Transcript Ms. Bettina Prato

Food price volatility – implications for
poor farmers in developing countries
Bettina Prato, Ph.D - SKMO, IFAD
1
Price volatility: what and whence
• Volatility ≠ variability: extreme variation + uncertainty
• To a degree not new in many developing countries because of:
- Environmental and climatic shocks (volatile supply)
- Imperfect decisions by producers and other market actors
- Low elasticity of demand
- High transfer costs
• Domestic factors of volatility generally prevalent in terms of
impact on poor food producers
• BUT, international volatility may also be transmitted, variably
- by country, commodity, value chain segment, over time
2
Is volatility increasing? Perhaps not, but:
• New sources of volatility in int’l markets: oil-food price link,
financialization of ag commodities, climate change
• Drivers of high prices: environmental scarcities + rising demand
(food, feed, feedstock)
• At domestic level: extreme weather events/climate change,
environmental degradation, incomplete or failed liberalization
• ALSO, unpredictable policies seeking to respond to price hikes
• Not new: poor resilience of production base, weak coordination
of market actors, information, policies, infrastructure
• Much attention now to “new” int’l factors – need broader focus
Implications for small farmers
• Small farmers/poor rural people disproportionately represented
among food insecure
• Hence – hurt by price spikes as food consumers
• Note – price spikes from int’l markets often reach consumers’
markets more than producers’
• Plus, uncertainty undermines resilience of production:
- Higher risk, while risk mgt and coping tools are weak
- Disincentive to invest to increase production
- Disincentive to produce for the market
• Also, volatility not a reliable signal of fundamentals – prices do
not fulfil their proper role in conveying information to farmers
In short:
• Price volatility threatens the food security of small farmers, and
• undermines their ability to contribute to more resilient food
supply in developing countries (which would mitigate volatility)
• Hence, addressing volatility essential both for short-term food
security of poor rural people and for longer-term resilience
• Need to:
- Understand factors behind price volatility in specific context
- Strengthen market environment (policies, regulations,
transportation, market infrastructure, information systems)
- Promote coordination and information flows in value chains
- Strengthen resilience of supply (climate, energy, scarcities)
- Strengthen risk mgt capabilities (insurance, safety nets,
organization, information, contracts)