Policies Against Hunger II

1

• Policies Against Hunger II
• Defining the Role of Food Aid in Contributing to
  Sustainable Food Security
• Berlin, 2-4 September 2003
• Global food markets, trade and aid a perspective
  on vulnerable and food insecure countries
• (slightly enhanced version of the presentation)
• ALI ARSLAN GÜRKAN
• Chief, Basic Foodstuffs Service
• Commodities and Trade Division
• FAO

2
The Approach

• Focus on vulnerable countries
• Least Developed (LDCs) and Net Food-Importing
  Developing (NFIDCs) countries of interest to
  WTO
• Developing low-income and food deficit countries
  (LIFDCs) of interest to FAO and to some extent
  WFP
• Focus on selected market indicators
• International prices of food commodities
• Global stocks
• Food prices at border of vulnerable countries
• Food imports
• Role of food aid within this perspective

3
Per capita apparent food consumption in
developing countries
4

Features of progress in food availability

• Food availability increased in all regions of the
  world over the past two decades.
• And, FAO expects that progress will continue over
  the next three decades
• Experience in all regions, however, have not all
  been at the same rate
• countries in East and South Asia appear to have
  achieved the best performance
• Countries in Sub-Saharan still lag behind all
  others and is expected to continue to do so,
  unless special efforts are made by both the
  countries themselves and the international
  community

5

Food availability is just one aspect of food
security

• A better insight can be had if we have a look at
  the progress made in reducing the number of
  undernourished

6
Number of people undernourished in developing
countries
7

There have been some progress in this respect at
the aggregate level

• mainly achieved by performance of countries in
  East Asia, which includes China
• only region where progress unbroken
• In Sub-Saharan Africa, though, the number of
  undernourished continued to increase
• progress expected only in the long run

8
Monthly FAO international nominal price indices
of basic food commodities
9

International prices of basic food commodities

• have been volatile,
• but not demonstrated a dominant trend since 1990,
• This is true for most income inelastic basic food
  commodities since the 1970s, as the next few
  slides show.

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Wheat - Annual average nominal prices
11
Rice - Annual average nominal prices
12
Maize - Annual average nominal prices
13
Soyoil - Annual average nominal prices
14

But not so

• For more income elastic commodities such as
  livestock products
• there is a clear upward secular trend for these
  basic food commodities, as the next few slides
  show

15
Butter - Annual average nominal prices
16
Beef - Annual average nominal prices
17
Lamb - Annual average nominal prices
18
Salient features of historical price developments

• Nominal prices of many food commodities exhibit
  no long term trends over the past few decades
• though their real prices have been on the decline
• except of those more income elastic (i.e.
  livestock products)
• Thus, rate of increase in demand and supply in
  long-run seem to be balanced
• except for livestock products.
• In short-run though there appear to be large
  imbalances, implying large price volatility

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Volatility in agricultural prices from such
imbalances

• are in most part related to
• the reliance of production on vagaries of natural
  conditions,
• the biological cycles of the production
  processes, and
• rigid structure of agricultural markets.
• An important buffer to the shocks in supply and
  demand is the publicly and privately held
  inventories

20
Inventories tend to be released when prices are
high and built up when they are low
21
What have these developments meant for food
imports by vulnerable developing countries?

• Using simple average shares of food imports in
  apparent consumption, calculated over the
  countries in each vulnerable group

22
Average shares of imports in apparent food
consumption have been rising
23
Overall upward trends in importance of food
imports have not changed much

• Share for the NFIDCs rose from just below 20
  percent in the early 70s to nearly 35 percent at
  the end of the 90s.
• Shares are much lower for the other two groups,
  starting from about 6-7 percent and rising to
  about 12-14 percent so are the rates of increase
  over the period

Showing food trade is important for food security
of vulnerable countries
24
Growth in food imports is likely to continue in
the medium term
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How about costs of importing food for these
countries?

• Following three slides demonstrate the importance
  of food import bills (excluding food aid) in
  relation to three important macro variables
• GDP
• total merchandise imports and
• total merchandise exports.

