1 School of Oriental & African Studies Reducing Food Price Volatility for Food Security & Development: G20 Action December 2010 Andrew Dorward Centre for Development, Environment and Policy School of Oriental and African Studies University of London

Questions  What are the sources of food price instability?  What has happened to food prices?  What are the prospects?  What to do, by/ with who, how, where?  Why? 2 Paris, 1st December 2010

Causes of the 2008 spike? 3 Paris, 1st December 2010 Environmental changes Policy changes Population growth Economic growth

Causes of the 2008 spike? 4 Paris, 1st December 2010 Environmental changes Policy changes Population growth Economic growth Water scarcity Oil prices

Causes of the 2008 spike? 5 Paris, 1st December 2010 Environmental changes Policy changes Population growth Economic growth Biofuels Reduced subsidies Water scarcity Oil prices Reduced R&D

Causes of the 2008 spike? 6 Paris, 1st December 2010 Environmental changes Policy changes Population growth Economic growth Loss of land Biofuels Reduced subsidies Water scarcity Rising demand Oil prices Reduced R&D

Causes of the 2008 spike? 7 Paris, 1st December 2010 Environmental changes Policy changes Population growth Economic growth Higher prices Low stocks Stagnant productivity Falling supply Loss of land Biofuels Reduced subsidies Water scarcity Rising demand Oil prices Reduced R&D

Causes of the 2008 spike? 8 Paris, 1st December 2010 Volatility: price spikes Environmental changes Stakeholder stocking Financial speculation Production lags Policy changes Population growth Economic growth Higher prices Low stocks Stagnant productivity Falling supply Loss of land Biofuels Reduced subsidies Water scarcity Rising demand Oil prices Reduced R&D

Causes of the 2008 spike? 9 Paris, 1st December 2010 Volatility: price spikes Weather shocks Environmental changes Stakeholder stocking Financial speculation Production lags Policy changes Population growth Economic growth Higher prices Low stocks Stagnant productivity Falling supply Loss of land Biofuels Reduced subsidies Water scarcity Rising demand Oil prices Reduced R&D Oil prices Biofuels

Drivers of food price changes  Long term drivers  Policies  Environmental eg climate change  Population  Economic growth  Energy prices  Technical change / labour productivity  Short term drivers  Weather shocks  Policy shocks  Stocks  Distinguish between  Low, middle, high income economies / people?  Long and short term food prices  What has happened to food prices? 10 Paris, 1st December 2010

What has happened to food prices? Long term trend Decline relative to income, due to labour productivity increases from energy substitution & technical change Short term spike More expensive relative to other goods and services, relative to inputs 11 Paris, 1st December 2010

What has happened to food prices? 12 Paris, 1st December 2010

What has happened to food prices? Rich buyers, sellers Long term trend Decline relative to income, due to labour productivity increases from energy substitution & technical change Short term spike More expensive relative to other goods and services, relative to inputs 13 Paris, 1st December 2010

What has happened to food prices? 14 Paris, 1st December 2010

What has happened to food prices? 15 Paris, 1st December 2010

What has happened to food prices? Rich buyers, sellers Less / emerging poor (buyers & sellers) Poor (net buyers) Long term trend Decline relative to income, due to labour productivity increases from energy substitution & technical change Always high relative to income Short term spike More expensive relative to other goods and services, relative to inputs More expensive relative to income, more difficult to afford 16 Paris, 1st December 2010

What is going to happen?  Impacts on labour productivity, incomes, equity, economies, food security, food stocks, price variability?  Implications for international policies:  Increase stocks  Raise supply - productivity  Whose productivity where?  What constraints?  Low productivity traps, price tight ropes?  What policies, what technologies?  Reduce demand?  Manage risk 17 Paris, 1st December 2010  Rising energy prices?  Population growth  Water scarcity?  Economic growth  Climate change impacts?

