The State of Food Security in the World
Reducing price volatility and
improving nutrition
Shenggen Fan
Director General
International Food Policy Research Institute
1st Brussels High-Level Lecture on Food Security and Development
21 November 2011
Key messages
 Undernutrition and micronutrient deficiencies
remain pervasive
 High and volatile food prices hurt consumers and
producers
 A changing global landscape presents
challenges and opportunities
 Urgent policy actions and innovative approaches
are needed to go beyond business as usual
Shenggen Fan, November 2011
925 million people are hungry?
Number of hungry, 1969-2010
Number of hungry by region, 2010
9
4
6
5
8
4
Source: FAO 2010
Source: FAO 2010
Methodology for measuring hunger is being revised to include:
• household expenditure surveys
• indicators to capture multidimensional nature of food insecurity
(FAO, 2011)
Shenggen Fan, November 2011
26 countries with extremely
alarming/alarming levels of hunger (2011 GHI)
GHI components:
•Proportion of undernourished
•Prevalence of underweight in children
•Under-five mortality rate
Source: von Grebmer et al. 2011
Shenggen Fan, November 2011
Sub-Saharan Africa and South Asia are
hotspots of child undernutrition
Prevalence of stunting in
children under-5, 2003-08
Source: UNICEF 2009
Prevalence of underweight
in children under-5, 2003-08
Source: UNICEF 2009
Shenggen Fan, November 2011
“Hidden hunger” remains pervasive…
Prevalence of micronutrient deficiencies
Source: HarvestPlus 2011
Shenggen Fan, November 2011
…2 billion+ suffer from micronutrient
deficiencies
 Iron deficiency anemia
• Africa and South Asia have the highest prevalence
• In some parts of India, 90% of girls suffer from this
deficiency
 Vitamin A deficiency
• 163 mil. are vitamin A deficient in developing countries
• 44.4% of children in South Asia suffer from this
deficiency
 Iodine deficiency
• 1.7 bil. people worldwide are affected by iodine deficiency,
and 1.3 bil. of them are in Asia
Source: UNSCN 6th Report and Bharati et al. 2009
Shenggen Fan, November 2011
Food security crisis in Horn of Africa
Crop & livestock loss
(3 consecutive poor rainy
seasons)
+
Poor governance
(Somalia)
+
Pre-existing refugee crisis
(e.g. Dadaab at full capacity pre-crisis)
=
Source: UNHCR and USAID, 2011
Increased malnutrition, death, and refugees
Urgently need immediate and long-term solutions to crisis
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Rising food price volatility
Shenggen Fan, November 2011
Two food price spikes in 3 years…
FAO Food Price Index
300
250
Meat
Global Cereal Prices (US$)
900
Dairy
Cereals
700
Maize
Wheat
Rice
200
500
150
300
100
100
50
All-time high of 238
points reached
Maize up 99% since June 2010
Source: Data from FAO 2011
Note: For Food Price Index 2002-2004=100
Shenggen Fan, November 2011
…and increasing variability in food prices
Coefficient of variation, 2005-11 (%)
25
Maize
20
Wheat
Rice
15
10
5
0
Source: Authors calculations with data from FAO 2011.
Shenggen Fan, November 2011
Transmission of global food prices to local
markets
200
180
Price transmission of staple food crops
in parts of SSA (June 07-08)
174 ETHIOPIA
160
(Minot 2011)
158 MALAWI
Percent
140
120
100
78 TANZANIA
80
60
78
MOZAMBIQUE
20
73 ZAMBIA
69 KENYA
40
39 GHANA
32 CAMEROON
53
MALI
54
0
RWANDA
25 SOUTH
AFRICA
Increase in domestic price as % of the world price increase
100 = full price transmission
Shenggen Fan, November 2011
 75% of global prices were
transmitted to African
prices
Data: from Minot 2011
 Positive price transmission
also in East and South
Asia and Latin America
 Degree of transmission
depends on trade policies
and protection of domestic
markets
(Fan, Torero and Headey 2011)
Financial speculation on agriculture
commodities?
