GLOBAL FOOD CRISeSMonitoring and Assessing Impact to Inform Policy ResponsesTodd Benson, Nicholas Minot, John Pender, Miguel Robles, Joachim von Braun

RepORtFOOD pOLICy

ABOut IFpRI

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Cover design by Shirong Gao.

Global Food CrisesMonitoring and Assessing Impact

to Inform Policy Responses

International Food Policy Research InstituteWashington, D.C.

September 2008

Todd Benson, Nicholas Minot, John Pender, Miguel Robles, Joachim von Braun

Copyright © 2008 International Food Policy Research Institute.All rights reserved. Sections of this report may be reproduced for noncommercial and not-for-profit purposes without the express written permission ofbut with acknowledgment to the International Food Policy Research Institute.

ISBN 10-digit: 0-89629-533-8 ISBN 13-digit: 978-0-89629-533-9

DOI: 10.2499/0896295338

ContentsExecutive Summary vi

Acknowledgments viii

Introduction 1

Conceptual Framework for Understandingthe Impact of a Food Crisis 2

Monitoring and Assessing the Impact of a Food Crisis 4

Monitoring and Assessing Current and Future Policy Responses 14

An Implementation Plan for Action on Monitoring and Impact Assessment 27

Conclusion 31

Appendix 1—Methods for Measuringthe Impact of Food Crises 32

Appendix 2—Government Policy Responses tothe Current Global Food Crisis 35

Notes 38

References 39

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Tables1. Basic information needed to assess the exposure of countries and

households to the effects of rising global food prices 9

2. Data to assess impact of global food crises on countries,households, and individuals 12

3. Analytical methods to assess impact of global food crises on countries, households, and individuals 13

4. Potential policy responses to food crises 15

5. Potential national policy responses to food crises: Favorable and unfavorable effects and conditioning factors 16

6. Methods for monitoring and assessing impacts of selected price-oriented policies on domestic food prices 21

7. Methods for monitoring and assessing impacts of selected supply-oriented policies on domestic food prices 23

8. Methods for monitoring and assessing impacts of selected income-oriented policies on domestic food prices 26

9. Main objectives and activities of the implementation plan for providing information and decision-support tools to respond to global food crises 28

A.1. Government policy responses to the food crisis and the symptoms of political actions triggered by the crisis, 2006–August 2008 35

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Figures1. Linking policy and policy analysis in addressing the effects of the global

food crisis at the national level and below: A conceptual framework 3

2. Conceptual framework for understanding the welfare impact of food crises 5

3. Conceptual framework for the policy information portal 29

A.1. Impact of releasing food from a food reserve 34

Executive SummaryStrong upward trends and increased variability in global

food prices over the past two years have led toconcern that hunger and poverty will increase across theworld.At the same time, rising food prices provide anincentive and opportunity for many developing countries tostrengthen the contribution their farmers make to nationaleconomic growth and poverty reduction. Policymakers andopinion leaders in developing countries, however, often lacksufficient information to gauge the likely effects of globalfood crises on their country and to identify, design, andimplement policy actions that can best avoid risks and takeadvantage of opportunities.The deficiencies in informationand analysis can lead to over- and underreactions, resultingin policy and market failures. Experiences across countries in2007 and 2008 show ample evidence of such outcomes.

This report seeks to support national decisionmakers,as well as their international development partners, inacquiring information and applying methods for under-standing the likely effects of a global food crisis on theircountry and acting to alleviate the risks and exploit theopportunities brought about by such crises. It describes dataand methods and suggests how to facilitate their collectionand use.The report then outlines the design and implemen-tation of an open Internet-based portal for sharing reliable,appropriate information and decision-support tools fornational policymakers so they can respond quickly tochanges in world food markets in an informed manner.

National decisionmakers and policy analysts mustunderstand the degree to which their country andpopulation groups within it are exposed to the negativeeffects of rising food prices or could exploit new oppor-tunities offered by the higher prices.This requiresinformation on

• global market developments;

• the characteristics of the country with regard tointernational trade in food;

• the trends in local wages, agricultural prices, and fuelprices;

• the composition of income and expenditure amongdifferent population groups in the country; and

• the responses of producers, consumers, and thegovernment to rising food prices.

The actual effects of the food crisis at the nationallevel depend on

• the net trade position (exporter or importer) inagricultural commodities relative to the size of theeconomy;

• the degree to which changes in global prices aretransmitted to local markets;

• the sensitivity of government revenue and expendi-tures to rising food prices; and

• the political and fiscal capacity of the government torespond to the crisis.

Moreover, the effects of a crisis will differ among com-munities and from household to household, depending on

• the net sales (or net purchases) of food relative tohousehold income;

• the level of income and assets, which influence foodsecurity and vulnerability to shocks; and

• the existence and effectiveness of governmentprograms and policies to protect vulnerablehouseholds.

Within households, members are likely to be affectedby a crisis to varying degrees, with the nutritionallyvulnerable members—women of childbearing age andyoung children—most at risk.

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This report distinguishes the basic informationneeded to assess the broad implications of a global foodcrisis for a country from the more advanced informationand analyses that are needed to design and implementspecific responses to such crises. In considering thevulnerability of countries, households, and individuals to aglobal food crisis, the report points to information thatnational decisionmakers can use to assess the degree towhich their country as a whole is likely to be affected byrising global food prices in one way or another and todetermine which population groups are likely to see achange in their well-being.The most important sources ofsuch data include nationally representative householdsurveys, food price series from important commoditymarketplaces in a country, and trade statistics.Wheresuch data are missing for a country, it is necessary to relyon qualitative or indicative, rather than representative,data to make the needed assessments in the short run.Toundertake relatively thorough assessments of the impactof a global food crisis on a country and its citizens,however, and to determine the best course of action tofollow in response, detailed data are required.

The analytical capacity required at the national levelto respond to a global food crisis will vary. Somepowerful initial analyses to gauge the probable impact ofa crisis can be conducted without much specialized skillusing relatively basic data sets. Detailed studies of thesecond-round and economywide effects of a global foodcrisis on a country, however, call for more compre-hensive data, sophisticated analytical tools, andspecialized skills.

A wealth of information on the world food situationand its shifts is available, but not everywhere, quickly, orat the needed level of disaggregation. In some contexts,even when information is available, access to it is notassured for all stakeholders. Frequently, government

leaders and their analysts, civil society, and businessactors are not sufficiently informed for sound decision-making. In response to these information challenges, thereport outlines a global initiative by which networks ofpartners and individual experts would provide reliable,appropriate information and decision-support tools fornational policymakers.This plan includes the creation ofan Internet-based information portal to serve as areliable information- and decision-support tool tostrengthen the ability of policymakers to respond quicklyto dynamic developments in world food markets. Intoday’s Internet world, many useful websites and portalsexist, including important ones operated by FAO, theWorld Bank, the CGIAR, and others.The portal designedhere will not duplicate them but add specific value.Theportal will become a reliable information and decision-support tool to strengthen the ability of policymakers inthe developing world to respond quickly to dynamicdevelopments in the world food system, especially crises.It will include policy analysis tools that users can employdirectly and detailed country-by-country data and otherfood policy information, assembled from a wide array ofsources. Because the portal will be designed in an openWikipedia-type fashion, access to the portal both toobtain and to add information and tools will be open tothe wider public as an international public good.

The adequacy of the response to a global food crisisdepends to a large degree on the policy- and program-related reactions of national-level policymakers aroundthe globe.This report provides insight on the informationand analytical tools that national-level decisionmakersneed to assess the risks and opportunities posed to theircountry and its citizens by a global food crisis, todetermine how they might respond to those risks andopportunities, and to identify ways to monitor the impactof the food crisis and the effects of policy responses.

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AcknowledgmentsThe authors are grateful to those who provided guidance, feedback, background materials, or other support

at various stages in the preparation of this report. In particular, we would like to thank Luz Marina Alvaré,Stephan Dohrn, Shenggen Fan, Ashok Gulati, Derek Headey, Rajul Pandya-Lorch, Mark Rosegrant, Marie Ruel,Maximo Torero,Teunis van Rheenen, and Klaus von Grebmer. We also thank Heidi Fritschel for her editorial helpin finalizing the document.

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The current world food crisis has revealed serious deficiencies in the information available for

guiding policy responses at global and national levels.This report seeks to support national

governments, as well as international development partners that assist country-level actions, with the

information and tools they require to assess the impact of the food crisis and to design and

implement policy responses to it.

Introduction

Strong upward trends in global food prices over thepast two years have led to widespread concern thathunger and poverty will increase sharply across theworld. At the same time, rising food prices provide astrong incentive and opportunity for many developingcountries to strengthen the contribution their farmers,and the agricultural sector as a whole, make to nationaleconomic growth and poverty reduction. Although acoordinated response is urgently needed at interna-tional and regional levels, national governments inparticular face the challenge of responding to theirpeople’s immediate increased food and nutritional needswhile stimulating the agricultural sector to increase thefood supply.The adequacy of the global response to theglobal food crisis depends to a large degree on thepolicy- and program-related reactions of national-levelpolicymakers around the globe.

Policymakers in developing countries often do not,however, have sufficient information to gauge the likelyeffects of the global food crisis on their country and toimplement appropriate policy actions. For example, the

imposition of domestic food price controls in manycountries in reaction to the current crisis can beexpected to limit farmers’ incentives to increase theproduction of food crops in subsequent croppingseasons. It is clear that many national leaders requiretools to assess the impact of global food crises on theircountry, on its economy, and on vulnerable populationgroups, as well as to design and implement nationalpolicies and programs to address the risks and opportu-nities presented by such crises.

Since the implications of high and volatile foodprices differ widely across countries and across groupswithin each country, policy responses must be adaptedto country-specific needs and conditions. Althoughpolicy responses are likely to be country-specific,however, a relatively consistent set of information andanalytical tools is required to guide policymaking incountries affected by global food crises.This reportdescribes these data and methods and suggests how tocoordinate their collection and use.

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The process starts at the upper left with the interactionof factors governing global demand for and supply of food.The factors most commonly highlighted as contributing tothe current global food crisis include increased costs offood production, processing, and marketing linked tosharply higher oil prices; the use of food crops for biofuelproduction in the United States and Europe; growing meatconsumption that stimulates increased demand for animalfeed; poor harvests in certain major agricultural regions;and consistent underinvestment in agriculture over pastdecades resulting in agricultural production that lagsbehind population growth or broader economic growth.Several other factors must also be noted, including a weakU.S. dollar on foreign exchange markets, disincentives toagricultural production and trade stemming from protec-tionist or distortionary trade policies, and speculativebehavior by both governments and commercial agents(see Abbott, Hurt, and Tyner 2008; FAO 2008; von Braunet al. 2008). Debate continues about the relativeimportance of each factor at the global level, but the neteffect has been sharply higher world food prices.

The global food crisis has effects at a range ofscales—national, household, and individual—and across arange of sectors of the economy.The impact of higherglobal prices on each country and its citizens depends,however, on local conditioning factors. For example, thedegree to which global price changes are transmitted tothe national economy depends on a country’s structureof imports and exports, transportation costs, and tradepolicy. Similarly, the degree to which higher local foodprices affect household welfare depends on theimportance of net food purchases relative to the size ofthe household budget. (These conditioning factors are

examined in more detail later in this report.) It is worthnoting, however, the double-ended arrow runningbetween effects and conditioning factors in Figure 1—theeffects of the high food prices have feedback effects onthe conditioning factors.

Feedback effects are the final element in tracing theeffects of a global food crisis at the national level andbelow. These feedback effects are shown in the diagram bythe looped arrows running between effects and feedbackeffects, and from feedback effects to global supply anddemand factors. The initial effects of rising global priceswill themselves lead to a cascade of secondary effects thatmay reinforce or mitigate the initial effects.Although thesefeedback effects are strongest within a country, as shownby the looped arrows, the impact of some of them willcontribute to further changes in global food prices, particu-larly through the regional and international impact of acountry’s trade and agricultural policies.

The pathways for policy analysis and policy action inresponse to higher global food prices are diagrammed inthe lower half of Figure 1. For a national government todesign and implement effective policy in response to aglobal food crisis, its leaders and policy analysts mustunderstand the degree to which the country andpopulation groups within it are exposed to risks oropportunities presented by the higher prices.This under-standing requires information on the characteristics—theconditioning factors—of the country and the populationgroups that determine how they are likely to be affectedby the global food crisis, information on global demandfor and supply of food, and information on the effects ofrising global food prices, both initially and in the second-round feedback processes.

Figure 1 provides a framework for understanding the context for this report. The key elements in

tracing the effects of a global food crisis at the national level and below are presented in the top

half of the figure, and the pathways for policy analysis and policy action are diagrammed in the lower

half. This figure is necessarily simplified; several of the elements are described in further detail later in

the report.

Conceptual Framework for Understanding the Impact of a Food Crisis

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Figure 1—Linking policy and policy analysis in addressing the effects of the global food crisis at the national level and below: A conceptual framework

Feedback Effects

WorldFoodPrices

Effects

Conditioning Factors

• National—balance of trade, fiscal balance, political ramifications, commodity markets, labor markets

• Household—income, expenditure• Individual—nutrition, health, school

attendance

• National policy, trade market structure, infrastructure, etc.

• Household characteristics• Intrahousehold factors, gender

Monitoring and Policy Analysis

• Data requirements• Analytical tools

Policy Response

GlobalSupplyFactors

GlobalDemandFactors

With appropriate data and the application ofappropriate methods for policy analysis and monitoring,political leaders and policy analysts within government willhave the evidence they need to design effective policiesand programs to respond to the effects (and feedback

effects) of a global food crisis on the country and itscitizens. Moreover, although the impact of the policiesimplemented will be strongest within a country, somepolicies will also contribute to further changes in demandand supply factors determining global food prices.

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Effects of a food crisisFigure 2 is a conceptual diagram of how changes inglobal food prices affect the national economy, theoperations of government, and commodity and labormarkets.These adjustments result in some immediateshort-term effects on the incomes of households, thenature of which will depend on key household charac-teristics. Finally, changes in the economic condition ofthe household will lead to changes in the well-being ofindividuals within affected households.

Effects at the national levelUltimately, the welfare of communities and individuals isof the greatest interest, but changes at the national levelmay be indicators of current or future impacts at theselevels. Five elements contribute to the aggregatenational impact—changes in local commodity markets,local labor markets, fiscal balance, terms of trade, andpolitical activity.

Local commodity markets. Higher worldcommodity prices generally increase the price of food,fuel, and fertilizer in developing-country markets, butthe degree to which the price increase is transmitteddepends on the commodity, the location of the countryrelative to global market centers, and the country’strade policies.Almost all of the global price increase islikely to be transmitted to local markets when thecommodity is internationally traded, when local andinternational commodities are close substitutes, whenthe country’s trade policy is relatively open, and whenthere are good transportation links with internationalmarkets. In many countries, wheat, maize, and to a lesserdegree rice are tradable, so their domestic pricegenerally reflects international prices.

