Impact of
Food Prices, Income and Income
Distribution
on Food Security in
Oman
Hemesiri Kotagama, Salwa Abdullah Nasser Al
Jabri, Houcine Boughanmi and Nejib Guizani
College of Agricultural and Marine Sciences,
Sultan Qaboos University, Sultanate of Oman
3rd Gulf Research Meeting,
University of Cambridge, 11-14 July
2012
1
Focus of the Presentation
• Food security is defined as a situation when:
– all people, at all times, have physical and
– economic access
– to sufficient, safe and nutritious food to meet their
dietary needs and food preferences for an active
and healthy lifestyle (FAO, 2003).
• Economic access is a function of:
– Food Prices, Income and Income Distribution
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2012
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Stimulus
“ Rather than asking how to cope with
hunger and famine, the question might be
how to escape their threat …
…strategies include economic growth with
unchanging income distribution and growth
with distribution.”
Timmer, C. Peter (2000) The macro dimensions of food security:
economic growth, equitable distribution, and food price stability,
Food Policy 25, pp. 283-295.
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2012
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Focus of the Study
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Economic Access and Food
Security: Global Scenario
• The world food security improved, since the
green revolution during 1940 to 1970s.
• Since then the challenge of achieving food
security has not been one of producing
sufficient food for the growing population but
a problem of distribution and access to food,
which partly depends on income and its
distribution (Leathers and Foster, 2004).
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Area cultivated has
increased …
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Cereal Productivity has
increased …
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New technology is being
adopted …
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Recent Phenomenon: Food
Price Surge
• The surge and volatility of food prices since
year 2008 has reawakened the need to examine
food security, particularly in developing
nations, where income is a dominant constraint
to access food and in nations that are highly
dependent on international markets for their
food needs.
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Surge in food prices …
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Surge in food prices …
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Surge in food prices …
• Since 2007
– “silent tsunami of hunger is sweeping the world.”
• Within 2 years
– Food prices rose by 83%.
– Wheat and rice prices have nearly tripled (300%).
• 1% increase in food price reduces the calorie intake by 0.5%
among the poor.
• Rising food prices have pushed 100 m people below poverty
line.
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Factors contributing to higher
food commodity prices
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Short-term Response of Arab countries
to address the recent food price surge …
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Oman’s position:
past and trend
• Oman up to 1970’s with
low population (0.65 m)
and subsistence farming
has been nearly selfsufficient in food..
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Oman’s position:
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past and trend
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Oman’s position:
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past and trend
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Oman’s position:
past and trend
• % Domestically Produced (2005)
–
–
–
–
–
–
–
–
Milk
Red meat
Poultry eggs
Poultry meat
Fish
Dates
Total fruits
Total vegetables
29%
34%
53%
35%
134%
108%
70%
56%
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2012
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Oman’s position:
past and trend
Vegetable Production (Tons)
400000
300000
Fruit s
200000
Veg
100000
0
1995 2000 2005 2006 2007
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Oman’s Position: Present
• Annual inflation in Oman in the past 18 years
upto 2008 years was 1% or less.
• Inflation in 2008, 10%.
• Food prices in 2008 have increased by
–17-20%.
• The family food expense
– increased by 11% in 2008 compare to 2007.
• 12% of Omani families spend
– about 60% of their income on food .
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Oman’s Position: Present
30
25
GENERAL
INFLATION
20
FOOD INFLATION
15
10
5
0
-5
1999
2000
2001
2002
2003
2004
2005
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2006
2007
2008
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Oman’s Position: Present
Others
Beverage-non alcoholic
Sugar products
Fruits&veg
Oil&fats
%change
Dairy&eggs
Fish
Meat&poultry
Cerals products
0.0
20.0
40.0
60.0
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80.0
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Food in Oman: Household
•
The average food consumption in the Sultanate of Oman is 1.89 Kg /person /day
compared 2.5 Kg/person/day by an average American
•
An average Omani family (average of 8 persons) spends about 161.439 OR for food
(MNE, 2001) and it has increased to 205.365 O.R in 2008 (MNE, 2010).
•
Expenditure on food, is the largest percentage of the total household income which
was about 31% (MNE, 2010). In the United States of America the share of food
expenditure of the household income is about 13% and it is 17% in Canada, 45% in
Indonesia (FAO, 2010).
•
A family is classified as poor if it spends more than 60% of the household
expenditure on food (MNE, 2010).
– Based on this standard 12% of Omani families are classified as poor based on Household
Expenditure and Income Survey conducted in 2007-2008 compared to 8% in 1999-2000 (MNE,
2010).
– It is apparent that there has been a slight increase in the poverty level in Oman.
•
Surge in food prices could be a reason for increased poverty.
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Food in Oman: Person
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Oman’s Short Term
Response
• Secured 200,000 tonnes of rice, sufficient to
feed the population for 2 years. (Observer, 4th
May 2008)
• State workers salaries were increased by 43%.
• Price controls (Price Control Authority)
• Food reserves improved
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Oman’s long-term trends …
Focus of this study
• Objective of the Study
–Decompose the impact of growth in
per capita income and its
distribution on changes in food
security in Oman, with increasing
food prices.
