Co-inventions, uncertainties and global food security

We study the relationship between the extent of participation in global agricultural value chains (GAVCs) and food prices at the country level. Using longitudinal data on a sample of 138 countries for the period 2000–2015 and a shift‐share instrumental variable design, we study how the extent of a country's participation in GAVCs in a given year relates to food price levels and volatility in that same country and in the same year. We document a mean–variance trade‐off, finding that on average, participation in GAVCs is associated with a decrease in consumer food price levels but an increase in food price volatility. Looking at a country's upstream (i.e., closer to producers) or downstream (i.e., closer to consumers) positioning in GAVCs, we find that food price volatility is associated more strongly with downstream participation than with upstream participation.

This paper analyzes price transmission from the global commodity market to domestic food markets for a large set of countries. First, a theoretical model is developed to explain price transmission for different trade regimes. Drawing from the competitive storage model under rational expectations, it is shown that domestic prices can respond instantaneously to changes of global prices even if no trade takes place but future trade is expected. Using a global database on food prices, we constructed national and international grain price indices. With an autoregressive distributed lag model, we empirically detect countries in which food prices are influenced by global commodity prices, including futures prices. Mapping transmission elasticities with the number of people below the poverty line, who typically spend a large share of their income on food, we were able to estimate the size of vulnerable population. Our empirical analysis revealed that 90 % of the global poor (income below $1.25 per day) live in countries where domestic food prices respond to international prices – but the extent of price transmission varies substantially. For 360 million poor people, international prices are transmitted to their country at rates of 30 % or higher within 3 months.

The Transmission of Oil and Food Prices to Consumer Prices Evidence for the MENA Countries

This paper investigates the effects of global oil and food price shocks to consumer prices in Middle East-North African (MENA) countries using threshold cointegration methods. Oil and food price shocks increase domestic prices in the long run, whereby the impact of food prices dominates. While global prices are weakly exogenous, consumer prices respond to deviations from the equilibrium relationship. The short run adjustment pattern exhibits asymmetries and is particularly strong after positive shocks. Downward rigidities on wages may play a crucial role in this regard, as the relatively weak reactions of consumer prices after negative shocks are related to labour market institutions and public subsidies. The more rigid the regulations the more pronounced are the asymmetries. Robustness checks show that international price shocks do not affect GDP growth.

The Transmission of Oil and Food Prices to Consumer Prices: Evidence for the MENA Countries

Global food security has been a hot topic since the large spike in world food prices in 2008. Between 2006 and 2008, global food prices rose by 60 per cent. The spike is estimated to have increased by 100 million the number of people considered to be ‘food insecure’. Demonstrations and riots occurred in more than 30 countries across the Middle East, Africa, Asia and Latin America, and in Haiti food riots led to the toppling of the prime minister.

The Food Crises and Political Instability in North Africa and the Middle East

An upsurge in global food prices in 2008 led to significantly higher food prices across the developing world. Global commodity prices have since declined but still remain volatile, but at the same time local food prices remain high in many countries. This study examines the potential impacts of the rise in food prices on poverty—income based poverty and calorie-based poverty- focusing on Pakistan, and its rural and urban areas. For this purpose, we used HIES data collected in three waves 2005–06, 2007–08 and 2010–11. Price elasticities are computed using binary Logistic regression method. The study results show that price of wheat, rice, milk, meat, fruit, pulses appear to distinguish the status of a household. Price elasticities shows that urban households are hit harder than rural households in calorie-poverty model. Overall, rising food prices are likely to lead higher poverty in Pakistan, as the negative impact on net consumers outweighs the benefits to producers. Therefore, effective strategy for eliminating poverty is far more concerned with price increases. Safety net programs can be more effective, but geographic targeting and other investments to strengthen safety nets are necessary to ensure that fewer people are affected by future crises. Government policies oriented towards relieving the food price pressure on the Pakistani poor should aim at lowering the prices of wheat, rice, eggs, oil, milk, and chicken.