For commodities that are not widely traded inter-nationally, however, such as cassava, sweet potato, and, insome countries, rice, the impact of world prices on local

prices is likely to be muted, as local prices follow localsupply and demand conditions.Yet even the local pricesof nontradable staples can be expected to rise inresponse to a food crisis as consumers seeking lower-priced substitutes shift their staple food consumptionto these nontradables. In addition, to the extent thatfarmers shift into production of tradable crops inresponse to their higher prices, the supply of nontrad-ables may tighten, contributing to price increases forthose commodities.

A rise in fuel prices increases the cost of trans-portation, which has a disproportionate effect onagricultural commodities because of their low value–bulkratio. Increased transportation costs further raise thedelivered cost of imported food and reduce the localprices obtained for export crops.To the extent that thefuel price hikes are transmitted to local markets, theyalso increase the cost of domestic agricultural marketing.

Local labor markets. Higher prices forcommodities, particularly food, will put upward pressureon wage rates. In the face of higher food prices,employees will seek to renegotiate the wages theyreceive from employers in order to reestablish theirprevious purchasing power.Typically, however, wages are“sticky” and upward adjustments lag behind priceincreases. Because labor is often an important source ofincome for the urban poor, the rural landless, and smallpart-time farmers, it is important to monitor changes inwage rates, particularly for unskilled labor, to assess theimpact of a global food crisis.

Fiscal balance. Global food crises can affectgovernment revenue and expenditure in several ways.First, changes in the volume and value of trade due to afood crisis will influence tariff revenue, an importantsource of revenue for many developing countries.Second, changes in the price of food, fuel, and fertilizerwill affect government spending on subsidies, particularlyif the after-subsidy price, rather than the size of the

Monitoring and Assessing the Impact of a Food Crisis

To assess the impact of global food price changes on countries, households, and individuals, this

section considers two elements of the broad conceptual framework presented in Figure 1—the

effects and the conditioning factors—in more detail and then examines the data and the methods

required to monitor and to assess the likely effects of a global food crisis.

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Conditioning Factors Monitoring and Analysis

Global-to-national price transmission• Transport and transaction costs• Market efficiency (competition, regulation)• Increasing returns to scale of trade flows• Degree of substitutability for commodity• Exchange rate dynamics• Trade and domestic marketing controls

(tariffs, quotas, etc.)

National level• Diversity of food staples consumed

(particularly nontradables) • Net trade position in food• National balance of payment status (scope

to increase import bill)• Food as proportion of average total

household consumption• Dependence of population on market for access

to food• Impact on general price inflation• Degree of political pressure on government• Labor market dynamics (scope for wages to track

food price movements)

Household level• Net food-buying or net food-selling household?• Household welfare level• Level of vulnerability to food insecurity due to

nonprice factors• Scope for increasing household income • Increased production of food • Expanding household livelihood strategies

Individual level• Intrahousehold resource distribution• Nutritional vulnerability (demographic) • Children under two • Childbearing-age women• Access to social services

Individuals: changes in human capital factors

Short-term impact on welfare and real income of different types of households:

• Urban rich: negative but small proportional effect• Urban poor: negative and large proportional effect• Rural wage laborers: negative and large effect• Rural farmers, net sellers: positive effect• Rural farmers, net buyers: negative effect

Figure 2—Conceptual framework for understanding the welfare impact of food crises

Agricultural and Food Markets

Rising prices in world markets for agricultural commodities (and oil)

External balance: exchange rate impact through terms of trade effect

Local labor markets: rise in wages relative to food prices

Local commodity markets for nontradable goods: substitution effects

Fiscal balance: changes in tariff revenue, subsidy and other program costs

Local commodity markets for tradable goods especially staples:price trends, production and consumption effects

• Monitor world commodity prices, particularly staple grains and fuel oil

• Monitor local staple food prices, terms of trade, and fiscal impact

• Analyze transmission of world price rises to local markets

• Measure effect of higher fuel prices on marketing margins

• Monitor unskilled wage rates

• Monitor prices of nontradable staples

• Analyze substitution in production and consumption

• Analyze impact on different types of households using partial and general equilibrium modeling methods

• Capture both immediate and second-round effects

• Monitor child and adult nutritional indicators

• Monitor school attendance, use of health services

subsidy, is fixed—a situation that can result in a rapidballooning of subsidy costs.Third, government spendingon social assistance programs will be affected to theextent that a food crisis causes more (or fewer) peopleto participate in the program or increases the cost perbeneficiary, as would be the case if program benefits aredefined in terms of a quantity of goods, for example.

Any adverse fiscal impact of a food crisis willeventually be transmitted to households in the form ofhigher taxes or reduced provision of goods andservices, although the costs may be passed on in futureyears or to future generations in the form of debt.

External balance. Global food crises also can affectexports, imports, and the market for foreign currencythrough changes in the terms of trade betweenimporters and exporters. For countries that are netimporters of food and fuel, higher world prices result in adecline in the terms of trade. If the exchange rate floats,the increased demand for foreign currency results indepreciation of the country’s currency. If the exchangerate is fixed, the result will be a “shortage” of foreign

currency and the possible emergence of a parallel marketfor foreign currency. In either case, the impact iseventually transmitted to households in the form ofhigher relative prices for households purchasing tradablegoods (imported and exportable goods), but higherreturns for households selling tradable goods (exportsand import-substitute goods).

Political activity. In many countries, the recentincrease in food and fuel prices has led to streetdemonstrations and even riots.These events are notnecessarily a good indicator of the size of the adverseimpact of a food crisis because political activity is alsoaffected by the degree of political mobilization in urbanareas, the government’s tolerance of dissent, and otherfactors.These political effects are likely, however, toinfluence the government’s reaction to the food crisis,to define the range of possible policy responses it mightundertake, and to condition how effective its actionsmight be to safeguard the welfare of the mostvulnerable households and individuals.

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Effects at the household levelThe broadest measure of the impact of a food crisis onhousehold welfare is the change in the real value of percapita consumption expenditure, although assetownership and nonmonetary measures (such asnutrition or incidence of crime) may be useful as well.As diagrammed in Figure 2, household welfare is directlyinfluenced by the price of food and other commoditiesthe household buys and sells, as well as prevailing wagerates. Similarly, the fiscal balance of government affectshouseholds through changes in taxes and in theprovision of government services from whichhouseholds might benefit.The external balance affectshouseholds indirectly by influencing the exchange rate,which in turn affects the relative price of tradable andnontradable goods that households face in the market.

The impact of a food crisis will vary across differenttypes of households in a country. Net food-sellinghouseholds are likely to benefit from rising food prices.These generally better-off farming households will seean increase in income that will more than compensatefor the rise in the price of any foods they purchase. Netfood-buying households, however, which generally makeup the majority of the population in most developingcountries, are likely to be adversely affected by theglobal food crisis.Their purchasing power will be erodedby higher food prices, potentially resulting in a shift tocheaper sources of calories, a reduction in nonfoodspending, the sale of assets, or a combination of theseresponses. For urban poor and landless ruralhouseholds, significant reductions in welfare can beexpected due to rising food prices, at least initially.Although wage rates for workers in these groups willadjust upward, these wage increases usually occur witha time lag and fail to keep up with food price increases.

Similarly, the household-level effects of higher fuelprices, which are an integral element of the currentglobal food crisis, depend on the importance of trans-portation, fuel, and fertilizer in household expenditurepatterns, as well as having an indirect impact throughthe higher cost of transportation of goods that theypurchase. For poor households in developing countries,the impact of higher fuel prices is usually much smallerthan the impact of higher food prices.

Given this variation in impact across households, itis misleading to talk about the “average impact” of aglobal food crisis.To fully understand the effects of acrisis, it is important to evaluate the impact of aparticular crisis on different types of households withina country.

Effects at the individual level

The welfare impact of a food crisis may differ acrossmembers of the same household, a fact that is not takeninto account in the preceding household-level analysis.Many studies have demonstrated that resources aregenerally not distributed equally to all household members,with women and girls often being disadvantaged, althoughthe degree varies across countries and regions and byhousehold characteristics (Quisumbing 2003).

In considering the effects of a global food crisis atthe individual level and how governments mightrespond, the focus should be principally on the degreeto which past and future investments in the humancapital of individuals can be safeguarded so thatindividuals can attain their full social and economicpotential and contribute creatively to their own and thecountry’s economic well-being. Educational attainmentand health and nutritional status are key factors toconsider, particularly because households may cope withthe negative impacts of a food crisis by disinvesting inthe human capital of individuals in the households,particularly the young.They may, for example, withdrawchildren from school to reduce costs or to generateincome from their labor, reduce expenditures onpreventative health care, and change the household dietaway from protein- and micronutrient-rich foods (meatand vegetables) to less expensive staples.Through suchpathways, the negative impact of a global food crisis onvulnerable households may extend into the nextgeneration.

Factors influencing vulnerability to a food crisisAs already noted, the effects of higher global food pricesdepend on a range of conditioning factors that operateat different levels.These factors determine the vulnera-bility of countries, communities, households, andindividuals to adverse impacts due to rising global foodprices.A closer examination of these factors willprovide national leaders with a better understanding ofthe type and size of impact that a global food crisis islikely to have on their country and its citizens.

On the left side of Figure 2, four sets of conditioningfactors are highlighted—those governing the degree towhich global food prices are transmitted to national foodmarkets, those that determine national-level impacts,those that determine the degree to which householdsmight benefit from or be adversely affected by higher foodprices, and, finally, those that influence how individualswithin those households are likely to be affected.

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The impact of a global food crisis is transmitted tothe level of the individual in a certain sequence.National-level effects are dependent upon the degree towhich global prices are transmitted to national markets.If a country has poor trading links to global marketcenters because it is landlocked or has inadequatetransportation links or because it has adopted stronglyprotectionist policies, the global food crisis is likely tohave only a limited direct impact on the country. Severalother factors that affect the transmission of prices arenoted in Figure 2 (Rapsomanikis, Hallam, and Conforti2006). Characteristics of the food economy of thecountry—whether it is a net importer or exporter offood, the importance of subsistence food production forthe population, and the degree to which food dominatesthe consumption baskets of households in thecountry—will determine the actual national effects ofthe rise in global food prices. Broader economic andtrade considerations are also important, such as the sizeof the food import bill relative to total exports, thefiscal impact of higher prices, and the ability of thecountry to implement social protection programs.Similarly, the responsiveness of labor markets tochanges in commodity prices will be an important factorin determining both national-level and household-leveleffects of a food crisis.

As noted, households vary in the degree to whichthey are exposed to the impact of rising food prices andin the nature of that impact. Some households will seean improvement in their welfare, others a decline, withsome slipping into poverty in consequence (Ivanic andMartin 2008).The position of households as consumersor producers with regard to food markets was alreadyhighlighted as a key characteristic in determining theinitial impact of higher food prices in local markets.Thegeneral welfare level of a household is also important—the wealthier a household is, the more resilient it willbe to such economic shocks. Similarly, those householdsthat can exploit additional income sources or expandexisting sources will be better able to cope with thenegative aspects of rising food prices and potentiallybenefit from them.

Finally, although the vulnerability of their householdwill be the most important determinant of individuals’vulnerability to risks from a global food crisis, thevulnerability of members of a household will vary.Where continued access to adequate food and basicsocial services is jeopardized, the nutritional well-beingof household members is placed at risk.The mostsevere and enduring effects of any resulting malnutritionare felt by women of childbearing age and their young

children, both in the womb and in the early years of lifewhen physical and mental development occurs rapidly.The degree to which household resources are directedto the needs of these individuals will determine howsignificant and persistent the effects of a global foodcrisis will be for them. Similarly, the provision of basicpublic social services or community assistance to themost vulnerable will mitigate some of the adverseindividual effects of a food crisis.

Most national leaders seek to act so that anypositive impacts of a global food crisis are enhanced andsustained and any adverse effects that constrain thedevelopment ambitions of the country or its people areavoided or reduced. Moreover, the entire social andeconomic framework within which the effects of aglobal food crisis play out at the national level isdynamic.Any public policy responses or any adjustmentsmade by private firms, households, and individuals in theface of changing economic conditions due to risingglobal food prices will alter the conditioning factors thatdetermined the nature of the initial impact of theserising prices. Consequently, feedback or second-roundeffects will foster additional adjustments. Many of thesesecond-round effects may operate in a manner oppositeto the initial effects experienced. Relatively sophisticatedpolicy analysis will be required to identify these second-round effects and adequately address the threats andopportunities facing a country and its citizens.

In considering the vulnerability of countries,households, and individuals to global food crises,national leaders can use a relatively small set ofinformation to assess the degree to which their countryas a whole is likely to be affected by rising global foodprices in one way or another and to determine whichgroups in the population of the country are thus likelyto see a change in their well-being.Table 1 provides alist of key national- and household-level indicators touse for this purpose.

The most important sources of these data for acountry include nationally representative householdsurveys with information on consumption, expenditure,and income; food price series from importantcommodity marketplaces in a country; and tradestatistics. Most countries have such data, but where theyare missing, it will be necessary to rely on qualitative orindicative, rather than representative, data to make thisassessment. For national leaders focusing on their owncountry’s vulnerability to a global food crisis, qualitativeassessments of the factors noted in Table 1 should besufficient to provide a reasonable indication of thedegree to which the country is exposed. In such a

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decisionmaking context, the value of the list ofindicators presented in Table 1 lies more in identifyingwhat sort of factors to consider than in their preciselevels. Undertaking a quantitative assessment of thesefactors, however, particularly if cross-country or within-country trend analyses are needed, requires professionalanalysis to compute some of the indicators listed.

Finally, for investigating what policy responses toglobal food crises are most appropriate for particulartypes of countries or households, the conditioningfactors at the national and household level listed inTable 1 provide an initial set of criteria upon which toconstruct typologies of country, household, or country-by-household types.With this relatively restricted set ofcategorical criteria, such groups can be defined simplythrough the construction of matrices based on them.

Data and analyses to assess impact of a food crisisThe preceding section discussed the factors that makesome countries and households more vulnerable thanothers to the effects of global food crises.This sectionconsiders what sort of information and analysis areneeded to measure the effects of such food crises,including both monitoring and impact analysis.Monitoring refers to the regular measurement ofindicators in order to understand historical trends,regardless of causes. In contrast, impact analysis tries toidentify the effect of one causal factor, such as theincrease in world food and fuel prices, excluding theinfluence of other factors, such as changes in localweather or agricultural policy.

Measuring national effectsUnderstanding the five elements that contribute to theoverall national impact of a global food crisis—changesin local commodity markets, local labor markets, fiscalbalance, external balance, and political activity—calls forcertain data and analytical requirements.

Local commodity markets. The basic datarequirements for monitoring and analyzing the effects ofglobal food price changes on local food prices include

• monthly or weekly prices in key markets for staplefoods, fertilizer, fuel, and other commodities that areimportant to poor households;

• estimates of the cost of shipping importedcommodities from international markets andshipping export commodities to their finaldestination; and

• the consumer price index.

