Market Analysis for Effective Food Security Programming IFADC May 7, 2012 Prepared by USAID-BEST...

Market Analysis for Effective Food Security

Programming

IFADC

May 7, 2012

Prepared by USAID-BEST Project/Fintrac Inc.

• Theory: Key Elements & Approaches

• Practice: Challenges & Insights

• Q&A

2012 IFADC: Market Analysis Overview

Fintrac/USAID-BEST Ethiopia Study, 2010

Food Aid: Intervention Tools

To improve food security for vulnerable populations, donors can use a number of food aid tools:

º Direct distributionº Monetizationº Local or regional procurement

(LRP)º Cash transfersº Vouchers

Fintrac/USAID-BEST Zimbabwe Study, 2012

We want to maximize food security impact, and maximize efficient use of scarce resources

We don’t want to risk hurting the very people we are trying to help, by:

º Encouraging dependencyº Putting people out of businessº Competing with farmers for laborº Supporting corruptionº Supporting uncompetitive marketsº Creating inflation

Market Analysis to Maximize Impact & Efficiency, Minimize Risk

Fintrac/USAID-BEST Guatemala Study, 2011

How Does the Market View Food Aid?

Distributed food aid:º An increase in the local food

supplyº An (in-kind) income transfer to a

household

Monetized food aid:º An (ad hoc) increase in the local

food supply induced by a non-commercial market actor

Local procurement of food aid/cash/vouchers:

º An (ad hoc) increase in demand for the local food supply


What Happens When Supply Increases?

Fintrac/USAID-BEST Ethiopia Study, 2010Fintrac/USAID-BEST Zimbabwe Study, 2012

Quantity supplied or demanded

Supply

Price

Pe

S0S1

P0P0

Q0 Q1

Q1

Demand

P0P1

Q0

Q1

Monetized/

Distributed

D0

What Happens when Demand Increases?

Fintrac/USAID-BEST Ethiopia Study, 2010Fintrac/USAID-BEST Zimbabwe Study, 2012

Quantity supplied or demanded

Demand

Supply

Price

Pe

S0

P0

P1

Q0 Q1

D0

D1

LRP/cash/

vouchers

Key Factors to Safeguard Markets

Distributed food aid: ºEffective targeting (who, where, what, when, how much)

Monetized food aid: ºFair market priceºVolumes small relative to local market’s supply

LRP/cash/vouchers:ºEffective targeting (who, where, what, when, how much)

º Supply able to expand to increased demand


Moving from Theory to Practice

• Analytical frameworks

• Data/information needs

• Real-life challenges


What Types of Analytical Frameworks Exist?

• Market Information Food Insecurity Response Analysis (MIFIRA)

• Emergency Market Mapping and Analysis (EMMA)

• Structure Conduct Performance (SCP)


Market Information Food Insecurity Response Analysis (MIFIRA)

• Development/emergency

• Designed for specialist?

• Key feature: decision tree

Emergency Market Mapping and Analysis (EMMA)

• Emergency

• Designed for layman

• Key feature: market map

Structure Conduct Performance Framework

Basic conditions: Seasons and seasonality, infrastructure, consumer preferences, income

distribution, stability, government policies

Conductbehavior and

strategies of market actors (price setting behavior, buying and

selling practices, informal norms of

trade, and information use)

Structure relatively stable

features of market environment (# and

concentration of buyers and sellers,

barriers to entry and exit, vertical and

horizontal coordination, and

licensing requirements)

Do I Really Need One of Those Analytical Frameworks?

• Depends on objective…

• Cherry pick from one framework based on your objective:º MIFIRA – which response is

most appropriateº EMMA – inform emergency

responseº SCP – broad understanding

of marketsFintrac/USAID-BEST Guatemala Study, 2011

What Do We Need to Know, and Where Do We Find It?• Household needs (demand)• How local markets ‘work’ (supply, demand, price

formation)

• Primary sources• Secondary sources

Secondary• Vulnerability assessments,

livelihood profiles, consumption and expenditure surveys

• Crop assessments• Trade statistics• Price monitoring: gov’t,

FEWS, WFP, FAO, etc.

