FAO regional/subregional policy

consultations on volatile pricesconsultations on volatile prices

Briefing for Permanent Representatives on policy tools to

address food price volatility

Rome, 27 May 2011

• Justification for the consultations and objectives

• Examples of regional/subregional seminar agenda

Outline

• Information about past and future consultations

• Lessons learnt, and way forward

Justification

• FAO’s mandate to respond and support informed decision making of country members

• Price volatility and second price hike • Price volatility and second price hike in 4 years

• Experiences of reactions of member countries during the 2007/08 hike

• The need for collective decisions and actions to manage food price volatility in the future

Objectives

• Assisting governments of Member countries in designing their immediate actions in response to the current food price crisis, in particular:

– Providing opportunities to exchange experiences made during – Providing opportunities to exchange experiences made during the 2007/08 crisis

– Raise awareness of the various policy options and programmatic actions and their implications

– Identify needs and opportunities for technical support and financial assistance

– Identify next steps to be undertaken at country level

• Overview of food price situation at global and regional levels

• Macro-economic policies and trade measures

• Setting the stage at the global and regional level

• Short-term responses to high food prices- an assessment of the food crisis of 2007-2008 and

Examples of seminar agenda

and trade measures

• Consumer policies and programmatic actions

• Producer policies and programmatic actions

• Way forward

food crisis of 2007-2008 and lessons learned

• Long-term challenges

• Strategies and policy responses in the long-run

• How others can help

• Follow-up at county level

Example of policy options and

programmatic actions.

Three policy objectives:

1.Protecting consumers by reducing world (and domestic)

price transmission

2.Facilitating access to food by consumers

3.Increasing food production

Selected examples follow.

Reducing price transmission from world markets

Reduce import tax

Tax breaks for importers

Facilities for importers

-Lowers prices

-Stimulates imports

-Impact on budget

-Needs budget provisions

to avoid high deficit

-May contribute to higher

world pricesFacilities for importers

Simplify import

procedures

-Same as above

-Speeds up imports

-requires time, challenges

vested interests

Reduced, banned or

taxed export

-Lowers prices

-Medium and long term

implications

-Will contribute to higher

world prices

-Risk of smuggling and

corruption

Reducing prices on domestic markets

Reduce VAT and other

taxes on food

-Lowers prices

-Impact on budget

-Limited scope

-Effective if competition

-Price monitoring

Reduce local road

taxes and tolls

-Lowers prices

-Improved flow of

commodities

-Difficult to target food

-Compensations to local

authorities

Reduce fuel tax-Reduces transport costs

-Improves real income

-Needs budget

arrangements to avoid

high deficit

Reducing prices on domestic markets

Progressive release of

public food stocks

- May lower prices

temporarily, depending on

size of stocks

- Can be used for safety

nets

- Consultation with private sector

needed

- Resources for replenishment

and budgetary implications

Consumer prices control

- Lowers prices for all

- May impact negatively

on producer prices and

future production

- Risk of black market

- Requires institutional capacity

Infrastructure

development / roads/

storage

- Long term action Multi-year engagement required

Improve value chain

efficiency- Long term action Low visibility, takes time

Improved access: safety nets

Cash transfers or food

vouchers (with or without linkage to work contribution or other conditions)

- Increased resources for

beneficiaries

- Parallel currency

- Risk of theft, corruption and

embezzlement

-Targeting possible

-Could have inflationary effects

-Budget implications

-Where markets function and

food is available

Food distribution

- Direct access

- Where food not available

- Where markets don’t work

-Targeting possible

-Under certain conditions can Food distribution - Where markets don’t work

- Food habits

- Risks of corruption

-Under certain conditions can

encourage local production

Universal food subsidy

- Everyone benefits

- Generally very expensive

- Targeting possible on some

food products

- With rationing, risk of black

market

- Very hard to phase out

Income generating

activities

- Sustainable model for

medium and long termlong startup

Improvement of food production short term

Direct Crop Seed

Distribution

- Lead time for procurement

- Needs good source of

adapted quality seeds

- Must be based on needs of

farmers

- Not sustainable

- May undermine local seed

systems

Community based seed

production

- seed supply of appropriate

crop varieties

- Technical supervision

needed

- May help develop seed production - Longer startup

- May help develop seed

system

Input vouchers for

vulnerable farmers

- Low cost

- Farmers allowed to chose

- Cost effective

-Input markets must work

-System to check quality of

inputs needed

Support to family gardens

and irrigated areas

-Production of short cycle

crops

-Supply to markets improves

prices may decrease

-Inputs must be available

-Exit strategy and marketing

arrangements needed

Input trade fairs

-Farmers left to chose

-May help develop seed

system

-Easy to check quality of

inputs

-Difficult to reach large

numbers of farmers

Improvement of food production: fertilizer

Bulk purchase by

government

Credit for private sector

Risk sharing fund

-Fertilizer available on time in

appropriate quantities and

quality

-Requires platform for

constructive dialogue

among public and private

sector

Universal (untargeted)

subsidized fertilizers

-Distorts production decisions

and encourages overutilization

- If input markets imperfect can

increase economic efficiency

- Small farmers have easier

access to fertilizer and can

increase yields

-Success is more likely in

areas where rain is

sufficient or reliable or in

irrigated areas

-Existence of reliable

delivery systems

Improvement of sustainable food production

Increase extension and

advisory services on food

production

-More efficient use of

fertilizer, taking into account

it higher price

- expensive and labor

intensive

Reduce post-harvest

losses and promote longer

shelf-life products

-Reduced losses and cost of

transportation

-Nutritious food immediately

-Profit through added-value

goes to the rural poor

-Employment and income for shelf-life products

-Nutritious food immediately

available in rural areas

-Employment and income for

non-farming rural dwellers

Integrated Pest

Management (IPM)