These would give some insight into their ability
to meet their food needs.
26
Average share of food import bills in GDP
27
Average share of food import bills in total
merchandise exports
28
Average share of food import bills in total
merchandise imports
29
Salient features of historical developments in
food import bills

• LDCs and LIFDCs compared to NFIDCs have been
  under greater stress to meet their food needs,
  between late-80s mid-90s
• share of commercial food import bills in GDP and
  total merchandise exports and imports of the two
  have increased, while those of the NFIDCs have
  declined or not changed
• since the late90s, however, the stress has
  declined, mainly because of lower unit costs of
  imports of most foodstuffs.
• The same two groups also face significantly
  greater variability in those shares, making them
  more vulnerable compared to the NFIDCs

30
Although food aid has been important in relieving
burden of food imports

• as the next slide shows, the share of food aid in
  commercial food imports have been
• volatile,
• declining consistently since the early 1980s and,
  by nearly 50 percent, though less steeply for
  the LDCs and developing LIFDCs compared to the
  NFIDCs, and
• much lower for the NFIDCs compared to the other
  two.

31
Average share of food aid in food import bills
32
Moreover, the share of value of total food aid in
official development aid

• have been declining consistently since the early
  1970s and
• have averaged only around 3 percent at the end of
  the 1990s

33
Share of food aid in official development
assistance
34
Donors, moreover, consider economic factors in
deciding how much food aid to give
As evidenced by the negative relationship between
cereal prices and food aid deliveries
35
And also by the positive relationship between
opening stocks of major cereal exporters and
total cereal food aid
36
Do these mean that the needs of the food insecure
were completely neglected?

• NO... Evidence suggests not.
• Regardless of how the donors decide to allocate
  their food aid resources, relatively more food
  insecure developing countries receive a
  significantly larger share of their external food
  needs in the form of food aid compared to others
  as the next slide shows

37
Profiles of food secure and insecure developing
countries on selected variables
38
Differences exhibited in the chart not merely
apparent, but reflect high level of statistical
confidence

• Relatively more food insecure countries not only
  rely on more food aid and are also more prone to
  face food emergencies, but are also under greater
  economic stress
• they have much lower GDP and lower levels of
  development
• their economic performances are poorer
• their ability to import their food needs are more
  constrained, and because of this
• they, paradoxically, tend to be more food
  self-sufficient

39
FAOs position on food aid matters

• FAO is not involved directly in food aid and does
  not have a position related to all of its
  different facets.
• However, through the activities of its
  Consultative Subcommittee on Surplus Disposal
  using FAO Principles of Surplus Disposal, it
• monitors food aid and other concessional
  transactions with the aim of minimising
  disincentives to commercial trade and
  agricultural production, and
• facilitates exchange information among donors on
  their food aid shipments

40
FAOs position on sustainable food security

• FAOs Anti-Hunger Programme unveiled at the World
  Food Summit five years emphasises a twin track
  approach to tackle hunger rapidly and sustainably
  that would
• channel investment to increase employment,
  productivity and incomes in rural areas where
  more then three-quarters of the worlds hungry
  live
• strengthen social safety networks to provide
  access to food and deliver immediate relief to
  most needy
• FAO supports immediate relief in the form of
  either cash or food, the latter through local
  purchases wherever possible or within the
  Principles of Surplus Disposable

41
Summary and policy conclusions - I

• Food insecure countries were spending a
  relatively larger share of their GDP and foreign
  exchange earnings from merchandise exports on
  importing food,
• both of which were increasing relatively more
  steeply until the late-90s.
• These were happening against a background
• in which these countries were receiving a
  relatively larger share in the form of food aid,
• during times when the relative importance of food
  aid was declining.
• Same countries were also more vulnerable because
  they had to cope with greater volatility

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Summary and policy conclusions - II

• Volume of food aid flows are closely related to
  economic conditions faced by the donors
• significantly and negatively related to food
  prices, presumably constrained by budgetary
  considerations
• significantly and positively related to stock
  levels at the beginning of the season, presumably
  determined by extent of domestic support in donor
  countries
• Nevertheless, relatively more food insecure
  countries receive a significantly higher
  percentage of their food imports in the form of
  food aid

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Summary and policy conclusions - III

• Aid in commodity form could have specific
  negative effects on the domestic food markets of
  the recipient countries and,
• its volume could be influenced significantly by
  domestic economic concerns of donor countries
• however, if it is targeted well, minimising
  leakages into the local markets and is a resource
  provided by donors in addition to other forms of
  aid,
• it will enhance, and indeed it has enhanced, food
  security of most vulnerable countries, and
• be useful as an international policy instrument
  to complement others in the fight against hunger