Farmers’ response to soaring food prices in the Arab region

Abstract

Sharp increases in food commodity prices in 2007–2008 led to impacts on food security and poverty worldwide. This paper discusses the impacts on smallholder farmers in six Arab countries that all suffer, to varying degrees, from water scarcity, poverty and food insecurity. The analysis is based on a survey covering more than 1000 rural households in Egypt, Jordan, Morocco, Sudan, Syria and Yemen. It examines government responses to the price spike, price transmission from international to local markets, and farmers’ production decisions in response to these price changes. It also discusses how smallholder farmers, given the right policy support, could benefit from new opportunities offered by higher commodity prices. Higher international prices were transmitted to domestic markets in all six countries. The price transmission was high and immediate in countries with the least intervention in food markets. In countries with more interventions on imports and/or domestic food prices, the connection between international and domestic prices was generally low. The ability of smallholder farmers to benefit from higher domestic prices was limited by various factors: drought, higher input prices (especially fertilizer), and the timing of the price increases in relation to the crop cycle. The study makes several recommendations to enable smallholder farmers to better respond to market signals. These include better timing of announcement of policy decisions regarding price supports, better access to credit, safety nets to protect the poorest households, improved management of water resources, and simple financial instruments to protect against price volatility.