Food Price Watch POVERTY REDUCTION AND EQUITY GROUP POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK FEBRUARY 2010 53160 Summary: While the global focus on food prices has waned, domestic staple food prices in several countries have experienced double digit increases in 2009, particularly in Sub-Saharan Africa. We highlight countries where such increases are most significant and estimate that the impact on undernourishment, or hunger, has been as much as 8% in 2009. Global food prices rose again in 2009. The World Figure 1: Trends in Global Food Prices Bank food benchmark index increased 23% between January and December 2009. Sugar prices rose 80% during this period and rice prices rose 9% in December 2009 alone. While the food price index for 2009 was on average 17% lower than the 2008 average, prices re- mained higher than 2007 (see figure 1). The recent increase could aggravate the adverse effect of the food price spike of 2008 which contin- ues to be felt in many countries in Asia and Africa. This is primarily for two reasons. First, despite the gen- eral easing of food prices in international markets after the mid 2008 food price spike, prices had been coming down very slowly in domestic markets in some of these countries. The recent upward trend in the international markets could reverse this gradual decline. Second, the global economic crisis of 2009 may have further strained the poor's already stretched coping mechanisms, though this impact varies considerably by region. Domestic staple grain price increases appear to have been greater than global grain price increas- es in recent months. Domestic food prices data from the FAO's Global Information and Early Warning Sys- tem for 58 low and middle income countries shows that the price increase of staples in several countries was significantly higher than the change in average food prices globally. 17 out of the 37 countries in the dataset witnessed higher average prices of their main staple in 2009 than in 2008. Note: 1) 2000 = 100; 2) Annual averages refers to the average of the food price index for the calendar year. Source: World Bank, DEC-PG Food Price Watch produced by the Poverty Reduction and Equity group at the World Bank is a new series which aims to draw attention to trends in domestic food prices in low and middle income countries and their policy implications. Contact person ­ Hassan Zaman (hzaman@worldbank.org) Table 1: Countries with the largest increase in domestic price of main staples (out of 58 countries) Price Increase, January 2009- October 2009 Average price increase, 2008-2009 Country Food Caloric Price Country Food Caloric Price Item Contribution Increase Item Contribution Increase Nigeria Sorghum 13% 50% Mozambique Cassava 33% 61% Uganda Maize 10% 35% Dem. Rep. Congo Cassava 55% 60% Bhutan Rice .. 26% Sudan Sorghum 26% 38% Sudan Sorghum 26% 24% Kenya Maize 36% 21% Tanzania Maize 34% 23% Chad Sorghum 18% 18% Kenya Maize 36% 16% Burkina Faso Sorghum 27% 15% China Rice 27% 15% Tanzania Maize 27% 14% Source: FAO, GIEWS for domestic price data Note: Of the 58 countries monitored by the GIEWS, this table only considers countries for which price data was available at least up to October 2009. All price increases reported correspond to current LCU prices except for Kenya, Tanzania and Uganda for whom USD prices had to be used as LCU prices were not available. All price data used for this table was accessed on January 18, 2009. For each of the countries in the database, the monthly $ denominated price of the staple grain was downloaded. Countries were sorted by the $ price increases and for the twenty countries that ranked the highest ­ i.e., witnessed the highest increase in the price of their staples in $ terms, monthly LCU denominated price data was retrieved. Countries were then ranked by the increases wit- nessed in the price of the staples in LCU terms. Several countries experienced double digit in- Figure 2: Kenya's maize prices increased while creases in their main staple price in 2008-09. For global prices declined example, cassava prices rose by 60% in the Democrat- ic Republic of Congo (where its consumption consti- tutes 55% of calorie intake). Sorghum prices in Nigeria rose by 50% from January 2009 to October 2009. Dur- ing the same period, domestic price for maize grew by 35% in Burkina Faso. It appears from our sample of 55 countries covered by FAO's domestic food price survey that predominantly countries in sub-Saharan Africa have experienced the largest price increases in staples in their local markets (see Table 1). Maize prices in Kenya, driven by election-related disruptions and a drought, rose even during the latter half of 2008 when global prices fell (see Figure 2). Source: Kenya Economic Update December 2009 POVERTY REDUCTION & EQUITY GROUP * WWW.WORLDBANK.ORG/POVERTY 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP Table 2: Impact of price increase on undernourishment, some estimates % Increase Change in % Change Projected per Domestic Undernourishment (over 2008 estimate) capita growth (2009) Price of Main Incidence Staple in 2009 Mozambique 61% 763,291 8% 2.2% Kenya 21% 453,897 5% 0.3% Burkina Faso 15% 149,592 3% 1.3% Tanzania 14% 444,599 4% 0.0% Note: Projected per capita GDP growth for every country based on data from the September 2009 Global Development Fi- nance. See footnote 1 on the undernourishment estimates. This continuing increase in the price of staples in Food prices are only one factor affecting under- domestic markets remains a significant threat to nourishment. There are a host of important determi- food security and nutrition in the developing world. nants of undernourishment, and more broadly malnutri- If these price increases in domestic markets represent tion, including access to clean water and sanitation, a general increase of similar magnitude across the healthcare services, and the rate of economic growth. cross section of caloric sources available, then the im- One estimate shows that the slowdown in global growth pact on food security and overall nutritional quality may in 2009 may have led to an additional 41 million under- be significant. We produce some estimates of the effect nourished people compared to what would have hap- of the staple food price increases on undernourishment, pened if the economic crisis had not occurred.1 or hunger, defined by the number of people who con- sume too few calories to meet their minimum dietary requirements (see Table 2). The estimated impact on undernourishment ap- 1 Estimates of the impact of higher food prices and slower pears to be significant. The results for the countries growth on undernourishment are derived from Tiwari and Zaman (2010), "Impact of Economic Crises on Global Under- in which domestic prices of staples increased the most nourishment", World Bank Policy Research Working Paper and we had data for income distribution are summa- 5215, which builds on a model developed by Senauer and Sur rized in Table 2. If there was an across the board aver- (2001) "Ending Global Hunger in the 21st Century: Projections for the Number of Food Insecure People", Review of Agricul- age increase in the price of calories by 61% in Mozam- tural Economics, 23 (1): 68-81 bique that would increase undernourishment incidence by approximately 763 thousand people - an 8% in- crease over 2008 levels. Similarly, if calorie prices rose by 21% and 15% in Kenya and Burkina Faso, under- nourishment incidence would increase by 5% and 3% respectively. These are significant numbers, particularly since malnutrition remains a key development chal- lenge in these countries. POVERTY REDUCTION & EQUITY GROUP * WWW.WORLDBANK.ORG/POVERTY 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP