculture, food, and nutrition needed
• Accountability at international and national
levels: independent monitoring and
assessment