FOOD SECURITY Concepts, Basic Facts, and Measurement Issues June 26 to July 7, 2006 Dhaka, Bangladesh

Rao 4a: Factors in Food Security 1: The Food Chain, and Sources of Its Instability Learning: The learning goal is to understand the nature and role of the food chain in determining FS and the most common problems of supply and price instability.

Brief Contents definition and aspects of the food chaindefinition and aspects of the food chain general and special food chain dependencygeneral and special food chain dependency physical versus financial flows along the food chainphysical versus financial flows along the food chain functions of the marketing system: information, physical and social accessfunctions of the marketing system: information, physical and social access the concept of food entitlements; direct or exchange entitlement failuresthe concept of food entitlements; direct or exchange entitlement failures seasonal variations in operations of the food chainseasonal variations in operations of the food chain supply instabilitysupply instability

The Food Chain Recall 3 aspects of FS (other than utilization): availability, access, stabilityRecall 3 aspects of FS (other than utilization): availability, access, stability We now examine their determinants and how they might become sources of vulnerability.We now examine their determinants and how they might become sources of vulnerability. We do so by looking at the features of the "food chain" & entitlementsWe do so by looking at the features of the "food chain" & entitlements Food chain refers to the sequence and steps from planting to final consumption.Food chain refers to the sequence and steps from planting to final consumption.

Figure 4.1

General and Special Food Chain Dependency We all are dependent on many different commodity chainsWe all are dependent on many different commodity chains The complexity of "our" food chains depends on what we consume.The complexity of "our" food chains depends on what we consume. To access the food we need food entitlements.To access the food we need food entitlements. For many HH, their food entitlement results directly from the food chain.For many HH, their food entitlement results directly from the food chain. Such HH are doubly dependent on the food chain, for both access and availability.Such HH are doubly dependent on the food chain, for both access and availability. The size of this doubly dependent group depends on the population dependent on agricultureThe size of this doubly dependent group depends on the population dependent on agriculture

Physical Flows Along a Food Chain Agents (producers, transporters, processors, wholesalers, retailers, consumers) are linked by physical and financial flowsAgents (producers, transporters, processors, wholesalers, retailers, consumers) are linked by physical and financial flows Physical flows can be shown in a supply utilisation account as at right:Physical flows can be shown in a supply utilisation account as at right: Large farmers Harvest Seed Waste Village traders Local traders Co-operative traders Village traders Small farmers Large farmers Local traders Private millers Waste Local traders Small farmers Large farmers Local traders Private millers Waste

Financial Flows Along a Food Chain Financial flows correspond to the physical flowsFinancial flows correspond to the physical flows They go in reverse direction - from final consumer to primary producerThey go in reverse direction - from final consumer to primary producer Financial & physical flows determine income distribution in the chainFinancial & physical flows determine income distribution in the chain At each stage, Revenues = Cost of purchased inputs + Value addedAt each stage, Revenues = Cost of purchased inputs + Value added In turn, Value added = Return to factorsIn turn, Value added = Return to factors + Taxes/subsidies + Profits/losses So VA entitlements go to labor, capitalists, landowners, etc. and to government So VA entitlements go to labor, capitalists, landowners, etc. and to government Commodity chain analysis helps us analyze how entitlements ariseCommodity chain analysis helps us analyze how entitlements arise

Functions of the Marketing System Marketing systems have 3 broad functions:Marketing systems have 3 broad functions: –logistical function –informational function –distributional function. Logistical function subdivided into 3 aspects:Logistical function subdivided into 3 aspects: –transformation over space (transportation) –transformation over time (storage, seasonal or long-term) –processing (e.g., milling, canning, etc.) marketing and VA in marketing rises with economic developmentmarketing and VA in marketing rises with economic development

Information Markets channel price signals and so help allocate foodMarkets channel price signals and so help allocate food Market failures produce information failures and so coordination failuresMarket failures produce information failures and so coordination failures In regulated markets, prices may be fixed and so cannot be information signalsIn regulated markets, prices may be fixed and so cannot be information signals

Distribution Markets and prices also help distribution the benefits of the division of laborMarkets and prices also help distribution the benefits of the division of labor The distribution role is politically sensitive and invites government interventions.The distribution role is politically sensitive and invites government interventions.