An upsurge in global food prices in 2008 led to significantly higher food prices across the developing world. Global commodity prices have since declined but still remain volatile, but at the same time local food prices remain high in many countries. This study examines the potential impacts of the rise in food prices on poverty-income based poverty and calorie-based poverty- focusing on Pakistan, and its rural and urban areas. For this purpose, we used HIES data collected in three waves 2005-06, 2007-08 and 2010-11. Price elasticities are computed using binary Logistic regression method. The study results show that price of wheat, rice, milk, meat, fruit, pulses appear to distinguish the status of a household. Price elasticities shows that urban households are hit harder than rural households in calorie-poverty model. Overall, rising food prices are likely to lead higher poverty in Pakistan, as the negative impact on net consumers outweighs the benefits to producers. Therefore, effective strategy for eliminating poverty is far more concerned with price increases. Safety net programs can be more effective, but geographic targeting and other investments to strengthen safety nets are necessary to ensure that fewer people are affected by future crises. Government policies oriented towards relieving the food price pressure on the Pakistani poor should aim at lowering the prices of wheat, rice, eggs, oil, milk, and chicken.

▀ We expect CPI inflation to slow markedly this year, dropping below the 2% target by the autumn. The inflationary impulse from the 2016 depreciation is fading and should partially reverse, while global food and energy prices are expected to stabilise. Base effects will become increasingly important. ▀ CPI inflation reached a five‐and‐a‐half‐year high of 3.1% in November, up from a little over 1% a year earlier. The 2017 pick‐up in inflation was the result of a perfect storm of a weaker pound, higher oil prices and sharp rises in domestic electricity bills. But inflation has subsequently slowed, reaching 2.5% in March. And, after a brief hiatus, we expect the downward trend to continue as we move through the year. ▀ The key driver of lower inflation will be weaker core pressures. In line with the literature, there is already evidence that the impact of sterling's depreciation is fading, and we think that the pressures could partially reverse if sterling continues to strengthen. We see little prospect of an offsetting escalation in domestic cost pressures. The recent pick‐up in wage growth has been muted and a further acceleration above 3% looks unlikely while there remains slack in the labour market. ▀ The food, petrol and energy categories contributed 0.8 ppt to CPI inflation last year, compared with a drag of 0.5 ppt in 2016, as stronger global pressures combined with the weaker pound. But as global prices have been more subdued of late, by the end of 2018, we expect these categories to be contributing 0.5 ppt to CPI inflation. ▀ The final element behind the expected slowdown in inflation is base effects. The comparison with last year's strong price pressures will depress the 2018 inflation rate, and we see the base effects being at their strongest mid‐year. ▀ We think it unlikely that such a slowdown in inflation would derail the MPC from hiking interest rates twice this year. But it could temper its hawkishness in 2019.

<sec><st>Background</st> The recent rises in global food prices have passed on to India and all the Indian states experienced huge price rise for all the major food items including rice and wheat. Recent studies showed that India’s impressive economic growth had not transformed to better maternal and child nutrition outcomes, and it is unknown whether the rising food price cause child malnutrition. We investigated the effect on food price shock on child nutrition in Andhra Pradesh, one of the largest Indian states where more than 85 million people live. </sec> <sec><st>Methods</st> We used a natural experiment study design with multilevel regression model. We used wasting as main outcome measure as this would better measure the effects of short-term fluctuation (price) of food intake on child nutrition outcome and price as the predictor after controlling for potential confounders such as socio-economic-demographic variables and episodes of natural disaster and social security programs. We utilised the food consumption and anthropometric measures from DFID-Young Lives data, a longitudinal cohort study set up in Andhra Pradesh in 2002 with a sample size of 2000 children of 6–18 months who had been followed in 2006 and 2009. This data was merged with the monthly price data from various market hubs collected by National Sample Survey Organisation since 2000, and we used the district level price of 12 highly consumed food items among Indian households. </sec> <sec><st>Results</st> The food price increased steadily from 2000 but had more than doubled after 2006. The per capita food intake had declined and the proportion of food expenditure to total expenditure increased after 2006. The percentage of children wasted was 19% in 2002 and 18.4% in 2006 but increased to 28% in 2009. An increase in the price each of the major food items increased the odds of wasting among the children, for e.g. one unit increase in price of rice resulted in 5% increase in the odds of wasting (adjusted odds ratio: 1.05; p < 0.001). </sec> <sec><st>Conclusion</st> The rising food prices adversely affected the childhood nutrition in India. The development programs to improve the maternal and child health will become ineffective if the policy measures to control the rising food price and to increase food security for people are not implemented. </sec>