Number of trades on futures contracts
(millions)
Monthly volumes of futures trading 2002-11
Source: Torero 2011 with data from CBOT 2011
• Volume of commodity futures traded have risen
• Speculation may have played a role during the recent food price crises
(Robles, Torero, and von Braun 2009; Torero 2011)
Shenggen Fan, November 2011
Strong link between oil prices and food
prices
250
2005 = 100
200
 Rising oil prices cause food
prices to increase, rather
than the reverse
Food
Oil
(Heady and Fan 2010)
150
 Rising oil prices make
biofuels more profitable,
rather than agricultural
production more expensive
100
50
(Abbott, Hurt, and Tyner 2008)
Source: IMF 2011
Note: Oil = Ave. crude oil price of U.K. Brent, Dubai, and West Texas
Intermediate
Biofuel expansion is driving food-fuel competition
Shenggen Fan, November 2011
Low global grain stocks
 Low stocks can lead to
large price increases
and market breakdown
 Record low grain stocks
contributed to global
food crises both in 1973
and 2007
(Torero 2011)
 At the onset of the 2007
crisis, stock-to-use ratio
for global grains hit its
lowest point since the
1960s
Source: FAO 2011
Shenggen Fan, November 2011
(Schnepf 2008)
Declining investment in agriculture
Share of agriculture expenditure by
region (% of AgGDP)
Official development assistance to
agriculture
ODA to agriculture
South Asia
Sub-Saharan Africa
15
Percent
30
Latin America & Caribbean
10
Constant 2009 US$ billions
20
% of total ODA (rightscale)
30
25
25
20
20
15
15
10
10
5
5
0
0
5
0
Source: IFPRI 2010
Shenggen Fan, November 2011
Source: OECD 2011
Percent
East Asia & Pacific
High and volatile food prices hurt poor
consumers
Self-reported food insecurity, SSA
% of households reporting problems in
affording food in last 12 months
2006/2007
2007/2008*
80
2008/2009*
70
 Evidence of impacts based on
household surveys remain
limited
 Ethiopia: More female-headed
hhs suffered from food
shortages - 67% compared to
58% of male-headed hhs
60
50
40
30
(Kumar and Quisumbing 2011)
20
 Ecuador, Haiti, Nicaragua,
Panama, and Peru: Reduction
in calorie intake (0.95% – 15%)
10
0
(Robles and Iannotti 2011)
Source: Headey 2011
Shenggen Fan, November 2011
High food prices hurt poor producers?
• Majority of poor producers are also net buyers of
food
• Increasing input and transport costs can reduce
profit margins
• Excessive volatility hampers long-term planning
and lower incentives to invest
• Poor producers benefit only if they are
net sellers of food
• Poor producers will profit if input costs
do not rise in parallel
(Fan, Torero and Headey, 2011)
Shenggen Fan, November 2011
Global food security
challenges and opportunities
Shenggen Fan, November 2011
Global food security challenges are large
Weak institutions
Low capacity
High and volatile
food prices
Lack of evidence-based
policies
Conflict
Rising energy
prices
Shenggen Fan, November 2011
©Hugh McLeod
Thin and
uncompetitive
markets
Climate change
Poor governance
Poor governance
Poor policies
underinvestment in agriculture
and rural development
Biofuel expansion
Natural resource
constraints
Population
growth
Gender inequality
Demographic
changes
Global population continues to rise
Population growth, 1960-2050
 New projections show global
population is not expected to
stabilize as earlier forecasted
 Global population projected to
surpass 10 billion by 2100
 Growth will come primarily
from developing countries and
urban areas
