Domestic Food Prices Research Articles

Global Biofuel Use and China's Food Security: Price and Policy Transmission Paths

The global fossil energy crisis and the pressure on environmental protection led to countries facing new issues related to energy and economic development. Biofuels are becoming favored by more and more countries. Along with the increase in biofuel production in major grain-producing countries, both global food consumption and prices have increased in recent years. This has raised growing concerns about food security. The current controversies about biofuels and food security include two aspects: the price crisis [1, 2, 3] and the resource crisis [4, 5, 6, 7, 8, 9, 10]. As China is a major grain producer and trader, the development of biofuels will inevitably affect its food security. With more than 1.3 billion people, China's food security is an important part of global food security. From 1990 to 2012, China's corn yields increased significantly but fluctuated frequently. Over the same period, the demand for corn increased strongly.1 As global grain supply is tight, it is difficult for China to satisfy domestic demand by international trade. If domestic supply cannot meet demand, then domestic food prices are likely to rise.

Inflation Dynamics in Ghana

The study sought to investigate the key factors that influence inflation dynamics in Ghana. The study found that inflation in Ghana is determined primarily by inflation persistence, reflecting price expectations, domestic food prices, petroleum prices and exchange rate. The other determinants of inflation used in this study such as money supply and world food prices weakly affect domestic inflation. The study also recommended that anchoring inflation expectations and managing exchange rate misalignment remains key policy strategies in any effort and attempt by the monetary authorities to achieving and maintaining price stability in the country coupled with moderating the negative effects of other inflation determining factors.

The effects of agricultural trade openness on food price transmission in Latin American countries

Trade of agricultural commodities has grown significantly in most Latin American countries (LAC) over the last two decades. However, after the international food price surges in 2006-08 and 2011-12 concerns about food access of the poor arose. Within a panel framework containing six LAC (Argentina, Brazil, Chile, Colombia, Mexico and Peru), we used a single equation error correction model to identify possible cointegrating relationships between the food consumer price index (CPI) and a set of trade related and domestic variables. The main focus of the study was to examine how different levels of trade openness impact international food price transmission to domestic markets. Our results confirm that deeper market integration increases global price transmission elasticities. In other words, more agricultural trade openness proves to elevate food CPIs during global price spikes. Thus, for poor consumers world price shocks can be deteriorating in the short-run and domestic food prices will slowly converge to a higher long-run equilibrium. Especially in increasingly integrated economies, effective policies to buffer food price shocks should be put in place, but must be carefully planned with the required budget readily available. We also found that exchange rate appreciations can buffer price shocks to a certain extent and that monetary policies seem to be an appropriate means for stabilizing food prices to safeguard food access of the poor population.

Feeding unrest

While both academics and politicians have long acknowledged the connection between food price shocks and so-called ‘food riots’, this article asks whether rising domestic consumer food prices are a contributing cause of sociopolitical unrest, more broadly defined, in urban areas of Africa. In order to unravel the complex and circular relationship between rising food prices and unrest, an instrumental approach with country fixed effects is used to isolate causality at the country-month unit of analysis for the period 1990 through 2012. Two instrumental variables, changes in international grain commodity prices and local rainfall scarcity, are evaluated and used individually and jointly as instruments for changes in domestic food prices. The main finding is that a sudden increase in domestic food prices in a given month significantly increases the probability of urban unrest, especially spontaneous events and riots, in that month. Undeniably, more fundamental economic and political grievances are also drivers of such events and are likely to determine how the unrest ultimately manifests, even when triggered by rising food prices. Although more research is necessary to determine why people choose particular protest methods and targets, the findings of this research provide evidence that sociopolitical unrest of different types is driven, or at least triggered, by a consumer response to economic pressure from increasing food prices regardless of the cause of the increase.

Implications of increasing world oil scarcity for national food security in South Africa

ABSTRACTEconomic and social stability depend on a healthy, functioning and affordable system of agricultural production and food distribution. In recent years, however, international and domestic food prices have risen considerably, partly as a result of rising oil prices. A growing body of literature indicates that world oil supplies will become increasingly scarce and expensive in the coming years, due to the depletion of easily extractable reserves. This poses a significant threat to agricultural production in South Africa, which is overwhelmingly derived from oil-intensive commercial farming. To mitigate the risk of serious disruptions to food production and distribution, the agriculture sector may require government support in the form of temporary fuel subsidies and, possibly, prioritised fuel access in order to cope with oil price shocks and potential fuel scarcity. Furthermore, to boost resilience and improve sustainability for the longer term, the agriculture sector should embark on a programme aimed at gradually reducing the reliance on petroleum products by adopting practices such as conservation agriculture and agro-ecological farming methods. In addition, since the current food distribution system is heavily reliant on road transport, and thus exposed to fuel price and supply shocks, the mitigation strategy should aim at a partial relocalisation of agricultural production and consumption, for example, by developing urban agriculture.