We study the impact of global food price shocks on domestic inflation in a large group of countries. For advanced economies, a 10% increase in global food inflation raises domestic inflation by about 0.5 percentage point after a year; however, the impact has declined over time and become less persistent. The global food price shocks of the 2000s had a much bigger impact on domestic inflation in emerging and developing economies than in advanced economies. This could reflect the smaller share of food in the consumption baskets in advanced economies. We also provide evidence that inflation expectations are more anchored in advanced than in emerging economies, which could also explain the smaller impact on inflation from global food price shocks.

Dramatic increases in international agricultural commodity prices began in 2006 and peaked in July 2008. An equally remarkable and rapid decline of those prices then ensued, accompanied by extreme volatility in those prices. The trend in food prices lagged the rapid increases in other commodity prices, including oil and metals, but accompanied those other prices in the downward part of the cycle. Not all agricultural commodities increased to the same extent—grains and oilseed prices increased the most, with rice among the most expensive at the peak and rising as much as crude oil, while prices of some African exports (cocoa, coffee and cotton) increased to a much smaller extent than the grains. High commodity prices quickly raised farmgate prices in developed countries. In developing countries, poor market integration and border barriers may have limited pass-through of these prices to the farmgate, but there was more rapid food price and general inflation than occurred in many developed countries. Countries were impacted to differing extents, and food riots occurred in the most affected cases. It has been noted that underlying fundamentals of food price inflation differ by the extent of development, as poor countries have smaller distribution costs but higher budget shares in basic staples. Import dependence, tradable versus non-tradable status of grains and whether there were home goods substitutes influenced the extent of price transmission. Many developing countries reacted by altering trade and domestic agricultural policies and attempted to stabilise domestic markets. Importing countries reduced tariffs and taxes in many cases, and food subsidies were increased in some cases. Export taxes were enacted to protect domestic users, and bans of exports were applied in some extreme cases—explaining the especially large increase in rice prices. While impacts on domestic prices vary across country cases, disentangling the role of policy response from market integration would require further work. Policy responses were complicated by disagreement at the time that prices were rising as to whether the increases would be permanent or short lived, which in turn depends on the root causes of the increases—over which there has been considerable debate. Consensus has emerged on some factors, while controversy over macroeconomic relationships persists. They were also complicated by dynamic adjustments of related prices, which were not instantaneous. For example, fertiliser prices did not fall until several months after grain prices fell. Policy responses of national governments in Africa and elsewhere in the developing world contrast sharply with initiatives recommended by the international community. International organisations, development banks and donors emphasise emergency relief and longer term agricultural development, whereas national governments heavily utilised market interventions through trade and domestic policy. In this paper, we will first explore the factors that have been offered to explain the run-up and subsequent down-turn in agricultural commodity prices. Explanations have included supply and utilisation events, competition for grains and oilseeds as food versus fuel, and financial factors such as currency changes that exaggerated prices measured in dollars. Interactions between these factors will matter to the resulting outcomes, so specific contributions cannot be assigned. Moreover, debate persists on the exogenous mechanisms driving these changes, which are often interrelated (e.g., worldwide economic boom and then global recession, speculation in commodities). The goal will be to identify factors likely to drive commodity prices in the future and to provide some understanding of the dynamics and persistence of the observed global price changes. The next part of the paper will explore how those global price changes were transmitted to developing country markets. The extent of farmgate price changes and retail food price adjustments will be documented to the extent feasible. The roles of border policy, domestic agricultural policy, market integration and retail food margins will be considered. Special emphasis will be placed on what actual policy adjustments were taken and how well they worked. Given the presumed underlying causes of high and then low food prices, and the uncertainty of future global commodity prices, policy options now available to developing countries will be explored. These will include short-run safety nets, market interventions and long-run incentives to agricultural development. In this part, special emphasis will be put on what happened in Africa and how it should respond in the future. Some of the key issues in the current debate on expanding African agricultural sectors, including price stabilisation and fertiliser subsidisation, will be explored. In the process, we will evaluate how far various methodologies have taken us in providing an understanding of the consequences of these recent events, and providing a sound basis for policy recommendations.