These data can be used to plot the movement of

nominal and real local prices in different markets, as wellas import and export parity prices for each commodity.A rough measure of the degree of price transmission isthe ratio of the percentage change in local prices to thepercentage change in world prices over a specific timeperiod—an elasticity of global price transmission for thecountry.

A more advanced analysis of the effects of globalprice changes on local commodity markets wouldexamine the degree of price transmission using time-series econometrics. If data permit, it would be useful toinclude subnational estimates of production of the mostrecent harvest of the food crops in question.Theanalysis could be done for different commodities anddifferent markets within the country in order to assessthe relative importance of local supply shocks and globalprice changes in determining local prices (see Delgado,Minot, and Tiongco 2005).

A broad set of qualitative, somewhat morecontextual information would usefully inform any quanti-tative analysis on the interactions of global and localcommodity markets.This information would include thetrade policy orientation of government, the quality of acountry’s market infrastructure—transport, communi-cation, contract enforcement—and a profile of foodconsumption patterns across households and regions.

Local labor markets. Basic data requirements toconsider how local labor markets respond to globalfood crises include monthly data on unskilled wagerates by gender and the rate of unemployment in theformal sector.Where possible, these data should bedisaggregated by region and between types of labor(such as agricultural or construction).A qualitativeunderstanding of local labor markets would be requiredto judge their flexibility in the face of rising food prices.Key market characteristics of interest would include therelative size of the formal and informal labor markets,its sectoral composition, and the range of labor marketregulations, including those governing minimum wagesand employment contracts. In addition to being useful inthemselves, these data are also an important input inthe analysis of household-level impact, as discussed later.

Fiscal balance. A basic analysis of the impact ofrising global food prices on the fiscal condition of anational government would examine each source ofrevenue or type of expenditure separately and estimatethe change in revenue or expenditure that would resultfrom a given increase in food and fuel prices. Forexample, what is the change in revenue associated withan ad valorem tariff on imported cereals, assumingactual changes in prices but no change in trade volumeor tariff rate?

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Table 1—Basic information needed to assess the exposure of countries and households to theeffects of rising global food prices

INFORMATION INDICATOR NOTES

National

Degree of integration intoglobal food trade

The extent of relative global food basketprice transmission for a country

Alternative measures: qualitative indicators of conditioning factorsfor price transmission from Figure 2 (transport and transactioncosts, trade regulation, exposure to terms-of-trade effects, etc.)

Diversity of staples consumednationally

Proportion of all calories consumed fromstaple foods that comes from the staplefood providing most calories

• Provides indication of scope for substitution in staples awayfrom those globally traded

• Possibly restrict focus to staple consumption patterns of poorhouseholds

• Alternative measure: proportion of all calories consumed thatcome from globally traded staple foods

Net food trade position Ratio of net staple food imports to GDP • Net exporting countries gain from higher prices, net importerslose, and countries that do not trade staple foods are relativelyunaffected

• Alternative measure: Ratio of net staple food imports to totalvalue of exports

Variability in national foodproduction

Annual variability in estimates of total sta-ple food production over past 10 years

• Poor production in one cropping season will result in height-ened exposure to global food crisis.

• Alternative measure: seasonal rainfall variability

Trade balance National balance of payment status (strongsurplus, in balance, or strong deficit)

Exposure to global fuel price shocks an element of this: degree ofself-sufficiency in petroleum and other energy consumption

Importance of food consump-tion to all household con-sumption

Food consumption as a proportion of thevalue of all household consumption

• Alternative measure: proportion of food in basket of itemsused for national consumer price index

• Indicates inflationary impact of higher food prices; also thepolitical pressure that government may experience from risingfood prices.

Private supply response tohigher food prices

Elasticity of supply in response to pricechanges for principal domestically pro-duced staple foods

Alternative measure: agricultural population as a proportion oftotal population

Household

Net food buyers or net foodsellers

Net sales (sales minus purchases) of trad-able food as a proportion of householdincome

In countries where staples are tradable, net buying householdslose, net sellers gain, and autarkic households are relatively unaf-fected. In countries where staples are not traded, little directeffect on households

Agricultural households Share of income from agriculture • Scope for self-provisioning in face of rising food price• Opportunity to respond to higher prices with increased

production

Options for householdresponse to rising food prices

Poverty level Poor are constrained in terms of assets and capital, resulting in amore restricted suite of household coping strategies to drawupon

Food consumption as a proportion ofvalue of all household consumption

Scope for reducing nonfood expenditures

Vulnerability to food insecu-rity in absence of food priceshocks

Households already vulnerable :• conflict affected• recent agricultural shocks• certain demographic types (elderly or

single-parent households)• already reliant on food assistance

before food price increase

Rising food prices will exacerbate current vulnerability, particu-larly for those vulnerable households that depend on the marketfor much of their access to food

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More advanced analysis of the impact of these priceincreases on a nation’s expenditures, revenues, and debtwould simulate the changes in revenue and expenditureas part of a larger system of equations, thus incorpo-rating interactions between markets and betweengovernment programs.This analysis may be amultimarket model describing the main agriculturalcommodities or a computable general equilibrium(CGE) model describing the economy as a whole.ACGE model can trace the effect of an adverse fiscalimpact to households based on assumptions about howthe government responds to the fiscal deficit throughhigher taxes, lower expenditures, increased debt, orsome combination of the three. Similarly, such a modelcan be used to assess changes in demand for targetedpublic social services as a consequence of changes inthe well-being of households due to a global food crisis.

External balance. A basic measure of the effect ofworld prices on the external balance of a country is theterms of trade effect, defined as the change in the valueof export revenue minus the change in the cost ofimports (based on the actual price changes but no changein the volume of trade), expressed as a percentage ofgross domestic product (GDP) (more detail on thecomputation of this effect is provided in Appendix 1).Thisanalysis would use annual or, preferably, monthly data onthe volume of food and fuel imports and exports tocalculate changes in the terms of trade on an annual ormonthly basis. Expressing the change in the terms oftrade as a percentage of GDP provides an idea of the sizeof the shock relative to the size of the economy, as wellas allowing cross-country comparisons. It also can bedecomposed to measure the proportion of the impactcaused by each commodity (such as wheat, maize, or oil).The likely effect on the exchange rate may be approxi-mated using previously estimated elasticities of excessdemand for foreign currency.

A more advanced analysis of these effects woulduse an economic model, ideally a CGE model. Such amodel would generate estimates of the impact of thefood and fuel price increases on the terms of trade andthe equilibrium exchange rate.An appropriatelydesigned CGE model would also be able to simulate theimpact of the depreciation on different types ofhouseholds.

Political activity. The data collection and analyticalmethods for assessing the political impact of rising globalfood prices are principally qualitative. Nevertheless, it isimportant to take these effects into account in under-standing the potential range of policy responses that canbe considered when evaluating alternative policies torespond to the effects of a food crisis.

Measuring household effects

The largest and most direct effect of a food crisis onhousehold welfare is likely to be through the prices ofagricultural commodities and, possibly, fuel and fertilizer.Thus, most analyses of the impact of a global food crisisat the household level should focus on prices and howchanges in prices of various sorts influence householdwelfare.

In the short run, before a household responds tochanging local prices, the impact of price changes onwelfare can be estimated using the changes in the priceof goods and services and the composition of incomeand expenditure of the household (see Appendix 1).

An extension of this analysis uses price elasticitiesof supply and demand to simulate the response ofhouseholds to the price changes, thus yielding thechange in welfare after the household responds to theprice changes.This approach corresponds to asimulation of the welfare impact in the medium or longterm. The welfare impact in the longer term is generallymore positive (or less negative) than the short-runimpact owing to second-round effects.As such, theshort-run impact generally serves as a lower limit of thepossible long-term impact of changing local food priceson household welfare (see Appendix 1).

Both the short-term and the medium- to longer-term expressions of welfare change for a household inthe face of rising food prices can also be calculated for aset of representative households or, preferably, for everyhousehold in a nationally representative householdsurvey. In the latter case, by estimating the change inincome associated with the price change, researcherscan estimate the resulting changes in poverty andinequality for the nation as a whole.

The basic data requirements for understanding thehousehold welfare impact of price changes include

• information on the price changes of importantgoods and services;

• information on the composition of householdexpenditure; and

• information on the composition of householdincome.

At a minimum, this information should be availablefor one or more “typical” types of households, with anemphasis on different types of poor households. It is,however, much more useful to have this information forall of the households in a nationally representativehousehold income and expenditure survey.This type ofdata set would permit the simulation of the impact ofprice changes on all households in the sample, and then

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aggregate the effects simulated to any desired categoriesof households (such as by region, by income category, byoccupation, and by net position in staple crops).Thisapproach has been used in various studies of the distribu-tional effects of hypothetical or historical changes in foodprices, including studies by Deaton (1989) for Thailand,Budd (1993) for Côte d’Ivoire, Barrett and Dorosh(1996) for Madagascar, Minot (1998) for Rwanda, andIvanic and Martin (2008) for various countries.

The analyses described use exogenous pricechanges, either historical prices or assumed pricechanges.A more advanced analysis is to develop amodel in which prices are endogenous, being a functionof change in world prices, trade policy, technology,weather, transportation costs, or other factors.This typeof analysis generates estimates of the detailed distribu-tional impact of selected policies and external shocks.The model may be a partial equilibrium model, such asan agricultural sector model with or without spatialequilibrium built into it (Minot and Goletti 1998).Alternatively, it may be a general equilibrium model thatincludes all sectors and makes income fully endogenous.Such models require more skills, resources, and datathan simpler approaches, but they present the mostcomprehensive approach to analyzing the impact ofpolicies on households.

Measuring individual effectsThe basic data requirements for monitoring the impactof a food crisis at the individual level include a numberof administratively collected variables:

• school enrollment by age and gender, collected byprimary and secondary schools;

• attendance at health clinics by age and gender,collected by clinics; and

• nutritional status by age and gender, collected byclinics or from nutritional surveys.

These indicators may be poor measures of theunderlying variables. For example, school enrollmentfigures do not indicate the share of each age group inschool and may be misleading indicators of trends ifthere is migration. Similarly, clinic-based nutrition figuresare not necessarily representative of the generalpopulation.

A preferable but more costly and time-consumingapproach to monitoring these individual-level welfareindicators is with household surveys that collectdetailed individual-level data. Such surveys can alsomeasure the quantities of food consumption by eachmember of the household, leading to individual-levelestimates of nutritional intake.

An analysis of the impact of a food crisis onindividuals would be based on the analysis of the impactof the crisis on household-level welfare (alreadydiscussed) and an estimated relationship betweenhousehold welfare and the individual-level outcomes ofinterest (such as nutrition or school attendance).Thisrelationship would be estimated using econometricmethods and would take into account other factorssuch as household composition, parental education,access to services, and measures of the role thatwomen play in household decisions.

Summary of data and methodsTable 2 summarizes the data that would be needed toundertake a relatively thorough assessment of theimpact of a global food crisis on a country and itscitizens.The data listed here represent something of anideal set. Moreover, the more detailed the data in termsof variables, frequency (weekly or monthly, rather thanannual), and spatial resolution (regional or district level,rather than national), the better. Important insightscould be gained, however, with a more basic set ofinformation: a nationally representative householdbudget survey, relatively detailed commodity priceseries, information on the food trade patterns of thecountry, and the consumer price index.

The ease with which the basic data sets for acountry can be assembled will vary considerablybetween countries, depending on the strength of theirstatistical systems and the degree to which quantitativepolicy analysis is used in decisionmaking.Where data aremissing for a country, the final column in Table 2 notesadditional sources of data or alternative practical typesof information that may be used.

Similarly,Table 3 summarizes the most importantanalyses to which the data listed in Table 2 could beapplied. One can categorize the methods into subsetscorresponding to basic, intermediate, and moreadvanced analyses.The basic analyses are those that canbe done without strong quantitative skills or specializedsoftware; the intermediate analysis requires more skillsbut no econometric analysis or modeling; and the moreadvanced techniques are considerably more demandingin terms of quantitative skills (econometrics andmodeling), data, and specialized software.

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Table 2—Data to assess impact of global food crises on countries, households, and individuals

INFORMATION PURPOSE RESPONSIBLE ALTERNATIVES

Basic data sets

Householdconsumption andexpenditure survey(nationally repre-sentative)

• Composition of household expenditures• Composition of household income• Food group consumption patterns, by population

group; importance of imported staple foods• Proportion of population that are net food buyers

or net food sellers• Household poverty status• Specification of sectoral or CGE models for

advanced policy analysis

• National statisticaloffice (NSO)

• Survey analysts atacademic andresearch institutes, ifNSO does not doanalysis

• Household surveys from NGOsand researchers that are indicativebut likely not nationally representative

• Estimates from neighboringcountries with similar householdlivelihood and welfare patterns;international databases (UNagencies, ERS/USDA)

Price series forfood, agriculturalinputs, and fuelfrom key nationaland internationalmarketplaces

Determine national market integration into globaltrade

• NSO• Ministry of Trade• International com-

modity price data-bases (e.g., IMF, FAO)

• Primary price data for CPI calcula-tion from NSO

• Ministry of Agriculture• Private sector commodity whole-

salers

Import and exportdata (commodities,amounts, value)

Importance of trade for food security and economicgrowth—require data on both formal and informaltrade

Customs Department • NSO (data on informal trade)• Food security agency (monitor all

trade in food)

CPI Deflate nominal to real prices or relate to wage ratechanges

NSO International financial databases (e.g.,IMF)

Additional data sets

Agriculturalproductionestimates

• Net trade position in food• Variability in national food production

Ministry of Agriculture • FAO national food balance sheets • National food import and export

data (formal and informal)

Elasticities of sup-ply and demand inresponse to pricechanges

• Own and cross-price elasticities of supply (can farm-ers shift to higher-priced commodities?)

• Own and cross-price elasticities of demand (canconsumers substitute away from higher-priced trad-able staples to local nontraded alternatives?)

