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The global transmission of high food prices-World Bank’s February evidence

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Higher global wheat prices have fed into sharp increases in domestic wheat prices in many countries, the February 2011 Food Price Watch of The World Bank has said. The transmission rate of global wheat price increases to the domestic price of wheat-related products has been high in many countries, according to the report. “For instance, between June 2010 and December 2010, the price of wheat increased by large amounts in Kyrgyzstan (54%), Bangladesh (45%), Tajikistan (37%), Mongolia (33%), Sri Lanka (31%), Azerbaijan (24%), Afghanistan (19%), Sudan (16%), and Pakistan (16%). Several of these countries have a large share of calories consumed from wheat-based products, particularly for the poor. Global food prices continue to rise, though not uniformly for all grains.”

The World Bank’s Food Price Watch is produced by the Bank’s Poverty Reduction And Equity Group, Poverty Reduction And Economic Management Network. The World Bank’s food price index rose by 15% between October 2010 and January 2011, is 29% above its level a year earlier, and only 3% below its June 2008 peak. A breakdown of the index shows that the grain price index remains 16% below its peak mainly due to relatively stable rice prices, which are significantly lower than in 2008. The increase over the last quarter is driven largely by increases in the price of sugar (20%), fats and oils (22%), wheat (20%), and maize (12%).

Maize prices have increased sharply and are affected by complex linkages with other markets. In January 2011, maize prices were about 73% higher than June 2010. These increases are due to a series of downward revisions of crop forecasts, low stocks (U.S. stocks-to-use ratio for 2010-11 is projected to be 5%, the lowest since 1995), the positive relationship between maize and wheat prices, and the use of corn for biofuels.

Ethanol production demand for corn increases as oil prices go up, with sugar-based ethanol less competitive at current sugar prices. Recent United States Department of Agriculture (USDA) estimates show the share of ethanol for fuel rising from 31% of U.S. corn output in 2008-9 to a projected 40% in 2010-11. Increased demand for high fructose corn syrup from countries such as Mexico, as they substitute away from higher priced sugar, also contributes to higher demand for corn. Prospects of easing in this market depend partly on the size of the crops in Latin America, particularly Argentina, which has been affected by unusually dry weather due to the La Nina effect, and the extent of import demand from China in 2011 as well as oil and sugar price trajectories.

Domestic rice prices have risen sharply in some countries and remained steady in others. The domestic price of rice was significantly higher in Vietnam (46%) and Burundi (41%) between June–December 2010. Indonesia (19%), Bangladesh (19%), and Pakistan (19%) have increased in line with global prices. These Asian countries are large rice consumers, especially among the poor. Rice prices have increased in Vietnam despite good domestic harvests. This is primarily due to the depreciation of the currency, which has fuelled overall inflation and expectations of higher demand from large importers and led  to the minimum rice export price being raised by the Vietnamese government. Rice price increases in Sri Lanka (12%) and China (9%) have been relatively moderate in the second half of 2010, while in Cambodia and the Philippines the retail price of rice remained largely unchanged during this period.

Largest Movers in Domestic Prices, June to December 2010
Wheat
Kyrgyzstan (retail, Bishkek) 54%
Bangladesh (retail, national average) 45%
Tajikistan (retail, national average) 37%
Mongolia (retail, Ulaanbaatar) 33%
Sri Lanka (retail, Colombo) 31%
Azerbaijan (retail, national average) 24%
Afghanistan (retail, Kabul) 19%
Sudan (wholesale, Khartoum) 16%
Pakistan (retail, Lahore) 16%

Rice
Vietnam (retail, Dong Thap) 46%
Burundi (retail, Bujumbura) 41%
Bangladesh (retail, Dhaka) 19%
Pakistan (retail, Lahore) 19%
Indonesia (retail, national average) 19%
Mozambique (retail, Maputo) 14%

Beans
Burundi (retail, Bujumbura) 48%
Cameroon (retail, Yaounde) 43%
Uganda (wholesale, Kampala) 38%
Kenya (wholesale, Nairobi) 22%

Maize
Brazil (wholesale São Paulo) 56%
Argentina (wholesale, Rosario) 40%
Rwanda (wholesale, Kigali) 19%

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State of Food Insecurity 2010 – FAO says too little, too timidly

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Food and Agriculture Organization (FAO), State of Food Insecurity (SOFI) 2010The 2010 edition of the State of Food Insecurity says much too little and what it does say is unconvincing. There is a theme for this years edition of one of the Food and Agriculture Organization’s (FAO) ‘flagship’ reports. The theme is “countries in protracted crisis” by which FAO means conflict and war, internal and external.

FAO doesn’t say so explicitly in the introduction to SOFI 2010 on its website. There’s no excuses for FAO not to when the World Food Programme, Oxfam, ActionAid and a number of international agencies and aid groups have done so, not just this year but for at least a decade.

As the world’s pre-eminent compiler of food and agriculture-related research, data and analysis, FAO ought to see itself as duty-bound to be clear and fair in its reportage but it is not.