What to do, how, by/with who, where? 18 Paris, 1st December 2010 Volatility: price spikes Weather shocks Environmental changes Stakeholder stocking Financial speculation Production lags Policy changes Population growth Economic growth Higher prices Low stocks Stagnant productivity Falling supply Loss of land Biofuels Reduced subsidies Water scarcity Rising demand Oil prices Reduced R&D Oil prices Biofuels

PreventCope Market State transparency agricultural R&D infrastructure insurance, options macro-economic management consistency rules inputs A output markets finance insurance safety nets institutions DC B Notes: Work in progress - stylised contents & location, instruments extend across & contribute to both prevention & coping; roles & providers differ between contexts (eg poor, less poor economies) & between levels (eg farm, national, regional, international) - especially for finance & insurance. Politicians are critical! Civil society? What to do, how, by/with who, where? finance

Why?  Low stable food prices critical for  Welfare of the poor – incomes, nutrition, health, child development, education, ……..  Development processes  International relations & security  Welfare / lifestyles of developed economies founded on  cheap mobile energy,  cheap food,  Technology & technical change  Institutions & institutional change  A critical G20 issue 20 Paris, 1st December 2010

higher labour productivity in food production Energy, materials, capital, technology, knowledge, institutions AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services

higher labour productivity in food production increased / constant per capita food availability Energy, materials, capital, technology, knowledge, institutions AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services

higher labour productivity in food production increased / constant per capita food availability releasing labour for production of other goods and services falling food prices relative to wages/income, Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services

higher labour productivity in food production increased / constant per capita food availability releasing labour for production of other goods and services falling food prices relative to wages/income, increased income available for purchase of non food goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services

higher labour productivity in food production increased / constant per capita food availability releasing labour for production of other goods and services falling food prices relative to wages/income, increased income available for purchase of non food goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services Increased demand for & supply of non-food goods & services

higher labour productivity in food production increased / constant per capita food availability releasing labour for production of other goods and services falling food prices relative to wages/income, increased income available for purchase of non food goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services increased / constant per capita ‘other’ availability releasing labour for production of other goods & services falling ‘other’ prices relative to wages/income, increased income available for purchase of goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing INDUSTRIAL, SERVICE, KNOWLEDGE REVOLUT- IONS Increased demand for & supply of non-food goods & services

higher labour productivity in food production increased / constant per capita food availability releasing labour for production of other goods and services falling food prices relative to wages/income, increased income available for purchase of non food goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services increased / constant per capita ‘other’ availability releasing labour for production of other goods & services falling ‘other’ prices relative to wages/income, increased income available for purchase of goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing INDUSTRIAL, SERVICE, KNOWLEDGE REVOLUT- IONS Increased demand for & supply of non-food goods & services Earlier(?) Positive feedbacks Capital, Technology, Knowledge, Health? Poverty reduction, Globalisation?

higher labour productivity in food production increased / constant per capita food availability releasing labour for production of other goods and services falling food prices relative to wages/income, increased income available for purchase of non food goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing AGRI- CULTURAL REVOLUT- IONS higher labour productivity, other goods & services increased / constant per capita ‘other’ availability releasing labour for production of other goods & services falling ‘other’ prices relative to wages/income, increased income available for purchase of goods & services Energy, materials, capital, technology, knowledge, institutions COORDINATION processes, scale, locations, populations, timing INDUSTRIAL, SERVICE, KNOWLEDGE REVOLUT- IONS Increased demand for & supply of non-food goods & services Later (?) Negative feedbacks Natural resource use, Waste, Environmental degradation, Biodiversity loss, Health? Inequity? ? Globalisation? Earlier(?) Positive feedbacks Capital, Technology, Knowledge, Health? Poverty reduction, Globalisation?

29 School of Oriental & African Studies Reducing Food Price Volatility for Food Security & Development: G20 Action December 2010 Andrew Dorward Centre for Development, Environment and Policy School of Oriental and African Studies University of London