• National planningauthority, Ministry ofFinance

• Analysts at academicand research institutes

Global elasticity datasets (e.g., FAPRI,ERS/USDA); elasticities for neighbor-ing countries with similar agriculturalproduction, trade, and food consump-tion patterns

Nutritional surveys,vulnerabilityassessments

• Pre-crisis vulnerability to nutrition insecurity• Impact of global food crisis on child and maternal

nutritional status

• NSO• Ministry of Health• Food security moni-

toring agencies

Estimates from neighboring countrieswith similar household livelihood andwelfare patterns (see DHS database,UNICEF,WHO, FEWSNET)

Use of social services

Monitoring the impact of crisis on use of social serv-ices that promote learning, health, and good nutrition

Administrative datafrom Ministries ofEducation and Health

Household survey data with informa-tion on all members’ education,health, and nutrition status

Wage rates; labormarket structure

Determine scope for response in labor markets toeffects of global food crisis

NSO (household, labor,and enterprise surveys)

Ministry of Labor (information onlabor regulations)

• Import andexport transac-tion costs

• Regulations ontrade in food

• Identifying barriers to trade• Export and import parity price computations; com-

parative advantage assessment

Ministry of Trade • More comprehensive data on costsfrom private sector importers andexporters

• “Doing Business” dataset of theWorld Bank

Fiscal position ofgovernment

• Sources of revenue, nature of expenditures, and howeach might change with effects of global food crisis

• Specification of sectoral or CGE models foradvanced policy analysis

Ministry of Finance Sectoral working groups (education,health, agriculture, etc.) for details onprogram design and expenditures

External balance • National balance of payment status• Assess terms-of-trade effects

• Ministry of Finance• Ministry of Trade

International macroeconomic data-bases (e.g., IMF)

Note: CGE = computable general equilibrium; CPI = consumer price index; DHS = Demographic and Health Survey; ERS/USDA = Economic Research Service/U.S. Departmentof Agriculture; FAO = Food and Agriculture Organization of the United Nations; FAPRI = Food and Agricultural Policy Research Institute; FEWSNET = Famine Early WarningSystem; IMF = International Monetary Fund; NSO = National Statistical Office; UNICEF = United Nations Children’s Fund;WHO = World Health Organization.

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Table 3—Analytical methods to assess impact of global food crises on countries, households,and individuals

METHOD PURPOSE ANALYTICAL SKILLSREQUIRED

Basic analyses

Monitoring of real food prices(world and local) and wages

To understand the potential and actual magnitude of the price shockshouseholds face and their ability to cope with them

Basic

Cross-tabulations of householdsurvey data

To develop profiles of population groups identified by likely impact ofglobal food crisis (by region, poverty status, livelihood, net-seller/net-buyer status, etc.)

Basic to moderate

Investigations of food group con-sumption patterns with house-hold survey data

To permit evaluation of the impact of rising food prices on the compo-sition of the diets of various population groups in the country

Basic to moderate

Profile of a country’s trade infood

Significance of trade for the food security of a country and for that ofits trading partners

Basic

Intermediate analyses

Price transmission from global tonational markets—basic correla-tion analysis

To assess exposure of national consumers to shifts in world prices oftraded commodities

Moderate

Analysis of terms of trade effects To determine the effect of world price changes on the value of netexports as a percentage of GDP and the impact on real householdincome

Moderate

Analysis of household-leveleffects

To understand the impact of world price changes on different types ofhouseholds based on the composition of their expenditure and income(with or without demand and supply response)

Moderate

Advanced analyses

Demand and supply estimation To estimate the effect of changes in prices, income, and other factorson demand for food commodities; to estimate the effect of price andother factors on agricultural supply response

Moderate to advanced

Partial-equilibrium, sector-specificmodels

To simulate the impact of policies and global price changes on the agri-cultural sector and (potentially) poverty and distributional effects

Moderate to advanced

Computable general equilibrium(economywide) models

To simulate the impact of global price changes and the policies adoptedin response on disaggregated economic growth and poverty; to gaininsights on fiscal implications of the crisis and the government’sresponses to it

Advanced

Price transmission from global tolocal markets (time-series econo-metric analysis)

To better understand barriers to trade in food and other commoditiesfor a country

Moderate to advanced

Note: Basic analytical skills should be available in government institutions with planning and budgeting responsibilities. Moderate skills can be expected to be found instronger ministerial planning departments.Advanced skills are likely to be found only in research universities or other research institutes (local and international).

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National governments have responded to the current world food crisis in several ways. Responses

intended to reduce the prices faced by domestic consumers in the short term, such as

reductions in tariffs or consumption taxes, food price controls, actions against speculators and

profiteers, consumer subsidies, export bans or taxes, government food imports, and release of food

reserve stocks, have been quite common. Less common are interventions to increase domestic food

production by triggering a supply response to the crisis, such as through providing input subsidies or

support prices for farmers. A third category of responses has sought to increase food availability for

or the income of vulnerable or politically powerful groups through social protection programs such as

food rations, food or cash for work, and cash transfer programs.Appendix 2 lists policy responses by

different governments to the current food crisis through mid-2008, as well as a listing of political

agitation triggered in part by the crisis.

Monitoring and Assessing Current and FuturePolicy Responses

Table 4 illustrates these policy responses, as well asothers that could be used in the medium and longerterm.The table classifies the interventions according tothe types of interventions mentioned—that is, thoseintended to affect consumer prices fairly directly, thoseintended to increase food production (with indirectimpacts on food prices), and those intended to increasefood availability for or the income of target groups. Italso classifies interventions according to whether theyare likely to have an impact in the immediate or shortterm, in the medium term (one to three years), or inthe longer term.

One point evident in Table 4 is that the set ofpossible policy responses expands as the time frame forimpacts is increased. In the short term, policymakers canlittle do to change domestic food production if farmershave already made their planting and input use decisionsfor the upcoming harvest. Policy responses are limitedto changes in tariffs, taxes, consumer subsidies, foodprice controls, export restrictions, government foodimports, or the release of public reserve stocks. In themedium term, the scope of action widens—governments can implement price stabilization policiesbased on the use of reserves, tariffs, or subsidies;promote food production using subsidies, producerprice supports, or provision of agricultural supportservices; and extend social protection programs. In the

longer term, larger sustained impacts can be achievedthrough broader investments for economicdevelopment and poverty reduction.

Given the breadth of possible policy responses to afood crisis in the longer term, the challenge ofmonitoring and assessing the impacts of such responsesis great and hardly distinguishable from the need tomonitor and evaluate policies and programs to promoteeconomic development and poverty reduction ingeneral.This report focuses mainly on methods ofmonitoring and assessing the short-term responses to aglobal food crisis and their impacts, although it alsoprovides some discussion of the need for andapproaches to assessing medium- and longer-termresponses and impacts.

Types of impacts expected from policy responsesAlthough the purpose of this report is not to presentan analysis of the impacts of actual or potential policyresponses to the current global food crisis, it is useful toconsider the types of impacts that can be expectedfrom policy responses in order to help guide decisionsabout what information should be monitored and whatanalytical methods should be used to assess impacts.Table 5 provides a set of hypotheses about favorableand unfavorable impacts that may result from various

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Table 4—Potential policy responses to food crises

TYPE OF INTERVENTION

TIME FRAME

SHORT TERM (< 1 YEAR) MEDIUM TERM (1–3 YEARS) LONG TERM (> 3 YEARS)

Reduce food prices forconsumers(price-orientedpolicies)

• Reduce tariffs/taxes on food• Adopt food price controls/take

action against profiteers• Adopt consumer subsidies• Adopt food export bans or taxes• Pursue government food imports• Release food reserve stocks

Same options as short term plus:• Establish food reserves and

release policy• Establish variable tariffs or

variable export subsidies/taxes • Pursue options to increase

domestic food production (seebelow)

Same options as medium term plus:• Invest in marketing infrastructure,

institutions, and information• Invest in increased food production

capacity (see below)

Increase foodproduction(supply-orientedpolicies)

Limited short-term options • Adopt input subsidies• Adopt producer price supports

and subsidies• Expand agricultural credit• Strengthen agricultural extension

Same options as medium term plus:• Pursue agricultural R&D• Invest in productive infrastructure

and assets (e.g., irrigation, mecha-nization)

• Improve natural resource manage-ment

• Improve property rights andresource tenure systems

Increase food avail-ability for or income oftarget groups (income-orientedpolicies)

• Increase support through existingsocial protection programs

• Increase public sector wages• Increase food aid programs

Same options as short term plus• Establish new social protection

programs or expand/improveexisting ones

Same options as medium term and thosefor increasing food production plus• Invest in other development and

antipoverty programs (e.g.,education, promote rural nonfarmenterprises)

policy responses and about conditioning factorsinfluencing these impacts.As already noted, most of theshort-term policy responses aim to reduce consumerfood prices, which is a favorable effect from thestandpoint of net food buyers. Policies and programs topromote increased food production also have beneficialimpacts on net food buyers to the extent that theyresult in reduced domestic food prices.They also canbenefit food producers by reducing their costs ofproduction (such as through input subsidies) orincreasing producer prices (such as through pricesupport and producer subsidies), although the netimpact on producers depends on the relative strengthof these effects compared with the downward pressureon producer prices caused by increased production.Targeted food aid or income-oriented interventionslikely have favorable impacts on the direct beneficiaries,and these may have beneficial spillover impacts on otherhouseholds or individuals such as by increasing demandfor goods and services provided by households as aresult of the increased incomes of beneficiaryhouseholds.

All of these policy responses have costs andpotentially unfavorable impacts as well.All price-orientedinterventions, to the extent they are successful inreducing food prices, will reduce the incomes of net foodsellers and the incentive for producers to respond byincreasing production. Reducing tariffs or consumptiontaxes, increasing consumer or producer subsidies, orincreasing social protection programs will have directbudgetary costs, potentially increasing governmentdeficits, credit shortages (if budget deficits are financed byborrowing), or inflationary pressures (if budget deficitsare financed through monetary expansion).The benefitsof interventions may not be well targeted to poorer andmore vulnerable households, especially interventionsfocused on affecting market prices, leading to potentiallyhigh costs relative to the improvement in food securityachieved. Direct subsidies to producers or consumers orsocial protection programs have more potential fortargeting, although targeting may not always be politicallyacceptable and may involve high administrative costs.Efforts to control prices and speculative behavior maylead to black markets, and thus be ineffective, and may

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Table 5—Potential national policy responses to food crises: Favorable and unfavorable effects and conditioning factors

POLICYRESPONSE FAVORABLE EFFECTS UNFAVORABLE EFFECTS CONDITIONING FACTORS

Reduced tariffs orother taxes onfood

• Lower domestic food prices• Increased domestic consumption and

welfare of net food buyers• Contribution to liberalized agricultural

trade

• Lower government revenue• Lower income of net food sellers• Reduced food production in longer

term• Benefits accrued by wealthier

(as well as poorer) net foodconsumers

• Reduced food available on worldmarkets

• Initial level of tariffs and taxes• Availability of offsetting sources

of government revenue• Difficulties for low-income

countries with lack of otherrevenue sources

Export restric-tions (includingtaxes and minimum exportprices)

• Lower domestic food prices• Increased consumption and welfare of

net food buyers• Increased government revenue

(if export taxes are used)

• Lower income of net food sellers• Reduced incentives for food

production• Benefits accrued by wealthier

(as well as poorer) net foodconsumers

• Reduced food available on worldmarkets

• Ability to enforce restrictions• Difficulty of applying export

taxes for countries with limitedadministrative capacity

Release of foodfrom stocks

• Lower domestic food prices (quicklybut temporarily)

• Increased consumption and welfare ofnet food buyers

• Increased government revenue ifgovernment stocks are sold

• Reduced cost of storing food

• Lower income of net food sellers• Reduced incentives for production

response• Possible undermining of private

storage activity if public stocks areused

• Benefits accrued by wealthier (aswell as poorer) net food buyers

• Availability of food stocks• Expectations about future prices

(useful only for countries thathave accumulated stocks)

• Release of food stocks will notaffect the price of a tradablecommodity

Price controls onfood

• Lower domestic food prices (if pricecontrols can be enforced)

• Increased consumption and improvedwelfare of net food buyers

• Lower income of net food sellers• Reduced incentives for supply

response• Market disequilibria leading to

quantity rationing• Rent-seeking behavior, black

markets• Deadweight efficiency losses• Benefits accrued by wealthier (as

well as poorer) net food consumers,if quantity restrictions can beovercome

• Ability to enforce price controlsand quantity restrictions (difficultto do this effectively in mostcountries)

• Political attractiveness of suchmeasures

Consumer foodsubsidies

• Lower consumer prices (if effective)

• Increased consumption and welfare of food consumers

• Increased producer prices andproduction incentives for nontradablefoods if supported by budget expenditures

• Increased income for producers

• High budgetary burden• Benefits accrued by wealthier (as

well as poorer) food consumers andproducers, if subsidies are nottargeted

• Political and administrative difficultiesof targeting

• Benefits leak to food exporters andnontargeted consumers

• Political feasibility of targeted versus general subsidies

• Budgetary capacity• Administrative costs and

feasibility of implementingtargeted subsidies (difficult for low-income countries)

Actions against orappeals to profi-teers, speculators

• Possibly lowered food prices (ifeffective) with benefits to net foodconsumers

• Possible undermining of privatemarkets

• Reduced food storage and marketingby private agents, leading to morevolatile food prices or larger foodmarketing margins

• Lower prices for farmers, reducingproduction and marketing

• Political attractiveness of findingscapegoats in marketing system

• Ability to distinguish “profi-teering” from reasonablespeculation and trading activitiesand to hold the guiltyaccountable (very difficult to dothis effectively in most countries)

Cash transferprograms-conditional cashtransfer (CCTs)and means-basedtransfers

• Possible targeting of poor and vulnerable

• Less costly than food aid, general foodsubsidies, or tariff/tax cuts

• Increased food consumption andimproved welfare of recipients

• Promotion of use of health andeducation services and facilitation oflong-term human capital investment

• Difficulty of establishing effectiveprograms quickly, especially CCTs

• Possible political unpopularity oftargeting

• Potential for leakages of targetedprograms

• High administrative and possiblybudget costs

• Prior existence of system• Administrative capacity to target

and distribute transfers (difficultfor most low-income countries)

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POLICYRESPONSE FAVORABLE EFFECTS UNFAVORABLE EFFECTS CONDITIONING FACTORS

Food vouchers orfood stamps

• Similar favorable effects as for cashtransfer programs

• Also may serve as a transition from in-kind to cash transfers

• Similar unfavorable effects as for cashtransfer programs

• More costly to administer than cashtransfers, but cheaper than in-kindtransfers

• Prior existence of system• Administrative capacity (difficult

for low-income countries)

Food- or cash-for-work and publicworks schemes

• Potential self-targeting to poor individ-uals with capacity to work

• Contributions to valuable infrastruc-ture and other public investments

• Maintenance of incomes of vulnerablepopulations in face of shocks (espe-cially labor demand shocks)

• Adjustability of wage payments inresponse to food price shocks

• Possible exclusion of vulnerablepeople facing labor constraints (e.g.,HIV/AIDS affected, women)

• Potential negative impacts on otheruses of labor, including agriculture

• Possible poor-quality publicinvestments

• High administrative demands ingeneral; higher with food-for-work

• Lack of complementary nonlaborinputs may undermine effectiveness

• Potential for aid dependency

• Administrative capacity to imple-ment and assure quality

• Access to source of food aid orfunds (usually donor funds)

• Availability of surplus labor atcertain times of the year (usefuloption for many low-incomecountries, especially for thosewith access to donor assistance)