Primary• Formal and informal

surveys of market actors (producers, traders, wholesalers, retailers, consumers) – esp. producer and trader conduct

How Do We Get the Information We Need?

• Desk researchº Existing market analyses

including past Bellmon analyses, food security reports

º Prices, production, trade, and food aid data from international and local data collection systems

• In-field researchº Interviews with private sector,

various levels of government, communities, NGOs, and UN agencies

º Market visitsFintrac/USAID-BEST Zimbabwe Study, 2012

What we’ve covered:

Basic principles Analytical framework General data/information needs

So, now what?

•Practical challenges translating theory into practice

Practical Challenge

• Production, trade, and food aid data from desk research are often unreliable or incomplete

Production

• Lack of resources to conduct frequent assessments

• Sometimes politicized• Validation in field is critical, but also

imperfect

Imports

• Lack of resources to monitor and report• Importers’ incentive to evade customs

duties

Food Aid

• Not all donors report to online databases• Among donors who report, reporting is often

inconsistent • FY vs CY vs MY• Does not specify whether monetized or

distributed food aid

Practical Challenges

• Commodity markets are complex.

Fintrac/USAID-BEST Haiti Study, 2011

• Questions So Far?

Market Analysis: Piece of Cake, or Piece of Work?

Practical Challenge

• People sometimes tell you what they think you want to hear…or what they want you to believe.



Price

• Definition

• Types

• Lack of market information systems

• Asymmetries

• Fair market price

• Objective measure of fair market price: Import Parity Price (IPP)

Fintrac/USAID-BEST DR Congo Study, 2010

Import Parity Price (IPP)

• Value of a unit of product brought from a foreign country and priced at a geographic location of interest in the importing country.

Fintrac/USAID-BEST Honduras Study, 2011

Calculating IPP:

• Import data (assess likely country of origin)• Commodity cost (in likely country of origin)• Ocean transport (from likely country of origin)• Insurance fees, port charges at port of entry • Custom duties and taxes (if applicable)• Inland transport costs to eventual point of sale (if

applicable)• Storage, operational fees, etc. (if applicable)

Determining Country of Origin

Ex: UN Comtrade – Wheat Imports

Example of IPP Calculation

Refined Soybean Oil

No. Item Source US$/MT

1 Refined Soybean Oil Ex Rotterdam USDA FAS Data. 748

2 Ocean Freight Marill Freight 50

3 Insurance 1% of #1 7.5

4 CIF Djibouti #1+#2+#3 805.5

5 Customs Duty 30% of #4 241.6

6 VAT 15% of (#4+#5) 157.1

7 Withholding Tax 3% of #4 24.2

8 Port Charges, handling etc. Axis Transit Services 39.5

9 Inland Freight Axis Transit Services 41.1

10 Storage ECEX 7.5

11 Packaging Whey Consulting Ltd. 119.5

12 Administration World Bank Salary Data 4.0

13 Total Import Parity Price Sum(#4:#12) 1440.1

Practical Challenge

• USG implementing partners have rich experience with demand-side constraints

• Newer tools -- LRP/cash/vouchers -- require understanding supply-side constraints as well


Practical Challenge

• Markets are dynamic.

External organizations

• Reading Lists• List of Data & Information

Resources• www.usaidbest.org

• Trade groups• Government ministries• Universities

• TOPS, Learning Alliance, FEWS NET, FAO, etc.

Resources

USAID-BEST

Your colleagues

Market Analysis for Effective Food Security Programming

• Questions?

• Comments?

Fintrac/USAID-BEST Haiti Study, 2012Fintrac/USAID-BEST Peru Study, 2011

Thank You!

IFADC

May 7, 2012

Prepared by USAID-BEST Project/Fintrac Inc.

Market Analysis for Effective Food Security Programming IFADC May 7, 2012 Prepared by USAID-BEST...

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