Food insecurity and its determinants

Expansion of aggregate food supplies within developing countries themselves is strongly associated with reduced undernourishment. It is not sufficient to rely solely on aggregate economic growth or reductions in poverty incidence to deliver improved food security. But the evidence also shows that higher food prices significantly increase the rate of undernourishment. It is therefore important to stimulate agricultural output without raising domestic food prices. Improvements in agricultural productivity achieve that, but agricultural protection aimed at food self‐sufficiency does not, because the objective of reducing imports is achieved through an increase in domestic food prices. Although this process delivers benefits to those food insecure people who are net sellers of food, in most poor countries their number is exceeded by the food insecure people who are net buyers of food. Increased food prices make the latter group more food insecure. Food self‐sufficiency does not imply food security.

Trade and Economic Implications of Low Level Presence and Asynchronous Authorizations of Agricultural Biotech Crops in China

China has developed its own strong biotech program as well as a biosafety regulation system for genetically modified (GM) commercial production and import, but has yet started to seek approval for its GM events in any foreign country. China's biosafety regulations on biotech crop import, which requires that import applications start after approval from the country of origin and the zero tolerance rule, will have important implications for major GM producing countries that export GM products to China in terms of trade, price, and production and also to China itself in terms of food price and economic welfare. As China continues to expand its biotech crop commercialization, to minimize its trade conflicts with its exporting destination countries, China may also need to revisit its current policy of not seeking approval for its GM events in its major export destination countries in the future. A less trade-distorted regulation on low level presence (LLP) can benefit from the comparative advantage of agricultural production, stabilized domestic food price, and increased total social welfare. Global cooperation should be set up to enhance the safety management and also lower the multifarious and unnecessary costs of LLP.

How Vulnerable are Arab Countries to Global Food Price Shocks?

We estimate pass-through effects of international food price movements into domestic food prices for 18 countries in the Middle East and North Africa, using threshold regressions. International price movements transmit to various degrees into domestic prices. Transmission is mostly asymmetric, pushing domestic price levels up as increases in international food prices are typically passed through, but declines are rarely transmitted. This situation is indicative of policy and market distortions, notably the presence of food subsidies in the context of fiscal constraints. Hence, both international prices and their volatility matter for domestic inflation, yet domestic factors also play a role.

How Strong Do Global Commodity Prices Influence Domestic Food Prices in Developing Countries? A Global Price Transmission and Vulnerability Mapping Analysis

This paper analyzes the transmission from global commodity to domestic food prices for a large set of countries. First, a theoretical model is developed to explain price transmission for different trade regimes. Drawing from the competitive storage model under rational expectations, it is shown that domestic prices can respond instantaneously to global prices even if no trade takes place but future trade is expected. Using a global database on food prices, we construct national and international grain price indices. With an autoregressive distributed lag model, we empirically detect countries in which food prices are influenced by global commodity prices, including futures prices. Mapping transmission elasticities with the size of the population below the poverty line which spends typically a large share of its income on food, we are able to estimate the size of vulnerable population. Our empirical analysis reveals that 90 percent of the global poor (income below 1.25$/day) live in countries where domestic food prices respond to international prices - but the extent of transmission varies substantially. For 360 million poor people, international prices transmit to their country at rates of 30 percent or higher within three months.

Can Export Restrictions be Disciplined Through the World Trade Organisation?

AbstractA number of major agricultural exporting countries responded to high food prices from 2007 to 2011 by imposing export restrictions on agricultural commodities in efforts to constrain domestic food price inflation. These restrictions reduced the volume of internationally traded food and exacerbated international price spikes. Net food‐importing countries were faced with growing import bills, and non‐governmental organisations that target food security scaled‐back programme commitments and appealed for increased funding. There have subsequently been a chorus of calls for the development of a formal international framework that could discipline the use of agricultural export restrictions; the agreements of the World Trade Organisation (WTO) have been targeted as possible fora for such disciplines. We present a framework in which the efficacy of such disciplines can be analysed and conclude that constraints on agricultural export restrictions are not likely to be effective within the WTO's Dispute Settlement Understanding for two reasons. First, the timelines for dispute settlement in the WTO are too long to be useful in disputes about export restrictions during periods of high food prices. Second, the withdrawal of tariff concessions, or trade retaliation, that could be authorised in such cases would not be a credible response for many complainant countries.

