Markets and Food Security

PATMarkets and

Food Security

Session 1.2

WFP Markets Learning Programme 1.2. 1Price Analysis Training

Learning objectives

After this session, participants should be able to:

•Explain the importance and value of market analysis in food security assessment

•Identify the essential links between markets and food availability; and between markets and food access


A quick review…

Food Security…

Definition?


Food Security

A situation…

…when all people, at all times, have physical & economic access to sufficient, safe & nutritious food to meet their dietary needs & food preferences for active, healthy life


Definitions for…

Availability?

Access?

Utilisation?

Market?

Market: A place where buyers & sellers come together to exchange goods and services


So, why are markets important for food security?

MarketsFood

SecurityAs a group: discuss your assigned question:

1. What type of products do HHs exchange on markets?

2. Why are markets important for food access?

3. Why are markets important for food availability?

4. How can WFP use market interventions to address food insecurity?

Quickly note responses on flip charts…you have 10 minutes.


1. What type of products do HHs exchange on markets?

Food, cash crops, livestock, labour and other non-food items such as soap, charcoal, etc.

For each HH, the types of product they exchange vary:

Pastoralist, cash cropper, subsistence farmer or daily labourer?

Rich or poor?

Depending on the season and on good year versus bad year

Therefore, to understand the impact of markets, we have to find out about selling/buying patterns of our target groups

WFP Markets Learning Programme Price Analysis Training 1.1.7

2. Why are markets important for food access?

HHs buy, sell, barter on markets, influencing their food availability, while prices they pay & receive, & their use of credit, influence HH income & expenditure

Each HH is confronted with price variation, influencing its ability to acquire food, & buying, selling, bartering patterns of HHs throughout the year & between years

HH food access influences individual food intake


3. Why are markets important for food availability?

Let’s talk definitions first:

General food availability vs. local availability

Food intake: impacted indirectly by food availability, through food access

Markets, or better: traders ensure that:

Food moving from food surplus zones to food deficit zones

Food being stored during surplus times for use during deficit times


3. Why are markets important for food availability? (continued)

If markets don’t function well, they do not perform these functions, or only at large transaction cost

Good speculation and bad speculation ‘Good speculation’ if storage contributes to dampening

price volatility ‘Bad speculation’ if storage worsens price volatility, or if

done at unreasonable profit margins


4. How can WFP use market interventions to address food insecurity?

Improve market functioning / reduction of transaction cost, often with partners, to:

reduce (informal) taxes

improve infrastructure

broaden the number of traders

enhance trade credit provisioning, etc.

Distribute cash or vouchers

Local and regional procurement

Purchase for Progress


the food security & nutrition framework

(based on UNICEF Model)

outcomes

immediate

underlying

basicWFP Markets Learning Programme 1.2. 12Price Analysis Training

HH food access directly influences individual food intake

markets in the food

security & nutrition framewor

k


MarketsFood

Security

To summarise, markets:

Influence food availability, co-determine purchasing and selling conditions, have an impact on food access and, subsequently, an indirect influence on individual food intake

Play a role in addressing food insecurity, through market interventions, local procurement and cash/voucher programmes

Markets & Food Security Analysis Markets

Food Security


Quick Case: Exercise 1.2.a. Government Policies in Pakistan

Task: Read the Quick Case and, with a partner, answer the questions below.

Government wheat policy tries to balance competing interests of producers and consumers. On production side, policy aims at increasing wheat yields, output, & support for farmer income. Increased wheat production seen as part of overall national FS strategy of reducing dependence on food imports for national food supplies.

On consumption side, government attempts to enhance HH food security, particularly through ensuring availability of wheat flour at affordable prices and maintaining price stability. Food policy options are constrained, however, by overall fiscal constraints, as well as a desire to minimize fiscal subsidies on food. Moreover, the wheat procurement price has been seen as a major determinant of overall inflation because of its role as a wage good and an indicator of overall government price policy. Thus, wheat policy is somewhat constrained by inflation targets and inflation policy.

What is the Government doing to impact availability? What is the Government doing to impact food access?

Adapted from: Nyberg, Jennifer, “Pakistan Market Assessment – Earthquake Affected Areas”, WFP, 2005, page 10.