SOFI 2010 says that the majority of the world’s undernourished people live in developing countries. Two-thirds live in just seven countries (Bangladesh, China, the Democratic Republic of the Congo, Ethiopia, India, Indonesia and Pakistan) and over 40% live in China and India alone.

The report says that “FAO’s projections for 2010 indicate that the number of undernourished people will decline in all developing regions, although with a different pace. The region with most undernourished people continues to be Asia and the Pacific, but with a 12% decline from 658 million in 2009 to 578 million, this region also accounts for most of the global improvement expected in 2010″. Where does FAO think this improvement is going to come from, given the fact that its own food price index shows how cereals have risen at a clip this year to match the rise in 2007?

Food and Agriculture Organization (FAO), State of Food Insecurity (SOFI) 2010Just as it did a month ago, the FAO is sounding like it is in two minds about what to report. SOFI 2010 says that “developing countries as a group have seen an overall setback in terms of the World Food Summit goal (from 827 million in 1990–92 to 906 million in 2010), while some progress has been made towards MDG 1 (with the prevalence of hunger declining from 20% undernourished in 1990–92 to 16% in 2010)”.

Which are the 22 countries covered by the ‘protracted crisis’ theme? Here they are, the numbers in total population in millions followed by number of undernourished in millions, both for 2005-07. (Why couldn’t these have been for 2009 in a report dated 2010?): Afghanistan (na / na), Angola (17.1 / 7.1), Burundi (7.6 / 4.7), Central African Republic (4.2 / 1.7), Chad (10.3 / 3.8), Congo (3.5 / 0.5), Côte d’Ivoire (19.7 / 2.8), Democratic People’s Republic of Korea (23.6 / 7.8), Democratic Republic of the Congo (60.8 / 41.9), Eritrea (4.6 / 3.0), Ethiopia (76.6 / 31.6), Guinea (9.4 / 1.6), Haiti (9.6 / 5.5), Iraq (na / na), Kenya (36.8 / 11.2), Liberia (3.5 / 1.2), Sierra Leone (5.3 / 1.8), Somalia (na / na), Sudan (39.6 / 8.8), Tajikistan (6.6 / 2.0), Uganda (29.7 / 6.1), Zimbabwe (12.5 / 3.7).

SOFI 2010 says: “On average, the proportion of people who are undernourished is almost three times as high in countries in protracted crisis as in other developing countries (if countries in protracted crisis and China and India are excluded). Nonetheless, not all countries in protracted crisis present very high levels of undernourishment as in some of these countries crises are localized to certain areas or regions. There are approximately 166 million undernourished people in countries in protracted crisis – roughly 20% of the world’s undernourished people, or more than a third of the global total if China and India are excluded from the calculation.”

Food and Agriculture Organization (FAO), State of Food Insecurity (SOFI) 2010The question, what happens when China and India are excluded from calculations? With the exclusions 130.4 million (China) and 237.7 million (India) fall out of the equations? Moreover, SOFI isn’t following it’s own data. The para above says 166 million (approx) undernourished in countries in ‘protracted crisis’ but the table annex shows that the 22 countries together have 146.8 million undernourished. If the larger number for the 22 countries is the 2009 estimate, then FAO could have used the same method to provide estimates for all countries for 2009.

When FAO recalculates its food price index monthly (the current index is up-to-date for September 2010) why are these estimates three years old? Why should China and India be excluded when they account for over a third of the global undernourished population? Last month FAO said that 925 million people in the world live in chronic hunger and explained that “the decline (from 1,020 million in 2009) was primarily attributable to better economic prospects in 2010 and the fall in food prices since mid-2008”. What fall in food prices? What better economic prospects?

The State of Food Insecurity 2010 is a disappointing and pedestrian effort. FAO ought to retract this version and revise it thoroughly without dwelling on themes like ‘protracted crisis’ and instead get to grips with the market- and economics-related reasons for food price spikes and the hunger they bring.

Why drought and hunger in Africa spells opportunity for global agri-tech

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Agriculture in Africa. Photo: FAOClimate change is leading to more intense drought conditions in Africa. Small and marginal farmers, pastoralists and nomadic communities are the most vulnerable and the hardest hit. Already. aid agencies have warned that 10 million people are already facing severe food shortages, particularly in the landlocked countries of Chad and Niger, after a drought led to the failure of last year’s crops. As many as 400,000 children are at risk of dying from starvation in Niger alone, according to Save the Children.

The Independent of Britain has reported that unusually heavy rains have washed away this year’s crops and killed cattle in a region dependent on subsistence agriculture. Organisations including Oxfam and Save the Children say that the slow international response to the emergency means that only 40 per cent of those affected are receiving food aid. As many as four out of five children require treatment for malnutrition in clinics.

Against this grim new news, the global agri-technology networks are readying plans to use possible food shortages to push new structures of seed, funding and conditions onto countries looking for quick fix solutions. One such programme ia the Comprehensive Africa Agriculture Development Programme (CAADP) which has announced that it received a major boost as several countries have begun drawing on funds from a US$22 billion pledge made by the G8.