Food Prices and Poverty Reduction in the Long Run

Standard microeconomic methods consistently suggest that, in the short run, higher food prices increase poverty in developing countries. In contrast, macroeconomic models that allow for an agricultural supply response and consequent wage adjustments suggest that the poor ultimately benefit from higher food prices. In this paper we use international data to systematically test the relationship between changes in domestic food prices and changes in poverty. We find robust evidence that in the long run (one to five years) higher food prices reduce poverty and inequality. The magnitudes of these effects vary across specifications and are not precisely estimated, but they are large enough to suggest that the recent increase in global food prices has significantly accelerated the rate of global poverty reduction. The policy implications of these findings are therefore nuanced: short-run social protection is justified in the face of high food price volatility, but passing on higher prices to producers in the long run is an important means of reducing poverty in the poorest countries.

Did the 2008–2009 Food and Financial Crises Affect Child Mortality? The Case of Sub-Saharan Africa

We estimate an aggregate model of child mortality on a panel of 40 African countries over the period 1995–2007. This model is then used to assess the impact of the 2008–2009 food and financial crises on child mortality, by comparing the number of child deaths computed under a “business-as-usual scenario” with those computed under the actual 2008–2009 “crisis scenario”. According to the simulation results, the 2008–2009 food price rise and recession caused a statistically non-significant additional 27,000 child deaths. However, if the 2008–2009 changes in other determinants of child mortality are factored in, the number of child deaths declined by 15,000. This unexpected result is explained by the fact that the effects of the rise in domestic food prices and the recession were offset in most of the region by the protective effect on the under-five mortality rate of a surge in food production, and by a rise in public expenditure on and foreign aid to the health sector.

International Transmission of Food Prices and Volatilities: A Panel Analysis

High and volatile food prices pose a significant policy challenge around the world, and an understanding of the dynamics of food price inflation and volatility is essential in designing appropriate policy responses. Using the panel data for 72 countries from 2000 to 2011, the paper assesses the international transmission of food price inflation and volatilities as well as the effects of various internal and external factors on domestic food price inflation and volatility. The paper offers evidence in support of the international transmission of food price inflation and volatility. Specifically, the paper finds that the domestic food price inflation in Asia is strongly associated with the lagged value of global food price inflation (using the FAO food price index), while volatility spillovers from global to domestic food prices are rather contemporaneous. The paper also finds that both national food price inflation rates and volatilities are strongly associated with both intra- and extra- regional food price inflation rates and volatilities, respectively. The findings also suggest that higher economic growth rates, greater shares of food in merchandise imports, and smaller increases in the share of food in merchandise imports lead to lower domestic food price inflation. An appreciation of local currency, greater political stability, and higher income level are also found to lower domestic food price inflation. On the other hand, higher economic growth rates lead to lower volatilities of food prices.

Examining the Determinants of Food Prices in Developing Asia

How the price of food is determined has become a critical issue, given the drastic surges in prices in recent years and the prevailing expectation of further increases. Along this line, this paper examines the sources of food price fluctuations in 11 developing Asian countries. The working model is a block vector autoregression (VAR), and 10 variables are classified into three blocks — world, region, and country — depending on their origin and nature. Empirical evidence shows that the regional shock plays a pivotal role in explaining the variations of domestic food prices, particularly at medium- to long-term horizons. Contrary to conventional belief, the world food price shock contributes little to the dynamics of domestic food prices in developing Asia. The findings suggest Asian food markets are more integrated regionally than with the world market. The short-run movements of domestic food prices are accounted for largely by the country’s own shock. Taken together, our findings suggest that promoting food price stability would require efforts at the regional level as well as at the domestic level, reflecting the influence of region-specific factors. Extensions to the developing countries in other regions produce similar findings on the determination of food prices.

Optimal Food Price Stabilization in a Small Open Developing Country1

In poor countries, most governments implement policies aiming to stabilize the prices of staple foods, which often include storage and trade measures insulating their domestic market from the world market. It is of crucial importance to understand the precise motivations and efficiency of those interventions, because they can have consequences worldwide. This paper addresses those issues by analyzing the case of a small, open developing country confronted by shocks to both the crop yield and foreign price. In this model, government interventions may be justified by the lack of an insurance market for food prices. Considering this market imperfection, the authors design optimal public interventions through trade and storage policies. They show that an optimal trade policy largely consists of subsidizing imports and taxing exports, which benefits consumers at the expense of producers. Import subsidies alleviate the non-negativity of food storage. In other words, when stocks are exhausted, subsidizing imports prevents domestic price spikes. One striking result: an optimal storage policy on its own is detrimental to consumers, since its stabilizing benefits leak into the world market and it raises the average domestic price. By contrast, an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices.

