Markets and Food Security

1. Markets and Food Security PAT Session 1.2 WFP Markets Learning Programme Price Analysis Training 1.2. 1

2. 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 WFP Markets Learning Programme Price Analysis Training 1.2. 2

3. A quick review… Food Security… Definition? WFP Markets Learning Programme Price Analysis Training 1.2. 3

4. 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 WFP Markets Learning Programme Price Analysis Training 1.2. 4

5. Definitions for… Market: A place where buyers & sellers come together to exchange goods and services Availability? Access? Utilisation? Market? WFP Markets Learning Programme Price Analysis Training 1.2. 5

6. So, why are markets important for food security? Markets Food Security As a group: discuss your assigned question: What type of products do HHs exchange on markets? Why are markets important for food access? Why are markets important for food availability? How can WFP use market interventions to address food insecurity? Quickly note responses on flip charts…you have 10 minutes. WFP Markets Learning Programme Price Analysis Training 1.2. 6

7. 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 Price Analysis Training

8. 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 Price Analysis Training

9. 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 Price Analysis Training

10. 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 Price Analysis Training

11. 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 Price Analysis Training

12. the food security & nutrition framework (based on UNICEF Model) outcomes immediate underlying basic HH food access directly influences individual food intake WFP Markets Learning Programme Price Analysis Training 1.2. 12

13. markets in the food security & nutrition framework Markets Food Security Price Analysis Training

14. Markets & Food Security Analysis • 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 WFP Markets Learning Programme Price Analysis Training 1.2. 14

15. 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. Price Analysis Training

16. Markets and food availability 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 Food Security WFP Markets Learning Programme Price Analysis Training 1.2. 16

17. Markets and food availability: Two levels of analysis Understanding food availability is essential to determining likely impact of market on HH food access Food availability is analyzed at two levels: • Macro-level analysis • Meso-level analysis Markets Food Security WFP Markets Learning Programme Price Analysis Training 1.2. 17

18. Markets and food availability Macro-analysis • 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 Markets Food Security WFP Markets Learning Programme Price Analysis Training 1.2. 18

19. Markets and food availability Meso-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 Food Security WFP Markets Learning Programme Price Analysis Training 1.2. 19

20. Markets and Food Access The Concept of Entitlement 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 Food 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 WFP Markets Learning Programme Price Analysis Training 1.2. 20

21. How do markets determine food access? Access to food is reduced with entitlement failures These reductions are likely due to market failures Markets fall in wages rise in food prices loss of employment drop in cash crop or livestock prices HH Food Access Food Security WFP Markets Learning Programme Price Analysis Training 1.2. 21

22. What are the market indicators of “entitlement”? Many indicators of “entitlement” are asset and market-based: • relative prices • real incomes • market-related shocks 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 WFP Markets Learning Programme Price Analysis Training 1.2. 22

23. How do markets determine food access? Effective Demand Effective demand is key to HH food access Purchasing Power Market Dependence Market Accessibility Markets Food Security Livelihoods Analysis Effective Demand: the quantity of a good or service that consumers are actually buying at the current market price. WFP Markets Learning Programme Price Analysis Training 1.2. 23

24. How do markets determine food access? Effective Demand • Purchasing Power: Economic access, HH income, Prices Market Dependence (involvement in markets) • On/in markets for goods (food, non-food, livestock…) & services (labour, credit, capital…) • Selling/buying behaviours: net seller/buyer, seasons and reasons of sales and purchases 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 Accessibility of HHs • Physical (distance) • Financial (price, credit…) • Social (gender, security…) Purchasing Power Market Dependence Market Accessibility Markets Food Security Livelihoods Analysis WFP Markets Learning Programme Price Analysis Training 1.2. 24

25. HH CASH AVAILABILITY Transfers Remittances Loans Markets in Food Security Analysisanother view: the livelihoods perspective Food Availability Market National food production and stocks Commercial imports Markets Food aid Agricultural inputs Extension Microfinance Market Food Security Food production Food Access Market Market HH Assets Non-food production Employment Market WFP Markets Learning Programme Price Analysis Training 1.2. 25

26. Market participation and food security • Markets as food source : • Evidence suggests very few, if any, HHs are autarkic • Majority of HHs buy more than they sell on markets Markets Food Security autarkic: self-sufficient (here in terms of food) WFP Markets Learning Programme Price Analysis Training 1.2. 26

27. Market Participation & FS Urban HHs - Senegal Markets Food Security 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 WFP Markets Learning Programme Price Analysis Training 1.2. 27

28. Market Participation & FS Rural HHs - Madagascar Markets Food Security Analysis of HH Food Security in Selected Districts of Madagascar WFP, Madagascar, September 2009 WFP Markets Learning Programme Price Analysis Training 1.2. 28

29. Small Group Work Exercise 1.2.c. The Marketastan File: Food Insecurity in Northern Province Price Analysis Training

30. 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) Price Analysis Training