Aims of the Series Agricultural and food policy lies at the heart of many pressing societal issues today and economic analysis occupies a privileged place in contemporary policy debates. The global food price crises of 2008 and 2010 underscored the mounting challenge of meeting rapidly increasing food demand in the face of increasingly scarce land and water resources. The twin scourges of poverty and hunger quickly resurfaced as high-level policy concerns, partly because of food price riots and mounting insurgencies fomented by contestation over rural resources. Meanwhile, agriculture's heavy footprint on natural resources motivates heated environmental debates about climate change, water and land use, biodiversity conservation and chemical pollution. Agricultural technological change, especially associated with the introduction of genetically modifi ed organisms, also introduces unprec- edented questions surrounding intellectual property rights and consumer preferences regarding credence (i.e., unobservable by consumers) char- acteristics. Similar new agricultural commodity consumer behavior issues have emerged around issues such as local foods, organic agriculture and fair trade, even motivating broader social movements. Public health issues related to obesity, food safety, and zoonotic diseases such as avian or swine fl u also have roots deep in agricultural and food policy. And agriculture has become inextricably linked to energy policy through biofuels production. Meanwhile, the agricultural and food economy is changing rapidly throughout the world, marked by continued consolidation at both farm production and retail distribution levels, elongating value chains, expanding interna- tional trade, and growing reliance on immigrant labor and information and communications technologies. In summary, a vast range of topics of wide- spread popular and scholarly interest revolve around agricultural and food policy and economics. The extensive list of prospective authors, titles and topics offers a partial, illustrative listing. Thus a series of topical volumes, featuring cutting-edge economic analysis by leading scholars has consider- able prospect for both attracting attention and garnering sales. This series will feature leading global experts writing accessible summaries of the best current economics and related research on topics of widespread interest to both scholarly and lay audiences.

The Tikkun Community should take justified pride in twenty-five years of fighting effectively for social justice and building from Jewish traditions and teachings in waging these fights. In that spirit I wish to pose what may seem like an out-of-nowhere question: are you following the current activities of the Commodities Futures Trading Commission?My guess is that almost everyone is answering “no.” This is a serious problem. Despite its obscurity as a federal government regulatory body, the Commodity Futures Trading Commission (CFTC) is making decisions now that could determine whether hundreds of millions of people experience malnutrition, hunger, and perhaps even starvation in the coming years.Futures markets for food, oil and other commodities have long been used by farmers and others to maintain stability in their business operations and plan for the future. For example, under a “plain vanilla” wheat futures contract, a farmer could spend $50,000 planting her crop now, and agree now with a commodities futures trader to sell the crop at a fixed price when the crop is harvested.But such simple agreements became increasingly overwhelmed by big-time market speculators in 2000 when the markets were deregulated, along with the rest of the U.S. financial system. Deregulation produced severe swings in the global prices of food and oil.The most severely impacted victims of commodity price volatility are people in developing countries, where it is common for families to spend 50 percent or more of their total income on food. The United Nations found that sharp price increases in 2008—a 40 percent average increase across a range of different food items—led to malnourishment for 130 million additional people. Low-income people in developing countries have been further hammered because, even though global food prices did fall sharply from their mid-2008 peak, they are still today, on average, about 20 percent higher than they were in 2006. Moreover, just between June and September of this year, the price of wheat rose by 72 percent, demonstrating that the extreme food price spike in 2008 was not a one-time aberration.The Dodd-Frank financial reform bill that passed Congress in July does create a framework for effectively regulating commodities futures markets. However this new law is weak on details, leaving these decisions to the day-to-day regulators at the CFTC.The Dodd-Frank law includes a prohibition on any sort of agricultural swap trading—the single most active area for speculative gambling on food products. But Dodd-Frank also allows the CFTC to consider exemptions from this prohibition. Not surprisingly, large numbers of Wall Street lawyers have drafted letters explaining why these exemptions should be granted generously. Dodd-Frank will be rendered toothless if Wall Street prevails on this and related issues. Speculators will again be permitted to gamble on hunger.So let’s keep up the fight for social justice on all terrains, including the Commodities Futures Trading Commission.