Increased publicsector wages

• Rapid response to impacts on apolitically important group

• Support for political stability• Spillover benefits to others through

increased demand for goods andservices by public sector employees

• Increased wages

• Failure to target those mostvulnerable to food price increases

• High budgetary costs• Possible contribution to public deficit

and an inflationary spiral

• Size and political clout of thecivil service

• Budgetary capacity and risk ofinflation

Minimum supportprices for farmers

• Stimulation of production response (ifeffective)

• Increased income of net food sellers• Increased price stability for net food

buyers and sellers

• Possible excess supply and stocks• High budgetary costs• Difficulty of enforcing minimum

prices• Possible disproportionate accrual of

benefits by wealthier net food sellers• Costs to net food buyers• Contribution to instability in interna-

tional markets if based on variabletariffs or export subsidies (not ifbased on stocking policies)

• Difficulty of eliminating onceestablished

• Political strength of net food sell-ers for particular commodities

• Dependence on food imports(easier to implement a variabletariff than stocks-basedapproach)

• Fiscal and administrative capacity(especially for stocks-basedapproach)

Subsidies to farm-ers, e.g., inputvouchers

• Stimulation of production response (ifeffective)

• Increased income of farmers• Reduced prices of nontradable foods,

leading to benefits to food consumers

• High budgetary costs if not welltargeted

• Political and administrative difficultyof targeting

• Potential for leakages of benefits toadvantaged groups

• Difficulty of eliminating onceestablished

• Potential negative impacts on privatemarket development (which can beaddressed through “smart” subsidies)

• Possible inefficiently excessive use ofsome inputs

• Political strength of farmers andinput suppliers

• Fiscal and administrative capacityto implement “smart” andtargeted subsidies

Building of foodreserves

• Stimulation of production in near term(while stocks accumulate) andbuffering of future price instability,which benefits domestic foodproducers and consumers and interna-tional markets

• Assurance of reliable supply forexporting countries

• Possible price increases in near term• Cost of establishing and maintaining• Limited impacts on prices except for

nontradable (or trade-prevented)commodities and large players ininternational trade

• Undermining of private stockholdingby government stocks

• Size of country’s net supply ordemand in international market

• Tradability of the commodity• Fiscal and administrative capacity

(not likely the most effectiveintervention for small low-income food importers)

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contribute to corrupt practices by regulators.To theextent that price controls are effective, they can causeshortages that must be addressed by other rationingmechanisms, leading to inefficient and possibly inequitableallocation of commodities. Leakages and spillover effectsof interventions may also undermine their effectiveness.For example, export bans may lead to increasedcontraband food exports, while changes in public foodreserve stocks may be offset by induced changes inprivate stockholdings.Trade interventions such asexport bans on staple foods also can precipitate protec-tionist reactions by other nations, undermining the foodsecurity of trade-dependent countries as the interna-tional market for food becomes increasingly volatile.

Many political, administrative, and economic condi-tioning factors can influence the feasibility and impacts ofthese policy interventions. For example, the ability to usetariff or tax reductions to offset food price increasesdepends on the initial level of these tariffs or taxes andon the political will and fiscal capacity of the governmentto offset or forgo the revenues that would have beencollected. Budgetary constraints may also limit the use ofsubsidies, social protection programs, or public sectorwage increases.The use of export restrictions dependson the government’s capacity to enforce such restric-tions. International treaty obligations under the WorldTrade Organization (WTO) or other trade agreementsmay also limit national governments’ ability to use trademeasures to buffer food price changes.The capacity ofthe government to enforce price controls or regulationson speculators will determine the effectiveness of suchmeasures, while the political context may promote orinhibit their use.The ability to expand the use of socialprotection programs will depend upon prior experiencewith such measures and the administrative capacity of thegovernment to implement targeted approaches.

These conditioning factors imply that low-incomecountries dependent on food and oil imports may belimited in their ability to use most of these potentialresponses effectively. Budgetary constraints are likely tolimit the use of large untargeted subsidy programs,reductions in tariffs and taxes, or public sector wageincreases, whereas administrative capacity constraintswill often limit the ability to target social protectionprograms. Some social protection programs, such asfood-for-work or cash-for-work, tend to be self-targetedand thus more readily usable than more administrativelycomplex approaches, such as conditional cash transferprograms. Low-income food-importing countries thatare large exporters of oil or other commodities whoseprices have also increased will have more budgetary

capacity to use subsidies, tariff and tax reductions, orsocial protection programs to buffer the impacts offood price increases, although they are still likely to facemany administrative capacity constraints. Higher-incomecountries tend to have more budgetary and adminis-trative capacities to implement a range of these options.

Monitoring and assessing theimpacts of policy responsesIt is important to clearly distinguish the concepts ofmonitoring and impact assessment. Monitoring involvescollecting data on selected indicators and observinghow those indicators change over time.The purpose ofmonitoring may be diagnostic or prescriptive. Forexample, changes in food security vulnerabilityindicators may be used to diagnose a serious problemoccurring for some population in some location,whereas such indicators combined with indicators ofthe conditioning factors affecting responses andoutcomes (such as indicators of prior investment andcoverage of social protection programs) may help toprescribe promising policy responses.

Monitoring by itself does not tell policymakerswhat impacts a given policy or program is expected tohave (ex ante assessment), is having (assessment duringimplementation), or has had (ex post assessment).Toassess impacts, one must define the counterfactual orbaseline situation against which impacts are to beassessed and use analytical methods to measure thedifference in outcomes between the situation with thepolicy or program being evaluated and the counter-factual situation. Conceptually, the counterfactualsituation should be the situation that is expected tooccur (in an ex ante assessment) or that would haveoccurred (in an assessment during implementation orex post) without the intervention. One of the main diffi-culties in impact assessment work is that thecounterfactual situation is not observed (nor is thefactual situation—the situation with the policy—observed in ex ante assessments).To address thisproblem, some assumptions and models, whetherexplicit or implicit, are necessary. For ex anteassessments, predictive models are needed to predictwhat will happen with the intervention versus withoutthe intervention. Such models could be as simple asassuming that the quantities of the commodities ofinterest produced and consumed would be the same inthe future as in the recent past and that the onlydifference between the counterfactual and factualscenarios is in the prices of these commodities (for

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example, commodity prices might be assumed to bereduced by 25 percent due to a tariff reduction). Orthey could be complex multimarket or generalequilibrium models that seek to assess how changes inthe market for one commodity affect othercommodities and factors of production.

Assessing impacts during or after an interventionoffers the advantage that the factual situation isobservable.The counterfactual situation, however, is not.Some common ways of addressing this problem are to

• assume that the situation observed before thepolicy or program is what would have occurredwithout intervention (before-after comparison);

• assume that the outcomes for some comparatorgroup not directly affected by the policy orprogram represent the outcomes that would haveoccurred for the affected population without theprogram (with-without comparison);

• assume that the changes in outcomes for acomparator group represent the changes inoutcomes that would have occurred for theaffected population without the program (double-difference comparison); or

• use a model to predict what would have happenedwithout the intervention.

The first approach (before-after comparison) isproblematic if other factors besides the policy orprogram being assessed that affect the outcomes ofinterest also are changing over time. In this case, thebefore situation may be a very poor proxy for whatwould have occurred without the policy or program.For example, food prices may be changing over time asa result of many supply- and demand-related factors, soattributing a change in food prices as due solely to apolicy change can be problematic.

The second approach (with-without comparison) isproblematic if the comparison group is different fromthe affected group in ways that affect the outcomes ofinterest.This problem can be addressed by (1) randomlyassigning groups or individuals to “treatment” versus“control” groups using an experimental design, whichassures that the with and without groups are statisti-cally similar in all observable and unobservablecharacteristics; (2) selecting the comparison groups bymatching members between the groups on relevantobservable characteristics; or (3) using econometricapproaches to correct for selection bias. Because itensures that treatment and control groups are similar inboth observable and unobservable characteristics,random assignment is seen as the “gold standard”

approach in impact evaluations of targeted programs(Heckman et al. 1998).This approach is not alwaysfeasible, politically acceptable, or appropriate to thenature of the intervention, however. Demand-drivendevelopment programs, for example, do not easily lendthemselves to the use of supply-driven randomassignment.

Moreover, all of these with-without comparisonapproaches assume that the comparison group isunaffected by the policy or program being assessed. Forinterventions that affect food prices throughout acountry, it is difficult to find counterfactual householdsin the same country who are unaffected. Even fortargeted subsidies or social protection programs,spillover effects of such programs to nonparticipantsmay affect outcomes for potential comparison groups aswell. Such effects are easier to avoid for small pilotprograms or small targeted changes in such programsthan for changes occurring on a large nationwide scale.

The third approach (double-difference) combinesthe strengths of the before-after and with-withoutcomparisons, since it nets out the effects of commonfactors affecting both with and without groups (like theeffects of common changes in prices affecting bothgroups) and fixed factors that may cause differences inoutcomes between the groups (like differences in theirabilities).This method is also subject to the shortcomingthat the comparison group may be indirectly affected bythe policy or program, however, and to anymeasurement error problems in comparing differences(Ravallion 2005).

The fourth approach (using a model to predict thecounterfactual) can overcome the problem of not beingable to identify a suitable comparison group unaffectedby the intervention.This approach is thus particularlyuseful for assessing the impacts of policies that affectfood prices and allows a similar approach to be used asfor assessing impacts ex ante.The validity of theassessment will depend on the validity of the model andthe assumptions on which it is based, however, many ofwhich may not be readily testable.

The preceding discussion points out that nomethod of impact assessment is free of assumptions orpotential problems.The best method to use will dependon the type of policy or program being assessed, thetime frame and outcomes of interest, the data availablefor the assessment, the ability to build on priorassessments and models, and the ability of key stake-holders to use and comprehend the method used. Inthe next three subsections, this report suggests somemethods of monitoring and assessing impacts of the

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three different types of policy interventions—price-oriented, supply-oriented, and income-oriented—withthese considerations in mind.The methods discussedrange from the simple to the complex, depending onthe nature of responses and impacts considered. Simplemethods require more restrictive assumptionsconcerning the responses of and impacts on producers,consumers, and others in the economy but are easier toimplement.

Price-oriented policies and interventions

Assessing the impacts of policies that affect householdsand individuals primarily through their impacts on foodprices—changes in tariffs, taxes, or subsidies; price orexport controls; grain reserve policies; and so on—canbe done in two steps. First, one estimates the impacts ofthese policies on domestic food prices and othernational-level outcomes such as fiscal and externalbalances. Second, the impacts of these price changes onhouseholds and individuals can be assessed using themethods discussed in earlier for monitoring andassessing the impacts of food price increases. Becausethe methods and data needs for the second part of thisassessment were discussed earlier, this section focusesonly on the first part of the assessment.

A distinction can be made between policies thataffect food prices fairly directly, such as changes intariffs, and policies that affect prices by affecting thequantity of food available in the market, such as grainreserve policies. In the former case, a first approxi-mation of the impact on prices is given by the policyitself. For example, a reduction in the tariff rate of $10per ton for an imported commodity can be expected toreduce the domestic price of that commodity by $10per ton if domestic markets are well integrated with theinternational market (perfect price transmission). If thisassumption holds, there is no need for any monitoringor assessment to determine the resulting domesticprice change. Because of transaction costs, market orgovernment imperfections, and other factors, however,the actual changes in domestic prices of the commodityin particular locations may be different (probablysmaller) than the change in the tariff rate. Hence it isuseful to monitor what happens to prices in differentlocations and assess the extent to which the policychange or other factors contributed to such changes.

In the case of interventions affecting the supply offood in the market, such as release of public grainreserve stocks, a different approach is needed.Theimpacts of these quantitative supply shifts on prices must

be estimated.This estimation can be done using a simplesingle-commodity partial equilibrium model, assumingthat only one commodity is affected, or using a morecomplex multimarket model, assuming that prices ofother commodities may also be affected. Other indirecteffects of the policy, such as the effects of releasingpublic stocks on private stockholding behavior, may alsoneed to be taken into account to draw reliableconclusions about the impacts of the policy.

Table 6 summarizes some approaches tomonitoring and assessing the impacts of a change in theimport tariff on an imported food commodity and of achange in public food stocks. In the interest of brevity,the table does not describe specific approaches for allof price-oriented interventions mentioned earlier.Rather, it presents these two examples as illustrations ofthe approaches and issues involved in assessing impactsof, first, an intervention with a direct price impact and,second, an intervention with an indirect impact onprices by changing the available supply.

Reduction in import tariff. As noted, with perfectprice transmission to domestic markets, there is noneed for monitoring or analysis to know the impact of achange in tariff on the price of the affected commodity.The case of imperfect price transmission is thusconsidered here, along with methods for monitoringand assessing impacts on other commodities.

To assess the potential short run impact of a tariffreduction ex ante, considering imperfect price trans-mission, one multiplies the percentage import pricechange due to the tariff reduction by the elasticity ofprice transmission. For example, if a tariff reductionimplies a 10 percent reduction in the import price ofrice and the elasticity of price transmission for rice inthe country is 0.5, then the predicted impact on thedomestic rice price is a 5 percent reduction.Thiscalculation assumes that the elasticity of price trans-mission can be estimated from available data or fromvalues in the literature and that the elasticity estimatedis valid for a change in the tariff. Estimates of trans-mission elasticities can be found in the literature (forexample,Valdés and Foster 2008). It is advisable,however, to use sensitivity analysis with a range ofvalues from the literature estimated for countries havingsimilar economic and policy environments. If suitablevalues are not available from the literature, the pricetransmission elasticity can be computed. (More detail oncomputing the short-term effects of a reduction intariffs on food commodities is provided in Appendix 1.)

