Lit in Review: Impacts of thte 2010/11 Surge in Food Prices

Ivanic, Maros, Will Martin, Hasan Zaman. (2011). “Estimating the Short-Run Poverty Impacts of the 2010-11 Surge in Food Prices.” World Bank Development Research Group, Policy Research Working Paper 5633, Apr

In the 2007/08 price increase, most of the price increase was concentrated in staple cereals. This meant the effects were concentrated on the poor who had few outside options to shift to. In the current price shock, however, food prices have increased in many more commodities and by less overall. This means there are more substitutions available and much of the hit has affected foods the poor consume less of anyway. As a result, they estimate that only 44 million more people are poor instead of the 105 million more in 07/08.

However, it appears that price transmission is higher this time than last. “For instance, between June 2010 and December 2010, the 68% increase in the international price of wheat was associated with large price increases in Kyrgyzstan (54%), Bangladesh (45%), Tajikistan (37%), Sri Lanka (31%), Azerbaijan (24%), and Pakistan (16%). The domestic price of rice rose broadly in line with the 21% increase in global prices in Indonesia (19%), Bangladesh (19%), and Pakistan (19%) during this six month period. Higher sugar prices have fed through to domestic prices quickly in many countries…”

Vietnam remains a remarkable exception, showing decreases in poverty in both instances. The next smallest increases are in Cambodia, Côte d'Ivoire, Ecuador, Nepal, Niger, Panama, Peru, Rwanda, and Timor Leste. In some cases this is a matter of churning, some farmers benefitting while others lose; in some cases because of very low price transmission; and in some because cash crop prices are also rising. Even though Niger saw a very small increase in headcount poverty, the poverty gap and poverty gap squared increased by more than 1 percentage point. Poverty increased 0.5 and 1.0 percent in Nigeria and India, though again with significant churning.

Seven countries saw an increase of more than 1 percent, listed with the most important causes: Belize (wheat), Uganda (vegetables, sugar, oil --> 2% more; maize --> 0.8% less), Sri Lanka (rice, sugar, and wheat), Bangladesh (rice and wheat), Pakistan (wheat), Tajikistan (wheat, sugar, oil).