Markets and Food Security

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Markets and Food Security

• Session 1.2

PAT
WFP Markets Learning Programme
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Price Analysis Training
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Learning objectives

• After this session, participants should be able
  to
• Explain the importance and value of market
  analysis in food security assessment
• Identify the essential links between markets and
  food availability and between markets and food
  access

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A quick review

• Food Security
• Definition?

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Food Security

• A situation
• when all people, at all times, have physical
  economic access to sufficient, safe nutritious
  food to meet their dietary needs food
  preferences for active, healthy life

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Definitions for
Market A place where buyers sellers come
together to exchange goods and services

• Availability?
• Access?
• Utilisation?
• Market?

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So, why are markets important for food security?

• As a group discuss your assigned question
• What type of products do HHs exchange on markets?
• Why are markets important for food access?
• Why are markets important for food availability?
• How can WFP use market interventions to address
  food insecurity?
• Quickly note responses on flip chartsyou have 10
  minutes.

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What type of products do HHs exchange on markets?

• Food, cash crops, livestock, labour and other
  non-food items such as soap, charcoal, etc.
• For each HH, the types of product they exchange
  vary
• Pastoralist, cash cropper, subsistence farmer or
  daily labourer?
• Rich or poor?
• Depending on the season and on good year versus
  bad year
• Therefore, to understand the impact of markets,
  we have to find out about selling/buying patterns
  of our target groups

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2. Why are markets important for food access?

• HHs buy, sell, barter on markets, influencing
  their food availability, while prices they pay
  receive, their use of credit, influence HH
  income expenditure
• Each HH is confronted with price variation,
  influencing its ability to acquire food,
  buying, selling, bartering patterns of HHs
  throughout the year between years
• HH food access influences individual food intake

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3. Why are markets important for food
availability?

• Lets talk definitions first
• General food availability vs. local availability
• Food intake impacted indirectly by food
  availability, through food access
• Markets, or better traders ensure that
• Food moving from food surplus zones to food
  deficit zones
• Food being stored during surplus times for use
  during deficit times

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3. Why are markets important for food
availability? (continued)

• If markets dont function well, they do not
  perform these functions, or only at large
  transaction cost
• Good speculation and bad speculation
• Good speculation if storage contributes to
  dampening price volatility
• Bad speculation if storage worsens price
  volatility, or if done at unreasonable profit
  margins

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4. How can WFP use market interventions to
address food insecurity?

• Improve market functioning / reduction of
  transaction cost, often with partners, to
• reduce (informal) taxes
• improve infrastructure
• broaden the number of traders
• enhance trade credit provisioning, etc.
• Distribute cash or vouchers
• Local and regional procurement
• Purchase for Progress

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the food security nutrition framework (based
on UNICEF Model)
outcomes immediate underlying basic
HH food access directly influences individual
food intake
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markets in the food security nutrition framework
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Markets Food Security Analysis

• To summarise, markets
• Influence food availability, co-determine
  purchasing and selling conditions, have an impact
  on food access and, subsequently, an indirect
  influence on individual food intake
• Play a role in addressing food insecurity,
  through market interventions, local procurement
  and cash/voucher programmes

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Quick Case Exercise 1.2.a. Government Policies
in Pakistan

• Task Read the Quick Case and, with a partner,
  answer the questions below.
• Government wheat policy tries to balance
  competing interests of producers and consumers.
  On production side, policy aims at increasing
  wheat yields, output, support for farmer
  income. Increased wheat production seen as part
  of overall national FS strategy of reducing
  dependence on food imports for national food
  supplies.
• On consumption side, government attempts to
  enhance HH food security, particularly through
  ensuring availability of wheat flour at
  affordable prices and maintaining price
  stability. Food policy options are constrained,
  however, by overall fiscal constraints, as well
  as a desire to minimize fiscal subsidies on food.
  Moreover, the wheat procurement price has been
  seen as a major determinant of overall inflation
  because of its role as a wage good and an
  indicator of overall government price policy.
  Thus, wheat policy is somewhat constrained by
  inflation targets and inflation policy.
• What is the Government doing to impact
  availability?
• What is the Government doing to impact food
  access?
• Adapted from Nyberg, Jennifer, Pakistan Market
  Assessment Earthquake Affected Areas, WFP,
  2005, page 10.