Changing the tariff for one commodity may affectthe domestic demand, supply, and prices of other

Table 6—Methods for monitoring and assessing impacts of selected price-oriented policies on domestic food prices

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POLICY NATURE OFIMPACTS

ASSESSMENTAPPROACH

KEY ASSUMPTIONS

DATA ANDPARAMETERS

NEEDED

SOURCES OF DATAAND PARAMETERS

Changes in tariffs on foodcommodities

Direct short-run tariffimpact withfull transmission

No assessmentnecessary; pricechanges in domesticmarket fully reflecttariff change

• Change in domesticprice = change intariff (100% pricetransmission)

• No effects on othercommodities

Level of tariffs before andafter change

National trade policies

Direct short-run tariffimpact withpartial transmission

Ex ante:• estimate % domestic

price change using %import price changetimes elasticity ofprice transmission

Ex post:• Same method• Before-after compari-

son of changes inimport price tochange in domesticprices

• Econometric timeseries analysis

• Transmission ofchange in tariff todomestic marketsincomplete due toimperfect marketintegration, transac-tion costs, contra-band imports

• Transmission elastic-ity stable; estimatefrom past prices rep-resents elasticity fortariff change

• No effects on othercommodities

Same as above, plus• Import price level,

before and after• Domestic price level,

before and after, indifferent locations

• Quantity imported,before and after (tocompute revenue impli-cations)

• Time series data onprices in domestic andimport markets and ontransaction costsaffecting price margins

Same as above, plus• Commodity price

information system• Agricultural trade sta-

tistics• Media reports, key

informants on politicaland natural shocks

• Trader surveys ontransaction costs andbarriers

• Key informants oncontraband trade

Indirectmedium-runtariff impactson othercommodities

Multimarket model Changes in tariffs forparticular commoditiesinduce changes inprices of othercommodities owing tocross-price demandand supply effects

Same as above, plus• Quantities of supply and

demand of all relevantcommodities (possiblyby regions)

• Direct and cross-elastic-ities of supply anddemand of allcommodities

Same as above, plus• Supply and use data

for relevantcommodities fromMinistry of Agricultureor National StatisticalOffice

• Elasticities estimatedfrom data orliterature on similarcontexts in this orother countries

Use of public grainreserve stocks

Direct short-runeffect ofincreased supply onselected commodity

Single-commodity par-tial equilibrium model(supply shift leading tochange in equilibriumprice); estimation usingelasticities of demandand import supply

• No effect of releaseon private stock-holding

• No effect on pro-duction

• No effect on othercommodities

• Quantity of stockreleased

• Total supply• Domestic price• Price elasticity of

demand• Price elasticity of

import supply (notcommonly available)

• Supply and use datafor relevant commodi-ties

• Elasticities estimatedfrom data or literatureon similar contexts inthis or other coun-tries

• Public stocks datafrom the national foodreserve agency

• Estimates of elasticityof import supply fromtrade and price data

Indirect short-runeffect ofincreased supply

Single-commoditypartial equilibriummodel with supply ofprivate storage included

• Private stockholdingdemand affected byprices

• No effect onproduction

• No effect on othercommodities

Same as above, plus• Quantity of private

stocks of commodity• Elasticity of private

stockholding demandwith respect to price

Same as above, plus• Private stocks esti-

mated fromhousehold and tradersurveys

• Elasticity of privatestockholding demandcomputed using priceand private stocksdata

Indirectmedium-termeffect ofincreased supply andreduced prices

Multimarket modelincluding supply anddemand of substitutecommodities

• Private stockholdingdemand affected byprices

• Demand for andproduction ofsubstitute orcomplementarycommoditiesaffected

Same as above, plus• Supply, use, and stocks

of substitutecommodities

• Supply, demand, andstockholding elasticitiesfor commodity andsubstitutes

Same as above

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commodities. For example, a reduction in the tariff onimported rice may reduce the demand for other staplecommodities, reducing their prices in the near term.Theeffects on supply may be mixed. Since the price of riceand other staples may fall, their production may also fallin the medium term, although substitution betweencrops in farmers’ supply decisions could lead toexpanded area of alternative crops.A multimarketsupply and demand model could be used to assess thesecross-commodity effects. Implementing such modelswould require data on the supply, use, and prices ofother commodities that are substitutes or complementsto the directly affected commodity, as well asinformation on the elasticities of supply and demand ofthese commodities (including cross-price elasticities).The supply and use data are likely to be readily available(though not always reliable) in the national statistics ofthe Ministry of Agriculture or from international organi-zations such as the Food and Agriculture Organizationof the United Nations (FAO). Estimated elasticities ofsupply and demand may be available for the countryfrom the literature, although typically it is difficult to findestimates of cross-price elasticities. If sufficient data onproduction, use, and prices are available for the selectedcommodities, these parameters could be estimatedeconometrically. Otherwise, it may be necessary to usevalues based on values for similar countries andcommodities in the literature, combined with expertjudgment and sensitivity analysis of the results.

Such a multimarket modeling approach could beused either ex ante or ex post to assess the impacts ofa tariff change. If used ex post, some of the predictedimpacts could be tested against actual data and used toimprove the model and estimated impacts. For example,the predicted impacts on prices of substitutecommodities could be compared with actual pricechanges, and the deviations could be used to adjust themodel parameters to obtain better predictions.Implementing this approach would be a fairly intensiveresearch endeavor and not something that is likely to bereadily implementable by government agencies in mostdeveloping countries.

Food reserve policies. As in the case of a tariffchange, if the domestic market is fully integrated withthe international market for an imported foodcommodity and the country is a small player in the inter-national market, then the effect of domestic food reservepolicies are perfectly predictable and no monitoring orassessment analysis is needed. In this case, release orpurchase of domestic stocks will have no impact on the

world or domestic price of the commodity, since thechange in domestic supply will have an insignificantimpact on the world market price, and the domesticprice will not change relative to the world market pricebecause the market is fully integrated. Release of publicstocks in this case can only reduce the quantity ofimports but cannot help reduce domestic food prices.Hence, it makes sense to consider buffer stock policiesonly in countries where the domestic market is not fullyintegrated with the world market, perhaps because oftrade or transportation barriers.

The short-run impact of releasing food stocks from areserve can be estimated using a simple partial equilibriumsupply and demand model. The only data required to doso are data on the total short-run supply of thecommodity, the amount of reserve stocks that will bereleased, and estimates of the elasticities of demand andsupply for the commodity.A similar computationalapproach can also be used to estimate the price responsefor the medium- and longer-run cases in which aproduction response is possible.This calculation can bemade by expanding the supply elasticity to be the sum ofboth the elasticity of import supply and the elasticity ofproduction with respect to price (for more detail, seeAppendix 1.)

Finally, this estimation method can also be used togauge the price impacts of public reserve policies, takinginto account the responses of private stockholding toprices.A simple formulation would treat demand forprivate stocks as just another component of demandfor the commodity, this demand being typically largerwhen prices are lower.The elasticity of private stockdemand would be added to the elasticity ofconsumption demand to determine the total elasticityof demand. Since private stockholding demand is likelyto increase the total elasticity of demand, the priceimpact of releasing public stocks is likely to be lesswhen such private responses are taken into account.

Food reserve stock policies can have impacts on theprices of other food commodities similar to the wayimport tariff changes do.As in that case, a multimarketmodel could be used to assess impacts on substitute andcomplementary commodities.The data and parameterrequirements to implement these models would besimilar to those needed to assess the impact of tariffchanges across food commodities.As discussed for thetariff case, these models could be used to predict impactsex ante or ex post. In the ex post case, the predictions ofthe models could be compared with observed changes inprices and quantities produced, consumed, and imported,

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Table 7—Methods for monitoring and assessing impacts of selected supply-oriented policieson domestic food prices

POLICY NATURE OFIMPACTS

ASSESSMENTAPPROACH

KEY ASSUMPTIONS

DATA ANDPARAMETERS

NEEDED

SOURCES OF DATAAND PARAMETERS

General (nongroup-specific) policies

Subsidies oninputs—fertilizers,seeds, credit

Direct impacton input pricesand costs offoodproduction;effects onother relatedmarkets (e.g.,labor market)

By level of disaggregation

National averagefarmer

Average farmercaptures effects atnational level

National-level data: inputprices, imports, exports,national productioncapacity, etc.

• National StatisticalOffice

• Ministry ofAgriculture

• National accounts• Trade information

Several types of farmers Selected types offarmers capture mostof the heterogeneity inthe country

Same as above, plusData for construction offarmer types

Same as above, plusHousehold survey andagricultural census

Individual farmers Aggregation of effectsfor individual farmersadds up to nationaleffects

Same as above, plusData at household andfarm level

Same as above, plus

By level of complexity

Food supply responseat farmer level

No other effects arepresent other thanfarmer supplyresponse

Supply elasticity withrespect to input prices

Same as above, plusEstimations of elastic-ities from previousstudies

Food supply responseand (equilibrium)effects on othermarkets

Model selectedaccurately representsmacroeconomiclinkages

Same as above, plusParameters for macro-economic linkages acrossmarkets

Same as above, plusSocial accountingmatrices from previousstudies

Generalagriculturalresearch anddevelopment

Specific toprograms (e.g.,improvedvarieties, soiland watermanagement)

Likely same as analysisof subsidies, reflectingdifferent levels of disag-gregation andcomplexity

Assumptions will bebased• on assessment

approach• on scenarios ana-

lyzed (e.g., high,medium, low yields)

• on impact pathwayexamined

Indicators that arespecific to the agriculturaloutcomes expected

Ongoing agriculturalresearch and develop-ment programs

Group-specific (targeted) policies

Examplesinclude inputvoucherprograms,micro-lendingschemes, andsmall-scaleirrigationprograms

Direct impacton benefi-ciaries toachieve a foodsupplyresponse; out-of-programspillover effects

• Randomized design• nonrandomized

designs:• Before/after• Matching.• Double

differences• Instrumental

variables• Discontinuity

regressions• If general equilibrium

effects are expected,similar approaches asabove for assessinggeneral (nongroup-specific) policies

• Attrition from groupof beneficiaries orcontrol group willnot affect validcomparisons acrossgroups

• In nonrandomdesigns, the controlgroup providesaccurate informationon what would havehappened to benefi-ciaries if they hadnot participated inthe program beingevaluated

• Outcome indicator:agricultural production

• Input indicator (ortreatment indicator)—examples includedummy variable forparticipation, amountreceived on vouchers,and size of loan

• Other factors thataffect outcomeindicator: land size andquality, labor,equipment, humancapital

• Baseline and after-program surveys ofbeneficiaries andcontrol group

• If nonrandomizeddesign, control groupcan be selected fromanalysis of a represen-tative householdsurvey

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and the discrepancies used to improve the specification ofthe model.

Supply-oriented policies and interventions

Higher food prices can potentially benefit farmers andinduce more food production and hence trigger a positivechain-reaction effect in local and regional economies.Thisdesirable outcome may require time, however, or may nothappen at all if farmers face constraints in gaining accessto productive inputs and resources.Typically small farmersare the ones who cannot quickly take advantage of bettermarket opportunities or increase their productionbecause of borrowing constraints or limited access toinputs.Therefore policy actions can help accelerate supplyresponses by relaxing the key constraints faced by small-scale farmers.

Policy interventions and programs aimed atsupporting increased agricultural production includesubsidies to farmers for key inputs like fertilizer orimproved seeds, agricultural extension and creditprograms, investment in small-scale irrigation, andsupport for agricultural research and technologydevelopment. Subsidies for fertilizer and seeds andprograms for extension and credit can have impact inthe medium run, whereas investments in small-scaleirrigation and agricultural research are expected to havelonger-term impacts. Moreover, to monitor and evaluatethe impact of these programs, it is important to differ-entiate between targeted policies that apply to specificgroups of producers and those that apply to all farmers,such as a general subsidy on fertilizers.

As a summary of the following discussion,Table 7sketches some approaches to monitoring and assessingthe impacts of supply-oriented policies, both general—input subsidies and agricultural research anddevelopment—and targeted.

General supply-oriented policies. These policiescan be directly monitored by observing selectedindicators over time and across groups. In the case ofgeneral subsidies for fertilizers or seeds, indicators ofthe input price paid by farmers after the subsidy will berelevant. Because the subsidy is intended to reduce theactual price farmers pay for the input, it is important toconfirm this is actually happening.Time-series data onfertilizer prices can be collected at the household levelor from commercial suppliers. In some cases or regions,most of the subsidy may be captured by intermediariesinstead of reaching farmers.Therefore input prices mustbe collected nationally to make sure the program iseffectively implemented in all regions.

Policies oriented to increase agricultural researchand development can be monitored by auditing howadditional funding is spent. Indicators such as the ratioof researchers’ salaries to total salaries can give anindication of excessive leakage of resources to adminis-trative activities. Depending on the nature of the specificresearch and development programs, outcome andcoverage indicators should be selected, such as thenumber of farmers adopting new technologies or seedsand the number of publications.

To evaluate the impact of these policies, differentmethods can be applied.The final output of an impactassessment exercise, however, should be the answer tothe following question:What is the food supplyresponse due to the policy or program beingimplemented? When policies are designed to lowerinput prices, methods similar to those used to assessthe impact of rising food prices can be used. Instead ofassessing the varied impacts of increasing food prices,researchers would assess the impact of decreasingprices, say, for fertilizers or credit, on food productionand food prices.

Such impact analyses can use different levels ofdisaggregation: national, assuming a single representativefarmer; by farmer group, assuming several fixed types offarmers; or for as many different farmers as are availablein a representative survey. On another dimension, thecomplexity of the analysis can be divided into twolevels: the food supply response at the level of thefarmer, and the food supply response and equilibriumeffects on other markets at the level of the economy.

With regard to data needs, in the case of subsidiesto fertilizers, a key parameter to estimate is the supplyelasticity with respect to the price of fertilizers—inother words, an estimate of how much food productionincreases with decreases in the price of fertilizers.Thesame concept applies for the price of other inputs,including for the interest rate or access to credit. Forsome farmers changes in input prices might imply adiscrete jump in the way they produce—for example,shifting from not using fertilizers or improved seeds atall to making intensive use of them.This supply elasticitywith respect to the price of inputs can be estimated ordrawn from the literature for a nationally representativefarmer, for several types of farmers, or for a whole setof farmers with different characteristics.

In evaluating the impact of agricultural researchprograms, the methods and indicators must be tailoredto the nature of the specific research programs orinterventions being evaluated. For example, researchprograms aimed at increasing yields can be evaluated

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using several alternative scenarios, such as high-,medium-, and low-yield increments. In terms of the levelof disaggregation, researchers can assume that yieldachievements are the same for all farmers or that theyvary across different type of farmers or regions. Nomatter what method is used, however, a good practice isto establish the impact pathway—for example, fromresearch to improved seeds to adoption to higher yieldsand then to increased agricultural production and foodavailability.

Targeted supply-oriented policies. Programs likeinput vouchers, microlending schemes, and small-scaleirrigation programs, among others, are usually targetedto specific groups of farmers within a country. Similarly,targeted crop insurance schemes may facilitateincreased risk taking by farmers and foster an improvedsupply response.To monitor these types of programs,researchers must identify a set of program-specificindicators and collect data such that the followingquestions can be answered: How is the project beingimplemented? How is the project operating in the field?How is the program progressing relative to targets? Forexample, monitoring input voucher programs willrequire data on the number of beneficiaries relative tothe target population, average time to deliver a voucher,number of regions covered by the program, timing andcapacity to use the available program funds, and qualityand quantity of data collection for ex post impactevaluation, among other information.

For impact assessment the focus must be on theexpected final outcomes, including higher foodproduction by the targeted farmers.As long as thetarget groups and participants are clearly identified, theimpact assessment can be directly applied to them.Thekey objective is to know how much the foodproduction of participant farmers increased owing tothe intervention.To answer this question, the impactevaluator needs to estimate what the output of thesefarmers would have been had they not participated inthe program.As discussed in considerable detail at thestart of this section, a range of different methods can beapplied to gain such an understanding.