Agriculture in Africa. Photo: FAOUnder CAADP, African governments are committed to increase their national budget expenditure on agriculture to at least 10 percent. The Programme, agreed by heads of state at the 2003 summit of the African Union, expects a six percent growth rate in agriculture every year. What part of this growth will meet the needs of the drought-hit people in Chad and Niger is not discussed.

Close behind is the International Maize and Wheat Improvement Center (known by its Spanish acronym CIMMYT, one of the CGIAR centres) which has used the alarming food situation news as a prop on which to announce a study which it says “finds widespread adoption of recently developed drought-tolerant varieties of maize could boost harvests in 13 African countries by 10 to 34 percent and generate up to US$1.5 billion in benefits for producers and consumers“. Who will these producers and consumers be?

The study was conducted as part of the Drought Tolerant Maize for Africa Initiative (DTMA) implemented by CIMMYT and IITA with funding from the Bill & Melinda Gates Foundation and the Howard G. Buffett Foundation. CIMMYT and IITA have said they “worked with national agriculture research centers in Africa to develop over 50 new maize varieties that in drought conditions can produce yields that are 20 to 50 percent higher than existing varieties”. There is no mention of Africa’s immense wealth of traditional cereals or the communities that have guarded and used old growing knowledge in difficult times.

Agriculture in Africa. Photo: FAOFinally, from August 30 to September 4, Namibia hosted the annual Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN) Regional Food Security Policy Dialogue, where over 200 policymakers, farmers, agricultural product dealers, scientists and non-governmental organisations from across Africa and the world gathered “to address African priorities on climate change and its impacts on food security, agricultural development and natural resource management”.

The tone and tenor is astonishingly upbeat, especially considering the dreadful food situation and climate change news that’s now coming out daily from central, eastern and north Africa: “Increasing the collaboration between public and private sector organisations can also help build infrastructure, secure better access to natural resources, improve the distribution of agricultural inputs and services, and share best practices. The Farming First coalition is a successful example of farmers, scientists, engineers, industry and agricultural development organisations coming together to push for improved agricultural policies which benefit farmers while safeguarding natural resources over the long term.”

FANRPAN has cited two reports by consulting firm McKinsey and Company which have (1) estimated that Africa produced only 10 percent of the world’s crops despite representing a quarter of land under cultivation and (2) noted that 60 percent of the world’s uncultivated arable land lies in Africa with the potential for African yields to grow in value more than three-fold by the year 2030, from US$280 billion today to US$880 billion.

Agriculture in Africa. Photo: FAOThose extraordinarily large sums may explain why FANRPAN is currently working in partnership with the Rockefeller Foundation “to improve food security throughout sub-Saharan Africa by promoting the understanding of climate change science and its integration into policy development and research agendas”. FANRPAN said it is also working with the International Food Policy Research Institute (IFPRI) – a study cell based in Washington, USA, whose research objectives have tended towards international agricultural trade in recent years. A recent collaboration is called ‘Strategies for Adapting to Climate Change in Rural sub-Saharan Africa: Targeting the Most Vulnerable’ which says it recognises the interrelated impact of climate change on household poverty, hunger and food security.

No doubt, but these high-minded statements of objectives come bundled with some decidedly commercial conditions. As IPS news reports, there are conditions attached to how countries will be accessing CAADP funds. Countries will need to have gone through the CAADP process, which includes designing a “national investment plan” which contains detailed and fully-costed programmes and signing a “CAADP compact”. This is nothing but an agreement between the government, regional representatives and “development partners” for “a focused implementation of the programme”. Moreover, the investment plans will have to undergo “an independent technical review” and the plan should also “have been tabled before a high-level CAADP business meeting” before funds are allocated. Which simply means that there are only so many ways the money can move.

Agriculture in Africa. Photo: FAOFor all these noble programmes, the countries in their sights are: Angola, Benin, Ethiopia, Ghana, Kenya, Malawi, Mali, Mozambique, Nigeria, Tanzania, Uganda, Zambia and Zimbabwe. The aid agencies on the ground are warning again what they have said last year, the year before, five years ago, a decade ago. “After six months without proper nutrition, these children have little resistance to disease,” said Severine Courtiol, Save the Children’s Niger manager. “There is little children can do to avoid coming into contact with this contaminated, disease-ridden floodwater. That’s why it’s critical we make sure they get enough food so they are strong enough to fight off and recover from sickness.”

Robert Bailey, Oxfam’s west Africa campaigns manager, said that some food was available in marketplaces in Niger, but was too expensive for ordinary households to afford. As a result, many were reduced to eating leaves and berries. Chad and parts of Mali were also affected, he added. “The international donor response has been too little too late. We estimate that 7.9 million people are affected by food shortages in Niger, with only 40 per cent receiving international aid. The other 60 per cent are dependent on the government and NGOs [non-governmental organisations]. But the government has no food.”