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Markets and food availability

• Sufficient food availability can be achieved
  through
• Domestic production
• Imports (commercial and public imports)
• Public transfers (e.g. food aid)
• National/regional stocks
• but market functioning is also crucial to food
  availability
• Physical access (travel distance, time, seasonal
  access)
• Market integration (transaction costs and trade
  flows)

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Markets and food availability Two levels of
analysis

• Understanding food availability is essential to
  determining likely impact of market on HH food
  access
• Food availability is analyzed at two levels
• Macro-level analysis
• Meso-level analysis

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Markets and food availability Macro-analysis

• Macro-level analysis of food availability
  conducted through secondary data on the market
  environment
• Market vulnerability to macro-economic
  conditions economic growth price volatility,
  international reserves
• Policy environment trade policies, regulations,
  institutions, food policy and interaction of
  grain reserves with markets, governance

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Markets and food availability Meso-Analysis

• Meso-level analysis of food availability
• conducted through trader surveys community
  interviews
• Seeks to understand market structure, conduct and
  performance (more on this in Session 1.4)
• This is the level of food availability analysis
  that we will conduct via our market visit and
  survey

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Markets and Food Access The Concept of Entitlement

• Food access is determined by HH entitlements
• The means of acquiring food is based on assets
  (land, labour, livestock, savings), through
• Direct entitlement (own production)
• Trade/market entitlement

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How do markets determine food access?

• Access to food is reduced with entitlement
  failures
• These reductions are likely due to market
  failures

• fall in wages
• rise in food prices
• loss of employment
• drop in cash crop or livestock prices

HH Food Access
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What are the market indicators of entitlement?

• Many indicators of entitlement are asset and
  market-based
• relative prices
• real incomes
• market-related shocks

Thus to understand reductions of HH entitlement
i.e. of food access we must understand the
markets with which those HHs interact
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How do markets determine food access?
Effective demand is key to HH food access
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How do markets determine food access?

• Purchasing Power Economic access, HH income,
  Prices
• Market Dependence (involvement in markets)
• On/in markets for goods (food, non-food,
  livestock) services (labour, credit, capital)
• Selling/buying behaviours net seller/buyer,
  seasons and reasons of sales and purchases

Question for Plenary and in your country?
Which livelihoods are more/less profoundly
integrated into local markets? Which are
generally more impacted by severe food price
shifts?

• Market Accessibility of HHs
• Physical (distance)
• Financial (price, credit)
• Social (gender, security)

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Markets in Food Security Analysisanother view
the livelihoods perspective

Food Availability
Market
National food production and stocks
Commercial imports
Food aid
Agricultural inputs Extension Microfinance
Market
Food production
Food Access
Market
Market
HH Assets
Non-food production
Employment
Market
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Market participation and food security

• Markets as food source
• Evidence suggests very few, if any, HHs are
  autarkic
• Majority of HHs buy more than they sell on
  markets

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Market Participation FS Urban HHs - Senegal
Urban Food Security Assessment, Analysis of
Impact of High Food Prices on FS Livelihoods of
Urban Populations in Senegal (Urban to Semi-urban
Centres of Pikine, Kaolack, and Ziguinchor), FAO
/ UNICEF / WFP, November 2008
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Market Participation FS Rural HHs - Madagascar
Analysis of HH Food Security in Selected
Districts of Madagascar WFP, Madagascar,
September 2009
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Small Group Work

• Exercise 1.2.c.
• The Marketastan File Food Insecurity in
  Northern Province

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Wrap-up Markets Food Security

• Understanding how markets function, how
  interventions facilitate trade, helps identify
  how to alleviate negative impacts of shocks
• Higher food prices make food access more
  difficult for HHs most low-income smallholders
  are net buyers of food, often selling at low
  prices at harvest, buying back at high prices
  during lean season
• Most vulnerable population groups those who buy
  more food than they sell (net buyers), spend
  large share of income on food, have few coping
  strategies
• These groups include urban poor, rural landless,
  pastoralists (who are particularly vulnerable
  they face falling livestock prices as food prices
  rise, causing steep drop in purchasing power)