PAT Markets and Food Security Session 1.2 WFP Markets Learning Programme Price Analysis Training

Learning objectives After this session, participants should be able to: Explain the importance and value of market analysis in food security assessment Identify the essential links between markets and food availability; and between markets and food access WFP Markets Learning Programme Price Analysis Training

A quick review… Food Security… Definition? WFP Markets Learning Programme Price Analysis Training

Food Security A situation… …when all people, at all times, have physical & economic access to sufficient, safe & nutritious food to meet their dietary needs & food preferences for active, healthy life WFP Markets Learning Programme Price Analysis Training

Definitions for… Availability? Access? Utilisation? Market? Market: A place where buyers & sellers come together to exchange goods and services WFP Markets Learning Programme Price Analysis Training

So, why are markets important for food security? Markets Food Security As a group: discuss your assigned question: 1.What type of products do HHs exchange on markets? 2.Why are markets important for food access? 3.Why are markets important for food availability? 4.How can WFP use market interventions to address food insecurity? Quickly note responses on flip charts…you have 10 minutes. WFP Markets Learning Programme Price Analysis Training

1.What type of products do HHs exchange on markets? Food, cash crops, livestock, labour and other non-food items such as soap, charcoal, etc. For each HH, the types of product they exchange vary:  Pastoralist, cash cropper, subsistence farmer or daily labourer?  Rich or poor?  Depending on the season and on good year versus bad year Therefore, to understand the impact of markets, we have to find out about selling/buying patterns of our target groups WFP Markets Learning Programme Price Analysis Training 1.1.7

2.Why are markets important for food access?  HHs buy, sell, barter on markets, influencing their food availability, while prices they pay & receive, & their use of credit, influence HH income & expenditure  Each HH is confronted with price variation, influencing its ability to acquire food, & buying, selling, bartering patterns of HHs throughout the year & between years  HH food access influences individual food intake WFP Markets Learning Programme Price Analysis Training 1.1.8

3.Why are markets important for food availability? Let’s talk definitions first:  General food availability vs. local availability  Food intake: impacted indirectly by food availability, through food access Markets, or better: traders ensure that:  Food moving from food surplus zones to food deficit zones  Food being stored during surplus times for use during deficit times WFP Markets Learning Programme Price Analysis Training 1.1.9

3.Why are markets important for food availability? (continued) If markets don’t function well, they do not perform these functions, or only at large transaction cost Good speculation and bad speculation  ‘Good speculation’ if storage contributes to dampening price volatility  ‘Bad speculation’ if storage worsens price volatility, or if done at unreasonable profit margins WFP Markets Learning Programme Price Analysis Training

4.How can WFP use market interventions to address food insecurity? Improve market functioning / reduction of transaction cost, often with partners, to:  reduce (informal) taxes  improve infrastructure  broaden the number of traders  enhance trade credit provisioning, etc. Distribute cash or vouchers Local and regional procurement Purchase for Progress WFP Markets Learning Programme Price Analysis Training

the food security & nutrition framework (based on UNICEF Model) outcomes immediate underlying basic WFP Markets Learning Programme Price Analysis Training HH food access directly influences individual food intake

markets in the food security & nutrition framework WFP Markets Learning Programme Price Analysis Training Markets Food Security

To summarise, markets:  Influence food availability, co-determine purchasing and selling conditions, have an impact on food access and, subsequently, an indirect influence on individual food intake  Play a role in addressing food insecurity, through market interventions, local procurement and cash/voucher programmes Markets & Food Security Analysis Markets Food Security WFP Markets Learning Programme Price Analysis Training

Quick Case: Exercise 1.2.a. Government Policies in Pakistan Task: Read the Quick Case and, with a partner, answer the questions below. Government wheat policy tries to balance competing interests of producers and consumers. On production side, policy aims at increasing wheat yields, output, & support for farmer income. Increased wheat production seen as part of overall national FS strategy of reducing dependence on food imports for national food supplies. On consumption side, government attempts to enhance HH food security, particularly through ensuring availability of wheat flour at affordable prices and maintaining price stability. Food policy options are constrained, however, by overall fiscal constraints, as well as a desire to minimize fiscal subsidies on food. Moreover, the wheat procurement price has been seen as a major determinant of overall inflation because of its role as a wage good and an indicator of overall government price policy. Thus, wheat policy is somewhat constrained by inflation targets and inflation policy.  What is the Government doing to impact availability?  What is the Government doing to impact food access? Adapted from: Nyberg, Jennifer, “Pakistan Market Assessment – Earthquake Affected Areas”, WFP, 2005, page 10. WFP Markets Learning Programme Price Analysis Training

Sufficient food availability can be achieved through…  Domestic production  Imports (commercial and public imports)  Public transfers (e.g. food aid)  National/regional stocks …but market functioning is also crucial to food availability  Physical access (travel distance, time, seasonal access)  Market integration (transaction costs and trade flows) Markets and food availability Markets Food Security WFP Markets Learning Programme Price Analysis Training

