Higher fuel and food prices: impacts and responses for Mozambique

Rising world prices for fuel and food represent a negative terms‐of‐trade shock for Mozambique. The impacts of these price rises are analyzed using various approaches. Detailed price data show that the world price increases are being transmitted to domestic prices. Short‐run net benefit ratio analysis indicates that urban households and households in the southern region are more vulnerable to food price increases. Rural households, particularly in the North and Center, often benefit from being in a net seller position. Longer‐term analysis using a computable general equilibrium (CGE) model of Mozambique indicates that the fuel price shock dominates rising food prices from both macroeconomic and poverty perspectives. Again, negative impacts are larger in urban areas. The importance of agricultural production response in general and export response in particular is highlighted. Policy analysis reveals difficult trade‐offs between short‐run mitigation and long‐run growth. Improved agricultural productivity has powerful positive impacts, but remains difficult to achieve and may not address the immediate impacts of higher prices.     

Rice Production,Trade and the Poor: Regional Effects of Rice Export Policy on Households in Vietnam

Analysing Vietnam's rice export policy and recent export ban in the context of rising food prices, this study combines insights from a regionally‐disaggregated or ‘bottom‐up’ CGE model and a micro‐simulation using household data. Three main conclusions are drawn. First, although there is little impact on GDP, there are substantial distributional impacts across regions and households from different export policies and market conditions. Second, both rural and urban households, including poor households, benefit from free trade, even though domestic rice prices are higher. Finally, under free trade, relatively large gains accrue to rural households, where poverty is most pervasive in Vietnam.     

The impact of the 2005–2010 rice price increase on consumption in rural Bangladesh

This article studies the impact of the rice price increase between 2005 and 2010 on consumption in rural Bangladesh. Using the Household Income and Expenditure Survey (HIES) data, we compare net rice buyers and sellers to self‐sufficient households. To identify the effect of rice price changes on household consumption of rice, nonrice food and nonfood items, we employ a difference‐in‐differences (DiD) technique. Our findings indicate that the surge in domestic rice prices between 2005 and 2010 reduced the nonrice food consumption of net rice buyer households by 7%, compared to the households who are self‐sufficient in rice production. However, it did neither affect their rice nor their nonfood consumption. In contrast, while we find no significant effect of rice price increases on the rice consumption of net rice sellers, we observe a 9% increase in their nonrice food consumption. In such situation, a subsidy on low‐quality rice may be effective in fulfilling the nutritional requirement of low‐income households.     

Returns to spending on agricultural extension: the case of the National Agricultural Advisory Services (NAADS) program of Uganda†

The aim of this paper is to assess the direct and indirect impacts of the agricultural extension system of Uganda, the National Agricultural Advisory Services (NAADS) program, on household agricultural income. Data from two rounds of surveys of Ugandan rural farm‐households conducted in 2004 and 2007, as well as different program evaluation methods and model specifications, are used to estimate impacts and compute a rate of return. The direct and indirect impact of the program is estimated at 37–95% and 27–55% increase in per capita agricultural gross revenue between 2004 and 2007 for households participating directly and indirectly in the program, respectively, compared to nonparticipants. The rate of return on the program's expenditures is estimated at 8–49%. The program has been relatively more effective among male‐headed, larger, and asset‐poor households, as well as those taking up noncrop high‐value enterprises and living further away from financial services, all‐weather roads, and markets or located in the Eastern and Northern Regions. Policy implications of the results are drawn.     

Impacts of price and productivity changes on banana‐growing households in Uganda

This article compares the effects of changing market prices and farm productivity on the welfare of banana‐growing households in the Ntungamo district of Uganda. A heterogeneous‐agent model is applied via a series of mathematical optimization problems, to simulate production and consumption responses of 70 farm households surveyed in 2006. Results show that a given increase in productivity has a greater impact on poverty alleviation than that same increase in market prices. Despite the effects of productivity gains being comparable across different types of household groups, price improvements primarily benefit the incomes of households who are involved in rural producer organizations, who are located closer to markets, and who sell at the market.     

Implications of higher global food prices for poverty in low‐income countries1

In many poor countries, the recent increases in prices of staple foods have raised the real incomes of those selling food, many of whom are relatively poor, while hurting net food consumers, many of whom are also relatively poor. The impacts on poverty will certainly be very diverse, but the average impact on poverty depends upon the balance between these two effects, and can only be determined by looking at real‐world data. Results using household data for 10 observations on nine low‐income countries show that the short‐run impacts of higher staple food prices on poverty differ considerably by commodity and by country, but that poverty increases are much more frequent, and larger, than poverty reductions. The recent large increases in food prices appear likely to raise overall poverty in low‐income countries substantially.     