-More efficient production

-Reduced risks of pesticide

induced pest outbreaks

-Less hazards for

environment and public

health

-Adequate training

-Conducive policy framework

(no subsidies on pesticides,

promoting IPM research,

farmer education, etc.)

- standards for pesticide

residue levels give

incentives

Some features of good interventions

�Do (No Harm) as little harm as possible

�Be clear on humanitarian versus economic scale

�Ownership and participation

Some statistics of past consultations

SubregionNo of

countries

Regional Organizations

involved

UN Organisations

involved

Other NGOs and

Institutions involved

No of parts.: F / tot

Private Sectorparticipants

Asia

Subregional

Office for the

Pacific Islands -

SAP

12 SPC, EU UNICEF 7/30

Regional Office

for Asia and 18ADB, ASAN, SAARC,

ILO, HLTF,

UNDP, UNICEF,

GTZ, IUCN,

OXFAM, WORLD 35/136 4for Asia and

Pacific (RAP)

18ADB, ASAN, SAARC,

UEUNDP, UNICEF,

WFP, UNESCAP

OXFAM, WORLD

VISION.

35/136 4

Su

b-

Sah

ara

n

Afr

ica

Subregional

Office for

Eastern Africa -

SFE

9 AU, EU

UNDP,

WFP,OCHA,

ECA, HLTF,

USAID, IFPRI,

SEUCO

(Nairobi). NMK

(Nairobi),

10/61 3

No

rth

Afr

ica a

nd

Near

East

Subregional

Office for North

Africa - SNE

4 AMU, EUIFAD, ILO, WFP,

UNECA, HLTF

EU,

Netherlands, US

State Dept.

12/56 None

Subregional

Office for the

Gulf Countries -

SNG and

Multidisciplinary

Team for

Oriental Near

East (Cairo) -

SNO

11 AAAID, AOADUNIDO, IFAD,

UNDP, ESCWA,

IMF, AMF,

USAID, JICA,

Mutah University

– Jordan; Cairo

University -

Egypt, Arab

Planning

Institute, Arab

Peasants&

Agricultural

Cooperatives

9/72 1

54 73/355

Schedule of consultationshttp://www.fao.org/isfp/isfp-highlights/detail-highlights/en/item/51583/icode/

• Five consultations conducted so far

Pacific Islands – SAP ( Fiji) 14-15 AprilAsia and pacific – RAP

• Seven consultations to go:

Central Africa : 30-31 May 2011,Libreville, GabonSouthern Africa : 6-8 June 2011,Lilongwe, Malawi

South America : 7-8 June 2011, Asia and pacific – RAP (Bangkok) 9-10 March Eastern Africa – SFE (Addis Ababa) 16-18 MarchNorth Africa – SFC (Tunis) 2-4 May Near East - RNE (Amman) 9-10 May.

South America : 7-8 June 2011, Santiago, ChileCaribbean : 13-14 June, Trinidad&Tobago

Central America : 15-16 June 2011, San Salvador, El Salvador

West Africa : 20-21 June 2011,Abuja, NigeriaEurope and Central Asia :

20-22 June 2011, Istanbul, Turkey

Lessons learnt

• Adaptation of the Agenda to regional/sub regional needs increases interest of participants

• Participation of private sector, NGOs and farmers organizations crucial for wholesome debate organizations crucial for wholesome debate

• The participation of WFP, IFAD and HLTF good for countries to know the tools each Organization offers at same meeting

• High level government participation leads to concrete commitment to country-level follow-up

• Very positive feedback from the participants on the usefulness of the consultations, including for cross-ministerial domestic dialogue

Lessons learnt (contd)

•Participants appreciate why (coordinated) policy implementation (coordinated) policy implementation matters for mitigating high food prices issues•Participants experience that sub regional cooperation is an important step towards prize stabilization•Discussion about country level follow-up is important for real impact

Way forward

• Follow up and next steps– Seminars at national level highly recommended (policy dialogue);

– Creation of regional online fora to discuss the outcomes of the seminars;of the seminars;

– Strengthening of information systems (GIEWS, FAPDA, MAFAP etc.)

– Improve regional cooperation – Long term project for supporting the Developing Countries to adjust to higher food prices for sustainable food security and agriculture development.

– Regional and Subregional fora of this nature to be held periodically on this and other emerging themes.

• Overall results � important input to the Committee for World Food Security (CFS) next October;

TCSP Policy Assistance Support Service