(United Nations 2011)
Source: CropLife International 2010
Shenggen Fan, November 2011
Natural resource scarcities will threaten
food production
Global loss of annual net primary productivity due to land
degradation, 1981-2003
Source: Bai et al . 2007 (LADA, FAO/ISRIC)
Source: Cordell et al. 2009
Physical and economic water scarcity
With “business as usual,” high water
stress by 2050 puts at risk globally:
Source: World Resources Institute 2009
Shenggen Fan, November 2011
•
52% of population
•
49% of grain production
•
45% of GDP
Biofuel expansion could add pressure
on food prices
Total crop production (‘000s kt)
Total biofuel production (Mil. liters)
EU-27 Oilseed
80,000
EU-27
70,000
USA
150
450
Brazil Sugarcane
400
USA Maize* (right-scale)
Brazil
60,000
350
100
50,000
300
250
40,000
200
30,000
50
150
20,000
100
10,000
* Maize and other
coarse grains
0
0
1995
2000
2005
2010
2015
2020
0
1995
2000
2005
Source: FAO-OECD, 2011
2010
2015
(2008-10 to 2020, OECD/FAO 2011)
2020
Source: FAO-OECD, 2011
Biofuel production is expected to grow by 70-140%
Shenggen Fan, November 2011
50
Climate change will drive food prices up
World food prices, 2010–2050 (2010=100)
250
2010
2050 no CC
2050 CC
200
150
100
50
0
Wheat
Maize
Rice
Source: IFPRI IMPACT (Nelson et al. 2010)
Note: Average of four GCM, A1B, A2 ,B1, B2 Scenarios
Shenggen Fan, November 2011
Foreign land acquisitions offer risks and
opportunities
Foreign farmland acquisitions in Africa,
2007-09
 Potential to boost FDI,
but have implications for
food security and
livelihoods
Need for:
 Information systems at
global and national level
on land deals
 Evidence-based
research on impacts
Source: Atlas des Futurs du Monde, 2010; IFPRI, 2009; FAOSTAT; WDI
Shenggen Fan, November 2011
EU and US economic crises have broad
implications
Real GDP growth annual (%)
Source: IMF 2011
Prospects for world GDP growth (%)
Source: IMF 2011
The probability of global growth below 2% is now substantially
higher than earlier this year (IMF 2011)
Shenggen Fan, November 2011
Changing global landscape is creating
windows of opportunity
 Emerging countries play a bigger role in the global
economy
 Private sector is a growing partner for the public
sector and development initiatives
 Agriculture and nutrition are moving up on global
agenda
 Inclusive institutions, efficient markets and
evidence-based policies are needed
Shenggen Fan, November 2011
Emerging countries now play a bigger role
in the global economy
Emerging countries outward FDI
flows (US$ millions)
350000
Distribution of FDI projects from
emerging & developing countries (%)
120
Brazil
300000
250000
To developing economies
To developed economies
To transition economies
China
100
India
80
58%
200000
63%
60
150000
40
100000
20
50000
0
0
2007
Source: UNCTAD 2011
Shenggen Fan, November 2011
2010
Source: UNCTAD with data from Financial Times
fDi Markets 2011
Substantial role of private sector
 Offer effective investment, unique expertise, and
innovation at a greater scale
 Public-Private Partnerships (PPPs):
• lower transaction costs and risks
• improve quality of innovation
• accrual of abilities, skills and resources (Hartwich et al. 2008)
 Examples of promising initiatives
• Nestlé Popularly Positioned Products → Private initiative to improve
nutrition of poor consumers through fortification
• Indian Rural Business Hubs → PPP to help rural entrepreneurs
access inputs, markets, training, etc.