Analysis of food demand in Vietnam and short‐term impacts of market shocks on quantity and calorie consumption

A complete demand system for Vietnam was estimated using household survey data. Results showed that demand for rice with respect to prices and expenditure is relatively inelastic compared to other foods. Demand for food in general tends to be less elastic at higher levels of income and for urban households. In the short term, a market shock such as a 10% decrease in income or a 30% increase in rice prices forces households to spend a larger portion of their expenditure on rice at the expense of other foods. Low‐income households face a higher risk of undernourishment as their daily calorie intake is more negatively affected by the shocks than high‐income households. The results suggest the importance of policies that provide necessary safety net programs for the poor.     

Rising Food Prices and Household Welfare: Evidence from Brazil in 2008

Food price inflation in Brazil in the 12 months to June 2008 was 18%, whereas overall inflation was 7%. Using spatially disaggregated monthly data on consumer prices and two different household surveys, we estimate the welfare consequences of these food price increases, and their distribution across households. Because Brazil is a large food producer, with a predominantly wage‐earning agricultural labour force, our estimates include general equilibrium effects on market and transfer incomes, as well as the standard estimates of changes in consumer surplus. Although the expenditure (or consumer surplus) effects were large, negative and markedly regressive everywhere, estimates of the market‐income effect were positive and progressive, particularly in rural areas. Because of this effect on the rural poor, and of the partial protection afforded by increases in two large social assistance benefits, the overall impact of higher food prices in Brazil was U‐shaped, with middle‐income groups suffering larger proportional losses than the very poor. Nevertheless, as Brazil is 80% urban, higher food prices still led to a greater incidence and depth of poverty at the national level.     

Cereal price shocks and volatility in sub‐Saharan Africa: what really matters for farmers’ welfare?

The lack of information as well as some misperceptions about the distinction between the welfare consequences of higher versus more volatile cereal prices has limited the effectiveness of policy interventions during the recent food crises in many developing countries. This article proposes an integrated empirical strategy to investigate and compare the different effects of these two phenomena and tests it using nationally representative household survey data from four sub‐Saharan countries. Results show that the negative impacts of a cereal price increase substantially outweigh the effects of price volatility on household welfare across the entire income distribution. The amplitude and the distribution of those effects depend heavily on specific factors, such as: the weight of food consumption over total expenditure; the budget share devoted to cereals; the substitution effect among food groups; and the relative number of net sellers versus net buyers accessing the market. We also show that volatility mainly harms the poorest quintile of the population.     

Crisis Behind Closed Doors: Global Food Crisis and Local Hunger

The high and volatile food prices in 2007–8 triggered estimates of massive increases in poverty and hunger. However, hunger and volatile food prices have long been a feature of developing economies. This paper examines the impact of high global food prices on domestic terms‐of‐trade, food consumption and child undernutrition in the Central African Republic, Ethiopia, Liberia and Sierra Leone, comparing findings with the impacts of ‘seasonality’. As high international food prices permeated domestic markets, households in all the case study areas resorted to coping strategies common in the annual hunger season. Though acute malnutrition has not risen as consistently as in a seasonal hunger crisis, reduced micronutrient intake threatens to have severe long‐term consequences for health and poverty reduction. The similar impacts of seasonal and global food price rises on households provide an opportunity to design appropriate interventions to protect livelihoods.     

Are we overestimating the negative impact of higher food prices? Evidence from Ghana

Most studies of the welfare impact of higher food prices adopt Deaton's approach, based on the first‐order effect of prices changes using income and expenditure survey data. This paper explores the impact of higher maize and food prices in Ghana and considers the sensitivity of results to changes in several assumptions. If second‐order effects are included, incorporating household response to price changes, the welfare impact of food price increases is more positive, but only modestly so. However, if we assume that marketing margins are constant in real terms rather than proportional to prices, the welfare impact is substantially more positive. These findings highlight the need for more research on the behavior of marketing margins under volatile prices.     