The Food Chain and Household Food Entitlement Typical HH has "multiple" sources of food entitlementTypical HH has "multiple" sources of food entitlement Own-production, exchange, labor, land rent, profits are all examplesOwn-production, exchange, labor, land rent, profits are all examples Are the poor more dependent on exchange than rich? No generalization possibleAre the poor more dependent on exchange than rich? No generalization possible Well-known U-shaped marketed surplus shareWell-known U-shaped marketed surplus share Growing specialization and long-distance trade produce greater all-round dependence on marketsGrowing specialization and long-distance trade produce greater all-round dependence on markets Evolution of complex food chains can be good for national FS: due to gains of specialization. But it can lead to more instability, especially under scarcity and more so for poorer regionsEvolution of complex food chains can be good for national FS: due to gains of specialization. But it can lead to more instability, especially under scarcity and more so for poorer regions The same can be said for household FS: there are gains but also threats, especially to the poorThe same can be said for household FS: there are gains but also threats, especially to the poor

Key Determinants of Entitlement Employment opportunities and the terms of employment;Employment opportunities and the terms of employment; Access to productive physical assets, and the terms of that access, whether agricultural or non-agricultural, whether privately owned, borrowed or rentedAccess to productive physical assets, and the terms of that access, whether agricultural or non-agricultural, whether privately owned, borrowed or rented Access to productive public goods & services supplied with or without subsidiesAccess to productive public goods & services supplied with or without subsidies Access to skills/knowledge helpful in getting and using resources and opportunitiesAccess to skills/knowledge helpful in getting and using resources and opportunities Rates of return on productive assets owned or operated by the householdRates of return on productive assets owned or operated by the household Terms of consumptionTerms of consumption Access to public consumption goods & services supplied with or without subsidiesAccess to public consumption goods & services supplied with or without subsidies Access to transfers, from government, non-government groups or other householdsAccess to transfers, from government, non-government groups or other households

The Entitlements Argument: Supply Shortfalls or Entitlement Failures? The argument that food insecurity has much more to do with insufficient access to food (due to entitlement failures) rather than a general shortage in production or supplies is really quite central.The argument that food insecurity has much more to do with insufficient access to food (due to entitlement failures) rather than a general shortage in production or supplies is really quite central. A precondition for food security is, therefore, not only the availability of adequate and reliable food supplies but also sufficient access to food supplies for the household to meet their requirements.A precondition for food security is, therefore, not only the availability of adequate and reliable food supplies but also sufficient access to food supplies for the household to meet their requirements. The importance of access to food as the other essential precondition of food security was emphasized at the World Food Summit and reflected in its Commitment number two "We will implement policies aimed at eradicating poverty and inequality and improving physical and economic access by all, at all times, to sufficient, nutritionally adequate and safe food and its effective utilisation".The importance of access to food as the other essential precondition of food security was emphasized at the World Food Summit and reflected in its Commitment number two "We will implement policies aimed at eradicating poverty and inequality and improving physical and economic access by all, at all times, to sufficient, nutritionally adequate and safe food and its effective utilisation".

Entitlements Concept and Argument Applies to HH AND National Levels, Too. At national level, entitlements means availability of foreign exchange to pay for imports.At national level, entitlements means availability of foreign exchange to pay for imports. When poor countries get low prices for what they sell and pay high prices for what they buy, this is a kind of national entitlements failure of the market. Other factors include:When poor countries get low prices for what they sell and pay high prices for what they buy, this is a kind of national entitlements failure of the market. Other factors include: –tendency for declining international terms of trade –running into external debt traps –over-dependence on foreign capital leading to financial crisis e.g., Indonesia –international rules of the game that may actually impoverish the poor further

Seasonal Variations in the Operation of the Food Chain Seasonal variation arises in many parts of the food chainSeasonal variation arises in many parts of the food chain Food cultivation and harvests are obviously seasonalFood cultivation and harvests are obviously seasonal But so can food marketing on account of storage and transport constraintsBut so can food marketing on account of storage and transport constraints

Seasonal Rural-Urban Price Differentials in Indonesia

Supply Instability Supply instability is a principal cause of temporary food insecuritySupply instability is a principal cause of temporary food insecurity Caused by unfavorable weather, regular seasonality or other temporary or regular supply disruptionsCaused by unfavorable weather, regular seasonality or other temporary or regular supply disruptions Supply instability may affect particular groups or regions more than othersSupply instability may affect particular groups or regions more than others HH with no credit, usually the poor, may be especially hard-hitHH with no credit, usually the poor, may be especially hard-hit