Understanding food availability is essential to determining likely impact of market on HH food access Food availability is analyzed at two levels: 1. Macro-level analysis 2. Meso-level analysis Markets Food Security WFP Markets Learning Programme Price Analysis Training Markets and food availability: Two levels of analysis

1. Macro-level analysis of food availability – conducted through secondary data on the market environment  Market vulnerability to macro-economic conditions: economic growth & price volatility, international reserves  Policy environment : trade policies, regulations, institutions, food policy and interaction of grain reserves with markets, governance Markets Food Security WFP Markets Learning Programme Price Analysis Training Markets and food availability Macro-analysis

Meso-level analysis of food availability conducted through trader surveys & community interviews Seeks to understand market structure, conduct and performance (more on this in Session 1.4) This is the level of food availability analysis that we will conduct via our market visit and survey Markets and food availability Meso-Analysis Markets Food Security WFP Markets Learning Programme Price Analysis Training

Food access is determined by HH entitlements: The means of acquiring food is based on assets (land, labour, livestock, savings), through:  Direct entitlement (own production)  Trade/market entitlement Markets and Food Access The Concept of Entitlement Markets Food Security WFP Markets Learning Programme Price Analysis Training entitlement: The set of alternative bundles of goods and services that a person can acquire by converting his/her endowments, such as land and labour, through production, trade or gifts

Access to food is reduced with entitlement failures These reductions are likely due to market failures How do markets determine food access? HH Food Access Markets Food Security fall in wages rise in food prices loss of employment drop in cash crop or livestock prices WFP Markets Learning Programme Price Analysis Training

Many indicators of “entitlement” are asset and market-based:  relative prices  real incomes  market-related shocks What are the market indicators of “entitlement”? Markets Food Security Thus: to understand reductions of HH entitlement – i.e. of food access – we must understand the markets with which those HHs interact WFP Markets Learning Programme Price Analysis Training

Effective demand is key to HH food access How do markets determine food access? Effective Demand Purchasing Power Market Dependence Market Accessibility Livelihoods Analysis Markets Food Security Effective Demand: the quantity of a good or service that consumers are actually buying at the current market price. WFP Markets Learning Programme Price Analysis Training

Market Accessibility of HHs o Physical (distance) o Financial (price, credit…) o Social (gender, security…) How do markets determine food access? Effective Demand Purchasing Power Market Dependence Market Accessibility Livelihoods Analysis Purchasing Power: Economic access, HH income, Prices Market Dependence (involvement in markets) o On/in markets for goods (food, non-food, livestock…) & services (labour, credit, capital…) o Selling/buying behaviours: net seller/buyer, seasons and reasons of sales and purchases Markets Food Security WFP Markets Learning Programme Price Analysis Training Question for Plenary …and in your country? Which livelihoods are more/less profoundly integrated into local markets? Which are generally more impacted by severe food price shifts?

Market Food Access Markets in Food Security Analysis another view: the livelihoods perspective HH CASH AVAILABILITY Transfers Remittances Loans Food aid Commercial imports Agricultural inputs Extension Microfinance Food production Non-food production Employment HH Assets National food production and stocks Market Food Availability Markets Food Security WFP Markets Learning Programme Price Analysis Training

Markets as food source : Evidence suggests very few, if any, HHs are autarkic Majority of HHs buy more than they sell on markets Market participation and food security Markets Food Security autarkic: self-sufficient (here in terms of food) WFP Markets Learning Programme Price Analysis Training

Market Participation & FS Urban HHs - Senegal Urban Food Security Assessment, Analysis of Impact of High Food Prices on FS & Livelihoods of Urban Populations in Senegal (Urban to Semi-urban Centres of Pikine, Kaolack, and Ziguinchor), FAO / UNICEF / WFP, November –2008 Markets Food Security WFP Markets Learning Programme Price Analysis Training

Market Participation & FS Rural HHs - Madagascar Analysis of HH Food Security in Selected Districts of Madagascar WFP, Madagascar, September 2009 Markets Food Security WFP Markets Learning Programme Price Analysis Training

Small Group Work Exercise 1.2.c. The Marketastan File: Food Insecurity in Northern Province WFP Markets Learning Programme Price Analysis Training

Wrap-up: Markets & Food Security  Understanding how markets function, how interventions facilitate trade, helps identify how to alleviate negative impacts of shocks  Higher food prices make food access more difficult for HHs: most low-income smallholders are net buyers of food, often selling at low prices at harvest, buying back at high prices during lean season  Most vulnerable population groups: those who buy more food than they sell (net buyers), spend large share of income on food, have few coping strategies  These groups include urban poor, rural landless, pastoralists (who are particularly vulnerable: they face falling livestock prices as food prices rise, causing steep drop in purchasing power) WFP Markets Learning Programme Price Analysis Training