A hedonic approach to estimating the supply of variety attributes of a subsistence crop

The article extends the household hedonic model by estimating a supply function for variety attributes of a subsistence crop in a developing economy. The model is applied to bananas in Uganda, making use of disaggregated data on variety‐specific farm‐gate banana bunch prices and attributes, while accounting for the semisubsistence nature of banana‐producing households. The article is motivated by the need to understand the attribute trade‐offs made by farmers at the farm gate in light of targeted variety improvement efforts and their impact on banana markets. Whether variety improvement will pay off at the market level requires a more detailed examination of the relative worth of banana attributes within the structure of consumer preferences and production technologies related to bananas in Uganda. The results confirm the importance of consumption and production attributes in selling behavior. Quality and bunch size are found to be complements at the farm gate. Banana bunches that capture a premium at the market will be those that provide bundles of desirable consumption and production attributes simultaneously. By revealing important price–attribute relationships, the findings provide guidance for crop improvement efforts and diversification choices, while taking into account implicit market signals for output attributes.     

Global market shocks and poverty in Vietnam: the case of rice

World food prices have experienced dramatic increases in recent years. These “shocks” affect food importers and exporters alike. Vietnam is a major exporter of rice, and rice is also a key item in domestic production, employment, and consumption. Accordingly, rice price shocks from the world market have general equilibrium impacts and as such, their implications for household welfare are not known ex ante. In this article, we present a framework for understanding the direct and indirect welfare effects of a global market shock of this kind. We quantify transmission of the shock from global indicator prices to domestic markets. Then we use an applied general equilibrium model to simulate the economic effects of the price changes. A recursive mapping to a nationally representative household living standards survey permits us to identify in detail the ceteris paribus effects of the shock on household incomes and welfare. In this analysis, interregional and intersectoral labor market adjustments emerge as key channels transmitting the effects of global price shocks across sectors and among households.     

The effects of China's growth on the food prices and the food exports of other developing countries

This article explores the impacts of China's growth in the international markets of agricultural products along two dimensions: food price inflation and export growth in other developing countries. China's food imports of vegetable oils have grown dramatically over the last decade, linking China's economic growth to the recent increases in global food prices. If China is a source of global food price inflation, exporting countries will benefit whether they sell directly to China or not. These direct and indirect linkages are explored using a short‐run, partial‐equilibrium model of international trade in agricultural products in which consumer prices and trade costs are derived from bilateral trade flows. China's effects on food prices and exports are estimated by reducing Chinese food expenditures in 2007 by half, roughly China's level of expenditures in 1995. Results indicate that food prices as measured by CES price indexes in developing Asia, Africa, and Latin America would have been reduced by 1.27%, 0.32%, and 0.22%, respectively. China has been an important source of growth for exporters selling directly to China. There is no evidence of export growth due to an overall increase in food prices caused by China's growth.     

Food Price Pass‐Through and the Role of Domestic Margin Services

The recent volatility in international agricultural markets has drawn attention to the impact of rising international agricultural prices and the induced price‐insulating measures on consumer food prices. Analyses based on simulation models on this topic typically ignore the role of domestic margin services. We extend the standard Global Trade Analysis Project (GTAP) model to allow for variations in the share of domestic margin services in consumed food across countries. This approach enables us to differentiate consumer prices from producer prices. Following the extension, the results show that domestic margin services reduce the consumer food price volatility for all countries, especially in high‐income countries, where the share of domestic margin services in final food consumption is higher. The effect of price‐insulating border policies is also reduced in the extended model. We find that our extension of the GTAP model greatly improves simulations of the 2007 surge in international agricultural prices. We validate our extension of the GTAP model by showing that the econometrically estimated food price pass‐through is decreasing with income and thus, is smaller in high‐income countries.     

A latent class approach to investigating demand for genetically modified banana in Uganda

This study explores consumer acceptance and valuation of a genetically modified (GM) staple food crop in a developing country prior to its commercialization. We focus on the hypothetical introduction of a disease‐resistant GM banana variety in Uganda, where bananas are among the most important staple crops. A choice experiment is used to investigate consumer preferences for various attributes related to the banana (such as bunch size, technology, producer benefit, and price) and examine their opinions on GM foodstuff. Choice data come from 421 banana‐consuming households randomly selected from three regions of Uganda. A latent class model is used to investigate the heterogeneity in consumers’ preferences for selected attributes related to the banana and to profile consumers who are more or less likely to accept GM bananas. Our results reveal that there is significant heterogeneity in consumer preferences across our sample. GM bananas are valued the most by poorer households located in the rural areas of the Eastern region. These food‐insecure households would experience the highest benefits (i.e., welfare gains) from the commercial release of GM bananas. In contrast, urban consumers are less accepting of GM bananas, and they would experience significant welfare losses if GM banana is released. According to our welfare estimates, both the total welfare benefits acquired by the gainers and the total welfare losses borne by the losers of this technology are significant and large. These results suggest the need for further investigation of the overall welfare effects of the introduction of GM bananas on the Ugandan society as a whole.     