Retail food prices in the Czech Republic - the influence of selected factors

During the last decade (2000–2010), we have witnessed an unprecedented rise in food prices, especially from the world and European market viewpoint. The article aims to analyze the development of prices in the food market in the Czech Republic and to identify the influence of global and European prices development on domestic food price development and price development of selected food products. The article focuses primarily on the sensitivity of Czech food price development and especially on sensitivity of the selected commodity aggregations price development on the global and European market price growth. Furthermore, it is analyzed the impact of changes in value added tax rate from 10% to 14% on food prices in general and then on the prices of selected food products in retails network. The results of the analysis are following. The Czech food market reacts sensitively to changes in food prices on the global market as well as on the EU market but the EU price development is determining for the CR. In terms of price response to change in the VAT rate, it appears that the growth rate is not absorbed on the production side but it is largely transferred to consumer prices. The selected food sample also showed high responsiveness in the development of prices to changes in the EU market prices but there are certain variations given by specifics of the Czech market.

Self-reported food insecurity in Africa during the food price crisis

This article analyzes data on self-reported food insecurity of more than 50,000 individuals in 18 Sub-Saharan African countries over the period 2005–2008, when global food prices increased dramatically. The average level of self-reported food insecurity was high but remarkably stable over time, at about 54%. However, this average hides large heterogeneity, both within countries and across countries. In eight of the sample countries, self-reported food security improved, while it worsened in the ten other countries. Our results suggest that heterogeneous effects in self-reported food security are consistent with economic predictions, as they are correlated with economic growth and net food consumption (both at the household and country level). Specifically, in the face of rising food prices, self-reported food security improved on average in rural households, while it worsened in urban households – a finding that holds when using global prices or domestic food prices. Improvements in food security over time were also positively correlated with net food exports and GDP per capita growth. While the self-reported indicator used in this paper requires further study and one should carefully interpret the results, our findings suggest the need for a critical evaluation of the currently used data and numbers in the public debate on food prices and food insecurity.

Crop Failures and Export Tariffs

We analyse a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. Our first results is that export tariffs are strategic complements and that for poor harvests equilibrium tariffs can explode (shedding some light on recent volatility in world food prices). We also show that the strategic interplay between governments of export countries and traders can give rise to a number of peculiar comparative statics. For example, it can be in the interest of traders to have poor harvests in one of the countries. Finally, we demonstrate that traders as well as consumers in import countries can benefit from cooperation between grain exporting countries.

Impacts of Changes in Exchange Rate and International Prices on Agriculture and Economy of the Sudan: Computable General Equilibrium Analysis

<p>Changes in exchange rate and international prices greatly affect food availability, the agricultural sector, and Gross Domestic Product (GDP). This study quantifies the effects of change in exchange rate and world prices on Sudan’s agricultural production, imports, exports, and GDP. Special emphasis has been placed on sorghum and wheat, the main food grains. A Standard Computable General Equilibrium model has been developed and used for the analysis. The main objective is to contribute to policy-making process for enhancing food security and social welfare in the Sudan<strong>.</strong></p> <p>Currency depreciation would reduce wheat imports and increase its domestic production, increase sorghum export, increase domestic output and export of sesame and cotton, and improves GDP; and vice versa for appreciation. Appreciation favors urban (wheat) consumers, whereas depreciation favors rural (sorghum) consumers.</p> <p>Increasing world price of wheat would decrease its imports, whereas that of sorghum would encourage its production and export, and increase domestic food prices. GDP decreases due to investment reduction<strong>. </strong></p> <p>It is recommended that wheat import should be conditioned on hard currency availability and food gap, while maintaining stable exchange rate that strike a balance between encouraging sorghum exports and wheat imports. It is also recommended to encourage innovation of fast food from traditional grains to curb the shift to wheat consumption.</p>

Food crisis and export taxation: the cost of non-cooperative trade policies

This paper aims to assess the rationales for export taxes in the context of a food crisis. First, we summarize the effects of export taxes using both partial and general equilibrium theoretical models. When large countries aim to maintain constant domestic food prices, in the event of an increase in world agricultural prices, the optimal response is to decrease import tariffs in net food-importing countries and to increase export tariffs in net food-exporting countries. The latter decision improves national welfare, while the former reduces national welfare: this is the price that must be paid to keep domestic food prices constant. Small net food-importing countries are harmed by both decisions, while small net food-exporting countries gain from both. Second, we illustrate the costs of a lack of regulation and cooperation surrounding such policies in a time of crisis using a global computable general equilibrium (CGE) model, mimicking the mechanisms that appeared during the recent food price surge (2006–2008). This model illustrates the interdependence of trade policies, as well as how a process of retaliation and counter-retaliation (increased export taxes in large net food-exporting countries and reduced import tariffs in large net food-importing countries) can contribute to successive augmentations of world agricultural prices and harm small net food-importing countries. We conclude with a call for international regulation, in particular because small net food-importing countries may be substantially harmed by those policies that amplify the already negative impact of a food crisis.