Two special considerations must be mentionedwhen assessing the impact of targeted policies andprograms. First, ex ante evaluations of expected impactscan be made using evaluations of existing programs orsimilar programs implemented in the past or in othercountries.To minimize errors in extrapolating resultsfrom other programs, a good practice is to extrapolatefrom programs where participants were, on average,

similar to the participants in the targeted program onewants to evaluate. Second, when the policy responseimplies the scaling up of existing programs, then anassessment of impacts outside the program may berelevant.As an example, imagine that a successfulmicrolending program allows farmers to improve theirfarming equipment in such a way that they can save ontheir labor demands. If this program reaches a largescale of operation relative to a given region, it is likelythat some effects of the program will operate throughthe labor market by changing the aggregate regionallabor demand, affecting equilibrium wages in the region.In this case, researchers should combine the impactevaluation methods proposed here for targetedprograms with those for the general policies andprograms discussed earlier.

Income-oriented policies and interventions

By income policies, we group together those policiesthat are intended to compensate the most vulnerablegroups for their real income loss and erosion in theiraccess to food due to higher food prices.These policiesinclude cash and conditional cash transfer programs,food vouchers or food stamps, food or cash for workand public work schemes.Table 8 outlines someapproaches to monitoring and assessing the impacts ofsuch income-oriented policies and programs. Essentially,the same considerations as for assessing targeted supply-oriented policies and programs hold for the assessmentof the effects of most income-oriented policies.

As already mentioned, when monitoring programswith well-defined target groups and participants,researchers must define a set of process indicators tohelp answer a set of central questions. How is theprogram being implemented? How is the programoperating in the field? How is the program progressingrelative to targets? Hence it is important to chooseindicators that will meaningful measure progress towardobjectives.With a monitoring system in place builtaround such indicators, the information collected can beused to adjust program implementation to better attainprogram targets. Indicators such as the number ofparticipants, the number of those participants whoshould not have qualified for the program, the timesince identification of participants until delivery of actualprogram benefits, and the share of expenditure onadministrative processes out of total program costswould be relevant.

For impact assessment, a range of differentmethods can be used.An extensive literature describes

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the design of impact evaluations, and the accumulatedexperience on evaluating income-oriented socialprograms across the developing world is large. Severalkey points on best practices for the impact evaluation ofsocial programs are mentioned here. First, such programsshould be evaluated based on an assessment of howdifferent the situation of participants (and sometimesnonparticipants) is relative to what their situation wouldhave been had the program not been implemented.Toanswer this question, one needs to evaluate the meaningof “situation” in this context. Hence, one crucial elementis to identify outcome indicators to define the situationof the participants.These indicators could be measures offood expenditure, income, nutritional levels, or calorieintake, among others.

Second, identifying a control group from whomevaluators can acquire information on the counter-

factual situation the participants would haveexperienced had the program not been implementedbecomes central.The challenges of correctly identifyinga control group for comparison were discussed in detailearlier in this section.

Finally, the data needed for impact evaluations willdepend on the evaluation design. Data should becollected on outcome indicators and on variables thathelp explain or condition those outcome indicators.Thisinformation must be collected from both the benefici-aries and the selected control group and for at least twopoints in time, before and after the program, to enablethe use of a double-difference approach. If possible, it isideal to collect data on multiple points in time after theprogram has been implemented to help determine theduration of any attributed impact to the program.

Table 8—Methods for monitoring and assessing impacts of selected income-oriented policies on domestic food prices

POLICY NATURE OFIMPACTS

ASSESSMENTAPPROACH

KEY ASSUMPTIONS

DATA ANDPARAMETERS

NEEDED

SOURCES OFDATA AND

PARAMETERS

Examplesincludecash transfers,conditional cashtransfers,food vouchersor food stamps,food- or cash-for-workschemes, andother publicwork schemes

Direct impacton beneficiaries:• More real

income• Greater, more

diverse foodconsumption

• Improvednutritionallevels

• Higher calorieintake

Also, out-of-programspillover effectsmay beimportant

• Randomized design• Nonrandomized

designs:• Before/after• Matching• Double

differences• Instrumental

variables• Discontinuity

regressions• If general equilibrium

effects expected,similar approaches asfor assessing generalsupply-oriented inter-ventions can be used

• Attrition from groupof beneficiaries orcontrol group will notaffect validcomparisons acrossgroups

• In nonrandomdesigns, the controlgroup providesaccurate informationon what would havehappened to benefici-aries if they had notparticipated in theprogram beingevaluated

• Outcome indicatorsare program specific:

• Real income• Food

consumption andnutrition levels

• Calorie intake• Input indicators (or

treatment indicators):• Dummy variables

for participation• Amount of cash

transferred• Amount of food

transferred• Other factors that

affect outcomes:• Demographic

variables• Education levels• Other human

capital factors• Environmental

factors• Social service

access

• Baseline and after-program surveys ofbeneficiaries andcontrol group

• If nonrandomizeddesign, controlgroup can beselected fromanalysis of represen-tative householdsurvey

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Access to comprehensive and detailed information on a timely basis is vital to influence and

inform policy responses to the current and future global food crises. Although abundant data

are available on food issues, relevant information is often outdated, spotty in coverage, and insuffi-

ciently disaggregated to local levels. Further, much of the information is collected in an

uncoordinated fashion by different international and regional organizations. In some contexts, even

when information is available, the principles of freedom of access to information about the vital

issues related to food security are not always followed and public, civil society, and corporate actors

are not sufficiently informed for sound decisionmaking in their domains. It would also be unrealistic

to assume that all the needs for information collection, policy analyses, and policy and program

monitoring are met by appropriate human capacity in most developing countries affected by food

crises. Therefore, coordinated action is needed not only to get the data and to conduct timely

analysis so that it can be shared with decisionmakers, but also to identify mechanisms for obtaining

advice and for cross-country learning and capacity strengthening. Many actors are already engaged in

such efforts, including multilateral and bilateral agencies. Yet knowledge about where to get advice,

for instance, on the implementation of sound context-specific food production investments, on trade

policy measures that do not backfire, or on the design of targeted food and income transfer

programs or effective nutrition interventions is still often out of reach for developing countries.

Learning from the experiences of other countries, based on sound research, can often help, but

mechanisms for doing so are lacking.

An Implementation Plan for Action onMonitoring and Impact Assessment

This section of the report sketches out the mainelements of a global initiative to develop the means toprovide reliable, appropriate information and decision-support tools for national policymakers so that they canrespond quickly to changes in world food markets.1 Theimplementation plan’s objectives and components areoutlined in Table 9.

An important element of the initiative is to set upan Internet-based open access policy information portalto provide comprehensive and detailed information onfood crisis and related developments, including formaland informal responses, country by country. In today’sInternet world, many useful websites and portals exist,including important ones operated by FAO, the WorldBank, the CGIAR, and others.The portal will not

duplicate them but add specific value.The portal shouldbecome a reliable information- and decision-supporttool to strengthen the ability of policymakers in thedeveloping world to respond quickly to dynamic devel-opments in world food system, especially crises.Theportal will also facilitate monitoring of actual donor-supported investments (and pledges) that address thecurrent food crisis at the country level. Salient elementsof the portal are as follows:

• Capacity-strengthening toolbox. In the initialstages of the development of the informationportal, existing tested tools for analysis will bebrought together in a capacity-strengtheningtoolbox.These tools will include key questions toask, decision-support for specific well-defined

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problems, and comparisons between countries andissues.As the information portal is expanded andstrengthened, new or adapted tools will be added,including many of those described earlier in thisreport.This toolbox will allow portal users to learnhow to use different tools of analysis and employthose techniques with country-specific datacollected and presented elsewhere on the portal.

• Country-by-country food policy information.Vital food statistics and trends will be made availablethrough the portal or, where sources already exist,through links.These datasets will include statistics onfood prices, production, consumption, stocks,markets, and trade, as well as poverty and foodsecurity information, at global, regional, and nationallevels. Both historical and current data will bepresented, as well as projections of some currenttrends.Also, data on the policy and programmeasures taken by various countries in respondingto the current food crisis will be provided.

• Food policy in the news. This element of theportal will contain latest news reports on the foodsituation across countries, including on food-relatedprotests and other manifestations of the currentfood crisis, and on policy and program actionsunder consideration. ‘In the news’ here means notonly the formal media, but also the fast-evolvinginformal media such as blogs.This part of theinitiative is significant because in a crisis opencommunication is crucial for maintaining trust andfor sound decisionmaking by all actors.

• Key players.The portal will provide technical links tothe public information bases of major national organi-zations in each country and of global institutionsaddressing the effects of food crises at global, regionaland national levels. Such institutions include the FAO,the World Food Programme (WFP), the InternationalFund for Agricultural Development (IFAD), the UnitedNations Children’s Fund (UNICEF), the World HealthOrganization (WHO), other UN organizations, theWorld Bank, regional development banks, theConsultative Group on International AgriculturalResearch (CGIAR), nongovernmental organizations(NGOs), and the private sector.

• Research findings. This section of the portal willcontain key publications by organizations workingin this field to allow users to quickly retrieve thelatest knowledge resources for assessing andresponding to the effects of food crises.

• User forums. Users of the portal will be able tosubmit specific questions, suggestions, and comments.The forum will not only provide help in using theportal, but also serve as a platform to discuss globalfood price issues and connect with other users andexperts.The forum will be monitored andmoderated by technical and content experts.

A conceptual flow chart of the information portal ispresented in Figure 3.An initial needs assessment,including interviews with the primary target audiencesand users, will be undertaken to fine-tune the structure ofthe portal and the information provided.The portal will

Table 9—Main objectives and activities of the implementation plan for providing information anddecision-support tools to respond to global food crises

OBJECTIVES ACTIVITIES

1. Information strengthening and monitoring • Development of an Internet-based portal• Development of a capacity-strengthening toolbox • Facilitation of urgent advisory action

2. Advisory services for policy actions • Assessment of impacts of high and volatile food prices incountries

• Identification of risks and vulnerabilities

3. Closing of important specific information gaps that limitappropriate food crisis responses

• Specific studies designed to strengthen actions and imple-mentation in countries, such as on women and food crisis,supply response, moving from emergency to social protec-tion, and others to be identified as the program is built

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Project partners• Africa• Asia• Latin America

Users• Senior policymakers• Researchers• NGOs and civil society

organizations• International agencies• Private sector

Coordinator

SourcesUsers Research dataExperts Early warning systemsOpen databases Project Þndings

WORLD FOOD SITUATION PORTAL

Capacity-strengtheningtoolbox

News

Collaborativespaces

Statistics/policies

Countrydata

Figure 3—Conceptual framework for the policy information portal

also be designed to allow contributions from all users.Users will be able to suggest changes to any part of thesite, and the portal will have built-in feedback mechanisms,such as user satisfaction surveys, to ensure that the dataprovided serve the needs of the portal’s users. In addition,Web statistics will be used to evaluate the performance ofthe portal to determine which sections and types ofinformation need to be further developed.Workingtogether with partners, the portal’s managers will adjust itto respond to national and regional needs.

All information on the site will be searchable, andthe site will abide by standards for low-bandwidthenvironments to be accessible in areas where Internetconnectivity is a problem. Information provided will betranslated into various languages (first French andSpanish, and later Chinese and Arabic), and offlineversions in the form of CD-ROMs will be made available.

The portal aims to assemble information from awide array of sources. In addition to information anddata on the Internet, the portal will contain informationassembled directly from a wide range of national (suchas national statistical agencies and relevant ministries),

regional (such as regional economic commissions andorganizations), and global sources. In addition, it willprovide organizations working on food and agriculturalpolicy issues with the opportunity to join this initiativeand to integrate their expertise and information intothe site, given its open access format. In this regard, theportal will be designed in an open Wikipedia-typefashion.Access to the portal both to obtain and to addinformation and tools will be open as an internationalpublic good to the wider public, including civil society,policymakers, and the private sector.

The portal will be rolled out with information on anumber of countries in three regions—Sub-SaharanAfrica,Asia, and Latin America and Caribbean—selectedbased on criteria such as high share and number ofundernourished people and diversity in size, economicand social conditions, and geographic location. Onceestablished, the portal will quickly embrace a larger setof countries, including about 45 countries where mostof the world’s food-insecure people live. Over time itwill be broadened to serve as a self-monitoring devicefor other countries.

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Key partners and sources of policy advice andsupport for this initiative include policymakers, policyadvisors, and food, nutrition, and agriculturalresearchers well connected to national and regionalfood and agricultural policy processes.Their networksand linkages to policymakers will be important, not onlyfor providing information to policymakers, but also forindicating where there might be knowledge gaps thatwould require extra information and capacity strength-ening. Collaboration between partners will facilitate theexchange of relevant information, strengthen capacity,and support mutual learning. Moreover, policymakers’needs, related to the policy processes in which they areengaged, will guide the nature and expansion of theadvisory services, based on sound assessments of policyoptions and actions delivered through consultativeprocesses that will be an element of the initiative.

An international steering committee composed ofpolicymakers and advisors will guide this initiative fromthe beginning.This committee will help ensure that theimplementation plan is well embedded in partner organ-izations and adds value without duplication.

A step-by-step approach is envisioned to build thisinitiative into a sustainable international public good.There will be three distinctive phases to this initiative:

1. the build-up phase during which functions,processes, and organizational designs will be testedand established;

2. the maintenance phase during which the initiatedfunctions and designs are optimized; and

3. the “auto-pilot” phase during which authority,accountability, and responsibility will be handled bythe user community with minimal coordination.

As a contribution to the monitoring andassessment of national policy responses to world foodcrises and to provide support for obtaining high-qualityinformation and knowledge management forappropriate policy responses, the International FoodPolicy Research Institute (IFPRI), in collaboration withnational, regional, and international partners, proposesto begin implementation of this action plan byDecember 2008.

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Conclusion

It is hoped that the description in this document of theinformation sets and analytical tools needed to guidepolicy responses to global food crises will contribute toa further fleshing out of this and related frameworks foraction on the current global food crisis at internationaland continental levels in coming months. Ultimately,

however, it is in the use of the information detailedhere—in the collection of basic data and its use inanalysis—at national and more local levels that will leadto long-term resilience to the effects of rising andvariable global food prices and contribute to sustainedglobal food security.

Decisionmakers who serve leaders of national governments need information and analytical tools

in order to assess the risks and opportunities that their country and its citizens face from the

current and future global food crises, to determine how they might respond to those risks and oppor-

tunities, and to monitor both the impact of a food crisis and the effects of governments’ policy

responses.Although the implications of a global food crisis differ across countries and population

groups, there are relatively well-defined sets of information and analyses that governments can employ

to manage such crises in their respective countries.As such, economies of scale can be captured at the

international level through joint action to collect data on food crises and on their national-, household-,

and individual-level effects; to build capacity in the analysis needed to guide policy formulation and pro-

gram design; and to evaluate the effectiveness of those policy responses. Similarly, there are a relatively

small number of types of policy responses that governments might take in the face of these crises.

Here too there is scope for international action—the lessons learned from effective and failed policy

responses by national leaders can be shared to aid countries considering similar policies.The proposed

global initiative to provide reliable, appropriate information and decision-support tools to enable

national policymakers to respond quickly to changes in world food prices sketched out in the preceding

section was formulated in recognition of the gains that can be realized through joint action across

countries and institutions to address the crisis.