Sufficient food availability can be achieved through… Domestic production Imports (commercial and public imports) Public transfers (e.g. food aid) National/regional stocks

…but market functioning is also crucial to food availability Physical access (travel distance, time, seasonal

access) Market integration (transaction costs and trade flows)

Markets and food availability

MarketsFood

Security


Understanding food availability is essential to determining likely impact of market on HH food access

Food availability is analyzed at two levels:

1. Macro-level analysis

2. Meso-level analysis

MarketsFood

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Markets and food availability:Two levels of analysis

1. Macro-level analysis of food availability – conducted through secondary data on the market environment

Market vulnerability to macro-economic conditions: economic growth & price volatility, international reserves

Policy environment : trade policies, regulations, institutions, food policy and interaction of grain reserves with markets, governance

MarketsFood

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Markets and food availabilityMacro-analysis

Meso-level analysis of food availability

• conducted through trader surveys & community interviews

• Seeks to understand market structure, conduct and performance (more on this in Session 1.4)

• This is the level of food availability analysis that we will conduct via our market visit and survey

Markets and food availabilityMeso-Analysis

MarketsFood

Security


Food access is determined by HH entitlements:

The means of acquiring food is based on assets (land, labour, livestock, savings), through:

Direct entitlement (own production) Trade/market entitlement

Markets and Food AccessThe Concept of Entitlement

MarketsFood

Security


entitlement: The set of alternative bundles of goods and services that a person can acquire by converting his/her endowments, such as land and labour, through production, trade or gifts

Access to food is reduced with entitlement failuresThese reductions are likely due to market failures

How do markets determine food access?

HH Food

Access

MarketsFood

Security

fall in wagesrise in food pricesloss of employmentdrop in cash crop or livestock prices


Many indicators of “entitlement” are asset and market-based: relative pricesreal incomes market-related shocks

What are the market indicators of “entitlement”?

Markets Food Security

Thus: to understand reductions of HH entitlement – i.e. of food access – we must understand the markets with which

those HHs interact


Effective demand is key

to HH food access


Effective Demand

Purchasing Power

Market Dependence

Market Accessibility

Livelihoods Analysis

MarketsFood

Security

Effective Demand: the quantity of a good or service that consumers are actually buying at the current market price.


Market Accessibility of HHso Physical (distance)

o Financial (price, credit…)

o Social (gender, security…)


Effective Demand

Purchasing Power

Market Dependence

Market Accessibility

Livelihoods Analysis

Purchasing Power: Economic access, HH income, Prices

Market Dependence (involvement in markets)

o On/in markets for goods (food, non-food, livestock…) & services (labour, credit, capital…)

o Selling/buying behaviours: net seller/buyer, seasons and reasons of sales and purchases

MarketsFood

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Question for Plenary

…and in your country?

Which livelihoods are more/less profoundly integrated into local markets? Which are generally more impacted by severe food price shifts?

Market

Food Access

Markets in Food Security Analysis

another view: the livelihoods perspective

HH CASH AVAILABILITY

Transfers

Remittances

Loans

Food aid

Commercial imports

Agricultural inputs

Extension

Microfinance

Food production

Non-food production

Employment

HH Assets

National food production and stocks

Market

Market

Market

Market

Food Availability

MarketsFood

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Markets as food source :

• Evidence suggests very few, if any, HHs are autarkic

• Majority of HHs buy more than they sell on markets

Market participation and food security

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autarkic: self-sufficient (here in terms of food)


Market Participation & FS

Urban HHs - Senegal

Urban Food Security Assessment, Analysis of Impact of High Food Prices on FS & Livelihoods of Urban Populations in Senegal (Urban to Semi-urban Centres of Pikine, Kaolack, and Ziguinchor), FAO / UNICEF / WFP, November –2008

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Market Participation & FS

Rural HHs - Madagascar

Analysis of HH Food Security in Selected Districts of MadagascarWFP, Madagascar, September 2009

MarketsFood

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Small Group Work

Exercise 1.2.c.

The Marketastan File: Food Insecurity in Northern Province


Wrap-up: Markets & Food Security

Understanding how markets function, how interventions facilitate trade, helps identify how to alleviate negative impacts of shocks

Higher food prices make food access more difficult for HHs: most low-income smallholders are net buyers of food, often selling at low prices at harvest, buying back at high prices during lean season

Most vulnerable population groups: those who buy more food than they sell (net buyers), spend large share of income on food, have few coping strategies

These groups include urban poor, rural landless, pastoralists (who are particularly vulnerable: they face falling livestock prices as food prices rise, causing steep drop in purchasing power)


Markets and Food Security

Documents

Transcript of Markets and Food Security