• Pepsico and China's Ministry of Agriculture → PPP to promote
sustainable farming
Shenggen Fan, November 2011
Transformation of supply chains
 Agrifood industry transformed along entire supply
chain:

Socioeconomic factors, e.g. income growth/urbanization
 Policy reforms, e.g. market liberalization/privatization
 Emergence of supermarkets and
large wholesalers/processors
 Higher quality supply chains
Potential food security impact: Lower food prices for urban consumers
BUT lower market participation among poor producers
(Minten and Reardon 2008)
Shenggen Fan, November 2011
Progress made towards CAADP target of
6% agricultural growth in SSA
Avg. Annual Agricultural GDP Growth (%)
20
5-year avg, 2005-2009 (unless otherwise noted)
10
CAADP 6% Target
8 countries
have met
target
0
-10
* 2004-2008
** 2003-2007
*** 2002-2006
Shenggen Fan, November 2011
The CGIAR is changing the way it does
business
 New vision and strategic objectives
[Food for People, Environment for People, and Policies
for People]
 Broadened research mandate to include
nutrition and health
 Country-led approaches and inclusive
partnerships
 Results-oriented strategy
Shenggen Fan, November 2011
CGAIR Program 4: Agriculture for
improving nutrition and health
1. Enhancing nutrition
along the value chain
2. Biofortification
3. Prevention and
control of agricultureassociated diseases
4. Integrated
agriculture, nutrition,
and health programs
and policies
Shenggen Fan, November 2011
Urgent policy actions and
innovative approaches are needed
Shenggen Fan, November 2011
Promote smallholder productivity
 Invest in agricultural R&D and infrastructure
•
•
Agricultural research access to high-quality seeds and
fertilizer e.g. drought & flood resistant crops
Develop more nutritious foods e.g. biofortification
 Promote climate-smart agriculture
•
Foster “triple wins” in adaptation/mitigation/productivity
e.g. soil nutrient management in Kenya
•
Improve land and water productivity through sustainable
farm practices and new technologies
 Link smallholders to value chains and markets
•
Exploit innovative mechanisms e.g. producers’
associations, contract farming and PPPs, or pro-poor
ITCs
Shenggen Fan, November 2011
Improve smallholder resilience
 Strengthen reach of productive social safety nets
• Ensure secure and smooth food consumption e.g. conditional
food transfers
• Especially for young children and women e.g. maternal and
child nutrition programs
• Enable savings, investments and assets build-up
 Increase access to risk management tools
• Provide poor farmers protection from weather, health and
price shocks e.g. weather index-based insurance for crops
and livestock
• Improve affordability of insurance and investments in
weather-tracking infrastructure
Shenggen Fan, November 2011
Invest in productive social protection
programs
 Better-targeted and more productive social
protection policies need to:
• Secure basic livelihoods
• Protect poor people from risk and vulnerability
 Explore new approaches, e.g. cross-sectoral
social protection, to reach poor more
effectively
• Ethiopia Productive Safety Net Program (PSNP):

Part of broad food security program
 Access to safety nets and ag. support more beneficial for
ag. productivity and food security than stand alone
programs (Gilligan, Hoddinott, and Taffesse 2009)
Shenggen Fan, November 2011
Reform global food architecture
 Support transparent and free global trade
• Eliminate harmful trade restrictions and prevent new ones
 Create global and regional grain reserves
• Locate in poor food importing countries i.e. Horn of Africa
 Minimize food-fuel competition
• Curtail use of grain feedstock to produce biofuels
 Monitor global food prices and speculation
• Support global information system (G20’s AMIS) or
IFPRI’s Excessive Food Price Variability Early Warning
System
Shenggen Fan, November 2011
Country-led programs are crucial
Geneva
Islamabad
Kathmandu
Dhaka
Hanoi
Guatemala
City
Kinshasa
IFPRI offices
Bujumbura
Johannesbur
g
CSSPs*
Project offices
 Improved access to information
 Cross-country mutual learning
 Capacity building
 Policy dialogue
Note: * CSSPs = Country Strategy Support Programs
Shenggen Fan, November 2011
DRC Country Strategy Support Program
 Assessment of institutional and capacity
challenges in agric. policy planning process
• Lack of sustainable funding and lack of demonstrated
benefits and impact of improved CSO participation
• Weak institutions and inadequate/aging staff in key publicsector organizations
 Future research agenda includes:
• Development domains combining agronomic potential,
infrastructure etc.
• Economy-wide analysis to assess potential impacts of
investments on growth and poverty
Shenggen Fan, November 2011
In conclusion
 The state of food security in the world remains
precarious
 A changing global landscape presents
challenges and opportunities
 Urgent actions are needed to promote an
agenda with greater support for food security
 Innovative approaches are needed to go
beyond business as usual
Shenggen Fan, November 2011