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APPENDIX 1

Methods for Measuring the Impact of Food Crises

This appendix provides additional detail on how to implement some of the basic analyses described in this report. Inparticular, it explains the equations for calculating the terms-of-trade effect of changes in world prices, the short-term and the long-term welfare effects of changes in prices, the effect on prices of a reduction in the tariff for a foodcommodity, and the impact of releasing food stocks onto the market on food prices.

Terms-of-trade effects. One way to measure the terms-of-trade effect is to calculate the change in the valueof net exports due to changing world price (assuming that the country maintains the same volume of imports andexports) as a proportion of the size of the economy.This effect can be calculated as follows:

terms-of-trade effect = [∑xi (∆pi /pi ) -∑ mi (∆pi /pi )]/GDP, (1)

where xi is the value of export commodity i, ∆pi /pi is the proportional change in the world price of export i, mi isthe value of import commodity i, ∆pi /pi is the change in the world price of import i, and GDP is the gross domesticproduct of the country. Equation (1) can be applied to individual commodities (such as maize and wheat) or tobroad categories (such as agricultural commodities).As a simple example, if a country has agricultural exports ofUS$0.1 billion, agricultural imports of US$1 billion, and a GDP of US$10 billion, the terms of trade effect of a 50percent increase in agricultural prices would be (0.1 x 0.50 – 1.0 x 0.50)/10 = -0.45/10 = -4.5 percent.Thus, the lossdue to terms of trade effects is about 4.5 percent of GDP.

Short-term welfare effects of higher food prices. The proportional change in welfare in the short run(before the household responds to the new prices) can be expressed as follows:

short-run ∆y/y = ∑ fi (∆pi /pi ) - ∑si (∆pi /pi ) = ∑(fi -si) (∆pi /pi ), (2)

where ∆y/y is the proportional change in household welfare (usually expressed in terms of the value of householdconsumption), fi is the share of income from the sale of commodity i, ∆pi /pi is the proportional change in the priceof commodity i, and si is the share of expenditure going to the purchase of commodity i.This implies that (fi -si) isthe net sales of commodity i divided by household income or expenditure. Deaton (1989) calls this the net benefitratio and notes that it can be considered the short-term elasticity of welfare with respect to the price of i.Theimpact of changes in wage rates can be incorporated into this framework by assuming that one of the“commodities” is labor and its “price” is the wage rate.

Medium-term welfare effects of higher food prices. In the medium term, the welfare impact of pricechanges must take into account the response of the household to the new prices, but it can be calculated by anextension of the preceding equation:

long-run ∆y/y = ∑ fi (∆pi /pi ) + ∑ 0.5 fi εsi (∆pi /pi )2 - ∑si (∆pi /pi ) - ∑0.5 si εDi (∆pi /pi ) 2, (3)

where εsi is the elasticity of supply of commodity i and εDi is the price elasticity of demand for commodity i.Thus,the only additional information needed to estimate the medium-run impact is estimates of the price elasticity ofdemand and the supply elasticity.This expression can be easily estimated with information about the composition ofdemand, source of income, and the elasticities. Equation (3) does not, however, take into account shifts in spendingpatterns due to changes in income, cross-price effects in supply and demand, changes in the wage rate, changes inthe exchange rate, or other general equilibrium effects.

Both the short-term and the medium-term expressions of welfare change can be calculated for a set of repre-sentative households or, preferably, for every household in a survey. In the latter case, by estimating the change inincome associated with the price change, one can estimate the resulting changes in the incidence of poverty andother measures of poverty and inequality.

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Short-term impact of a tariff reduction. To assess ex ante the likely short-term impact of a reduction intariffs for food commodities, considering imperfect price transmission from global to national markets, one multipliesthe percentage import price change due to the change in tariff by the elasticity of price transmission:

∆Pd /Pd = ε(Pd, Pi ) x ∆Pi /Pi (4)

where ∆Pd /Pd and ∆Pi /Pi are the proportional change in the domestic and import price, respectively, and ε(Pd, Pi ) isthe elasticity of price transmission.

This calculation assumes that the elasticity of price transmission can be estimated from available data or fromvalues in the literature and that the elasticity estimated is valid for a change in the tariff. If suitable values are notavailable from the literature, the price transmission elasticity can be estimated.A simple method for estimating theelasticity is to calculate the ratio between percentage changes in domestic food prices and import prices over somespecified time period in the past (see, for example, Dawe 2008).2 More complex methods use econometric analysisof time-series price data (for example, Syrovátka and Lechanová 2005).The first method is simpler to use andrequires less data but produces only a point estimate for the elasticity, which could be biased because of theselection of unrepresentative time periods for the comparison or effects of other factors affecting the relativechanges of import and domestic prices. Econometric methods can help address these problems. Nonetheless, neitherthe simple two-point method nor econometric methods may produce a valid estimate of the elasticity that wouldapply to a change in tariff, because the elasticity evident in the historical price data may have been affected by otherfactors besides changing tariffs that do not apply in the present period. Such problems will be difficult to overcomein an ex ante assessment.An ex post assessment, however, could be used to check the validity of ex ante predictions,producing estimates of the elasticity of price transmission specifically in response to a change in tariff.

Short-run impact of releasing food stocks. The short-run impact of releasing food stocks from a reservecan be estimated using a simple partial equilibrium supply and demand model, as illustrated in Figure A.1.3 In thefigure, release of the quantity R from the reserve increases short-run supply from S to S + R, causing the marketequilibrium price to fall from P(S) to P(S + R).Assuming that the demand and supply functions have constant priceelasticities (or assuming small changes), the proportional change in price resulting from the change in supply is given by

∆P/P = (∆Q/Q) /(εD - εS) = R/ [S x (εD - εS))], (5)

where ∆P/P is the proportional change in the domestic price of the commodity resulting from the increase insupply, ∆Q/Q is the proportional increase in supply, and εD and εS are the price elasticities of demand and supply forthe commodity, respectively.4 For example, if the price elasticity of demand is -0.2, the price elasticity of supply is 0.3,and releasing the reserve stock increases supply by 10 percent, then the predicted impact on the price is -20 percent.

To use this approach, the only requirements are data on the total short-run supply of the commodity, theamount of reserve stocks that will be released, and estimates of the elasticities of demand and supply for thecommodity. Relevant estimates of the elasticity of demand may be available in the literature or could be estimatedeconometrically.The elasticity of supply in this case includes the responsiveness of the supply of imports to domesticprice changes and is related to the elasticity of price transmission (see endnote 3).5 This elasticity is not commonlyestimated, so it may be difficult to find appropriate values in the literature. It could be estimated econometricallyusing data on imports of the commodity and domestic prices, controlling for levels of production and import prices.6

It is important that any elasticity estimates used are subjected to sensitivity analysis.A similar computational approach to Equation (5) can be used to estimate the price response for the medium-

and longer-run cases in which a production response is possible. In this case, the supply elasticity will be the sum ofthe elasticity of import supply and the elasticity of production with respect to price. Estimated elasticities of

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production with respect to price are commonly found in the literature or could be estimated econometrically usingappropriate data.

Finally, equation (5) can also be used to estimate the price impacts of public reserve policies, taking into accountthe responses of private stockholding to prices.A simple formulation would treat demand for private stocks as justanother component of demand for the commodity, this demand being typically larger when prices are lower.Theelasticity of private stock demand would be added to the elasticity of consumption demand to determine the totalelasticity of demand. Since private stockholding demand is likely to increase the total elasticity of demand, the priceimpact of releasing public stocks is likely to be less when such private responses are taken into account. Estimates ofthe elasticity of private stockholding are less common than estimates of consumer demand, as this elasticity requiresdata on private stockholding levels, which may not be very reliable. Hence, addressing this issue may requirecollection of new data on private stocks in many countries. Data from household production and consumptionsurveys (which often include food stock levels) and trader surveys could be used for this purpose.

Figure A.1—Impact of releasing food from a food reserve

• National—balance of trade, fiscal balance, political ramifications, commodity markets, labor markets

• Household—income, expenditure• Individual—nutrition, health, school

attendance

Quantity

Price

P(S + R)

P(S)

S + RS

D

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APPENDIX 2

Government Policy Responses to the CurrentGlobal Food Crisis

Table A.1—Government policy responses to the food crisis and the symptoms of political actionstriggered by the crisis, 2006–August 2008

COUNTRY

GOVERNMENT RESPONSES PROTESTS

Traderestriction

Trade liberalization

Consumersubsidy

Social protection

Increasesupply Violent Nonviolent

Afghanistan X X X X

Algeria X X

Angola X

Argentina X X X X X

Armenia X

Austria X

Azerbaijan X

Bahrain X X X X

Bangladesh X X X X X X

Belgium X

Benin X X X

Bolivia X X X X X

Brazil X X X

Burkina Faso X X X X X

Burundi X

Cambodia X X X X

Cameroon X X X X

China X X X X X

Comoros X

Congo, Rep. X X

Côte d'Ivoire X X X X

Cuba X

Dominican Republic X

Ecuador X X X

Egypt X X X X X

El Salvador X X

Ethiopia X X X X X

The Gambia X

Germany X

Ghana X X

Guatemala X X X

Guinea X X

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Table A.1—Government policy responses to the food crisis and the symptoms of political actionstriggered by the crisis, 2006–August 2008

COUNTRY

GOVERNMENT RESPONSES PROTESTS

Traderestriction

Trade liberalization

Consumersubsidy

Social protection

Increasesupply Violent Nonviolent

Guinea-Bissau X

Haiti X X X X

Honduras X X X

India X X X X X X

Indonesia X X X X

Iran X X

Italy X

Japan X

Jordan X X X X

Kazakhstan X X X X

Kenya X X X

Kuwait X

Lebanon X X

Liberia X X X

Madagascar X X X

Malawi X X

Malaysia X X X

Mali X X X X

Mauritania X

Mexico X X X X

Mongolia X X X X

Morocco X X X X

Mozambique X

Namibia X X

Nepal X X

Netherlands X

Nicaragua X X X

Niger X X X X X

Nigeria X X X

North Korea X

Oman X X X

Pakistan X X X X X X

Panama X X

Paraguay X X

Peru X X X X X

Philippines X X X

Qatar X

Russia X X X X X

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Table A.1—Government policy responses to the food crisis and the symptoms of political actionstriggered by the crisis, 2006–August 2008

COUNTRY

GOVERNMENT RESPONSES PROTESTS

Traderestriction

Trade liberalization

Consumersubsidy

Social protection

Increasesupply Violent Nonviolent

Rwanda X

Saint Lucia X

Saudi Arabia X X X X

Senegal X X X X X

Sierra Leone X X X X X

Singapore X

Somalia X X X

South Africa X X X

South Korea X X X

Sri Lanka X X

Sudan X

Suriname X

Switzerland X

Syria X

Tajikistan X X X

Tanzania X X X

Thailand X X X X X

Timor-Leste X

Togo X X

Trinidad and Tobago X X

Tunisia X X X

Turkey X X X

Turkmenistan X

Uganda X X

United Kingdom X

Ukraine X X

United Arab Emirates X X X

Uruguay X X

Uzbekistan X X X

Venezuela X X X X

Vietnam X X X

Yemen X X X X

Zambia X X

Zimbabwe X X

Sources: Government responses: International Monetary Fund (IMF), FAO, and news reports, 2007–08; food-related protests: news reports, 2007–08.

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Notes

1. Teunis van Rheenen, Klaus von Grebmer, and Rajul Pandya-Lorch contributed to the design of this plan.

2. This method uses equation (4) in a modified form: ε(Pd, Pi ) = (∆Pd /Pd)/(∆Pi /Pi).

3. Although domestic production is assumed to be fixed in the short run, the supply curve in Figure A.1 is upwardsloping (rather than a perfectly inelastic vertical line) because the supply of the imported commodity respondspositively to increases in prices.This assumes that the elasticity of price transmission from the world to thedomestic market is positive but less than one. If the elasticity of price transmission is one (perfect transmission),the supply curve (including imports) will be an infinitely elastic horizontal line and the release of stocks wouldhave no effect on the domestic price. If the elasticity of price transmission were zero, imports would notrespond at all to domestic prices and the short-run price elasticity of supply would be zero. In this case, thechange in prices would be determined by the elasticity of demand. In the medium or long run, the supply ismore price elastic because production can respond to price changes in the longer term. Hence, the priceimpacts of releasing reserves or other shifts in supply or demand are likely to be smaller in the long run than inthe short run.

4. The second equality follows because ∆Q/Q = R/S.

5. In the short-run case, production is fixed and the elasticity of supply is equal to the price elasticity of imports. Inthe medium or longer run, the elasticity of supply equals the sum of the elasticity of production and elasticity ofimports.

6. This elasticity could be estimated using an equation of the form: ln(Importst) = b0 + b1ln(Pdt) + b2ln(Pit) +b3ln(Productiont) + ut . The estimated value of b1would be the estimated price elasticity of import supply,controlling for production and import price level.

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References

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Quisumbing,A. R., ed. 2003. Household decisions, gender, and development: A synthesis of recent research.Washington, DC:International Food Policy Research Institute.

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Rapsomanikis, G., D. Hallam, and P. Conforti. 2006. Market integration and price transmission in selected food andcash crop markets of developing countries: Review and application. In Commodity market review, 2003–2004.Rome: Food and Agriculture Organization of the United Nations.

Ravallion, M. 2005. Evaluating anti-poverty programs. Policy Research Working Paper No. 3625.Washington, DC:Development Research Group,World Bank.Available at http://ssrn.com/abstract=922915.

Syrovátka, P., and I. Lechanová. 2005. Price transmission and estimations of price elasticity of secondary demandfunctions:Application on commodity market for food grains. Agricultural Economics – Czech 51 (7): 293–303.

Valdés,A., and W. Foster. 2008. Do high world commodity prices hurt or help family farms? A simulation case study for Chile.Presentation at the FAO Expert Workshop on Policies for the Effective Management of Sustained Food PriceIncreases, July, Rome.

von Braun, J., with A.Ahmed, K.Asenso-Okyere, S. Fan,A. Gulati, J. Hoddinott, R. Pandya-Lorch, M.W. Rosegrant, M.Ruel, M.Torero,T. van Rheenen, and K. von Grebmer. 2008. High food prices:The what, who, and how of proposedpolicy action.Washington, DC: IFPRI.

World Bank. 2008. Double jeopardy: Responding to high food and fuel prices. G8 Hokkaido-Toyako Summit, July 2.Accessed online at http://www.worldbank.org/html/extdr/foodprices/.

Todd Benson is senior research fellow in the Development Strategy and Governance Division of IFPRI.Nicholas Minot is senior research fellow in the Markets,Trade, and Institutions Division of IFPRI.John Pender is senior research fellow in the Environment and Production Technology Division of IFPRI.Miguel Robles is postdoctoral fellow in the Markets,Trade, and Institutions Division of IFPRI.Joachim von Braun is the director general of IFPRI.

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