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Analytical Methodology
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Food Security Threshold:
NAPLCD Model
Objective function:
n
Min
P
X
i
i 1
… Eq.1 (Cost of food)
i
Subject to:
n
a
i 1
X
i
ij
X
i
 i
 N
…Eq.2 (Nutritional requirements)
j
n

X
…Eq.3 (Food preferences)
i
i
Xi  0
Where:
Pi = Price of food (OR/Kg)
X i = Quantity of food (Kg/Day/Family)
i
= Number of food items, 1, … n.
a i j = Amount of nutrient j in food i (Relevant unit/Kg of food)
j = Number of nutrients, 1, … m.
N
j
= Recommended nutrient intake for nutrient j (Relevant unit/Family/Day)
i 
Xi
(Proportion of a food item over the total quantity of food)
n
X
i
i
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Food Security Measures:
Concept
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Food Security Measures:
Head Count and Gap
𝐹∝
=
1
𝑞
𝑖 =1
𝑁
∝
𝑠−𝑦 𝑖
. 5
𝑠
Where:
Fα is food security index for α = 0, 1 or > 1 .
α is a sensitivity parameter.
N is the population size.
s
is
food
security
threshold,
disposable
income
level
below
which
the
household
is
food
the
ratio
insecure. NAPLC is used in this study.
yi is (HDIF) disposable income for food of the ith household.
q is number of households y < s (food insecure).
nehw F α = 0; Head Count Index of Food Insecurity (F 0)
1.
nehW α = 0 equation 5 will be as:.
𝑞
𝐹0 =
𝑁
F0
referred
is
to
as
the
Head
Count
Index
of
Food
Insecurity
(HCIFI)
as
it
is
between the number of the people who are food insecure (y < s) over the total population of
people (N), given the HDIF.
2.
F when α = 1; Food Security Gap Index (F1)
When α = 1 equation 5 becomes:
𝐹1 =
1
𝑁
𝑞
𝑖 =1
𝑠−𝑦 𝑖
𝑠
F1 is a measure of amount of income that is required to bring all
household that are food
insecure to s (food security threshold), weighted by population size and s.
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Conceptual illustration of the impact of increase in income and
improved income equality on food security
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Measures of Decomposition
•
Food security measure at a time t (Ft) can be represented by equation 9.
Ft = F (s/ µt,Vt)
•
•
•
•
•
•
Where:
s is a food security threshold,
µt is the mean of the distribution of disposable income for food,
Vt is the variance of the distribution of disposable income for food.
Decomposition
Ft+1 – Ft = F (s/ µt+1,Vt) - F (s/ µt,Vt) + F (s/ µt+1,Vt+1) - F (s/ µt,Vt) + Residual
...Eq.10
•
•
F (s/ µt+1,Vt) - F (s/ µt,Vt) is the impact on food security due to growth in income.
F (s/ µt+1,Vt+1) - F (s/ µt,Vt) is the impact on food security due to change in income
distribution towards equality.
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RESULTS
AND
DISSCUSION
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Percent change of food Consumer Price Index (CPI)
of all food in relation to base year 2003 (MNE , 2009)
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Percentage fulfillments of recommended levels of nutrients by
an Omani household (per day per family)
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Percent of income spent on food with increasing
household income
Income (OR/Month/Household)
% Expense on food of total household income
less than 100
0.78
100-199
0.78
200-299
0.72
300-399
0.66
400-499
0.54
500-599
0.42
600-699
0.33
700 more
0.24
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NAPLCD value under different
food access scenarios
OR/ Month/ Household
Scenario / Year
2003
2004
2005
2006
2007
2008
Purchased food items (PFI)
153.140
154.539
158.001
159.343
168.654
198.900
173.272
174.855
178.772
180.290
190.825
225.048
(PFI+FIP) (30%)
139.440
140.839
144.301
145.643
154.954
185.201
Weighted Average
163.123
164.649
168.430
169.895
180.064
213.093
Purchase food items and
restaurant food
(PFI+PFR) (70%)
Purchase food items and
produce
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The Lorenz curves for income distribution for
years 1999/2000 and 2007/2008
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Measures of food insecurity revealing the impact
of price increases on food security
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The cost of alleviating food insecurity
Parameter
Data and Estimate
1. NAPLC 2008 (OR/Month/Household)
213.00
2. Estimated F0
0.29
3. Estimated F1
0.07
4. Average food insecurity gap (OR/Month/Household) (Equation 8)
50.68
5. Oman's population (Million)
2.30
6. Number food insecure [F0X(5)]
0.67
7. Total food gap [(6) x (4) x 12 months] (Million OR/Year)
8. GDP 2008 market prices (Million OR)
405.64
23185.10
1.75
9. Food insecurity gap/GDP as %
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Decomposition of food security changes due to
growth and redistribution of income
Without a change in food prices
Income Distribution
Change in incidence of Food Security
Actual
2003
2008
Growth
Redistribution
-6.31
-6.92
change
Food Security Headcount
24.02
9.70
-14.32
Rate (F0)
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Conclusions
• The recent surge in food prices have decreased food security in Oman.
• However in the long-term food security in Oman has improved due
increased income and its equalizing distribution.
• Short term interventions by the government on assisting vulnerable low
income households would alleviate the situation.
• Continuing the implementation of egalitarian economic policies on
investments in regional rural development, education, health etc will revert
and further improve the food security situation in the Sultanate of Oman.
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Thank you
Environmental Cost and Changing Face of Agriculture in the Gulf States
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