Livestock development planning in Uganda: Identification of areas of opportunity and challenge

Livestock are an important element of the livelihoods of many Ugandan households, and considerable efforts at economic development by the government of Uganda have focused on the livestock sector. However, these development efforts have suffered due to a lack of detailed data on the distribution of livestock in Uganda to guide the targeting of such programs. In this paper, we use data from the 2008 National Livestock Census to develop a better understanding of where in Uganda there might be potential for significant investment to intensify the production of livestock and, conversely, where there are important challenges that need to be addressed, such as conflicts between human populations and livestock. This analysis is done by developing a quantitative model to predict mean livestock stocking rates at sub-county level (n = 929) that uses population density, agroecological factors, and market access as explanatory variables. A mapping of model residuals approach is then used to identify areas in Uganda that are relatively understocked and those that are potentially overstocked. This information is used to suggest approaches to livestock development in both types of areas.     

Production efficiency of Chinese agriculture: evidence from rural household survey data

A shadow-price profit frontier model is developed to examine production efficiency of Chinese rural households in farming operations. The model incorporates price distortions resulting from imperfect market conditions and socioeconomic and institutional constraints, but retains the advantages of stochastic frontier properties. The shadow prices are derived through a generalized profit function estimation. The shadow-price profit frontier is then estimated and an efficiency index based on the estimated profit frontier is computed and decomposed to household characteristics. Empirical results using data from China's Rural Household Survey for 1991 reject the neoclassical profit maximization hypothesis based on market prices in favor of the general model with price distortions. Farmers' resource endowment and education influence their response to the market restrictions, thus alter their performance in terms of efficiency. The estimated efficiency index ranges from 6% to 93% with a sample average of 62%. Households' educational level, family size and per capita net income are positively related to production efficiency. Households living in mountain areas or with family members employed by the government or state industries are relatively inefficient. Reducing market intervention, allowing right of use of farm land to be transferred among households, encouraging migration of excess farm labor, and promoting farmers' education will improve rural households' efficiency in agricultural production.     

The impact of integrated livestock disease management for food security in Togo

In sub-Saharan Africa, livestock is one of the key channels through which most households meet their food security needs. However, diseases such as the African Animal Trypanosomosis (AAT) constrain productivity. Using data from 445 randomly sampled small-scale cattle farmers, this paper investigates the role of integrated livestock disease control on household food security. Using a novel approach to link different food security measures to cattle productivity, the paper identifies the channels of impact at the household level. Methodologically, the paper estimated the propensity score matching algorithm to net out the effect of adoption. The results show that households who adopt RDU have record livestock productivity and higher consumption per capita expenditures. They tend to be more food secure, experience lower seasonal food supply fluctuations and experience a lower probability of falling below the food poverty line.     

Demand for meat and dairy products by Turkish households: a Bayesian censored system approach

We extend the Tobit (censored) linear equation system procedure to utility‐theoretic demand functions, along with a mapping mechanism to impose the adding‐up restriction implied by consumer utility maximization theory—a theoretical restriction very often ignored in previous empirical studies with censored demand systems. In this context, the Bayesian Markov Chain Monte Carlo (MCMC) procedure is applied to the censored linear approximate almost ideal demand system (LAIDS) for 12 food products, using data from the Turkish Household Expenditure Survey. All own‐price elasticities are negative and expenditure elasticities positive. Uncompensated own‐price elasticities for rural households are generally much higher than those for their urban peers, though demand for most food products are own‐price elastic for both types of households. The differential patterns in demand elasticities between urban and rural households become even more evident (almost twice) as relatively more expensive foodstuffs are consumed, showing that accessibilities to alternative products have made rural Turkish households more cognizant toward price changes in foods. Household characteristics play a key role in food expenditures, notably so in urban areas, and regional and seasonal differences are also present.