T A Session 1 2 Markets and Food

T A Session 1. 2 Markets and Food Security P WFP Markets Learning Programme Price Analysis Training 1. 2. 1

Learning objectives After this session, participants should be able to: • Explain the importance and value of market analysis in food security assessment • Identify the essential links between markets and food availability; and between markets and food access WFP Markets Learning Programme Price Analysis Training 1. 2. 2

A quick review… Food Security… Definition? WFP Markets Learning Programme Price Analysis Training 1. 2. 3

Food Security A situation… …when all people, at all times, have physical & economic access to sufficient, safe & nutritious food to meet their dietary needs & food preferences for active, healthy life WFP Markets Learning Programme Price Analysis Training 1. 2. 4

Definitions for… Availability? Access? Utilisation? Market? WFP Markets Learning Programme Price Analysis Training Market: A place where buyers & sellers come together to exchange goods and services 1. 2. 5

So, why are markets important for food security? Markets As a group: discuss your assigned question: Food Security 1. What type of products do HHs exchange on markets? 2. Why are markets important for food access? 3. Why are markets important for food availability? 4. How can WFP use market interventions to address food insecurity? Quickly note responses on flip charts…you have 10 minutes. WFP Markets Learning Programme Price Analysis Training 1. 2. 6

1. What type of products do HHs exchange on markets? Food, cash crops, livestock, labour and other non-food items such as soap, charcoal, etc. For each HH, the types of product they exchange vary: § Pastoralist, cash cropper, subsistence farmer or daily labourer? § Rich or poor? § Depending on the season and on good year versus bad year Therefore, to understand the impact of markets, we have to find out about selling/buying patterns of our target groups WFP Markets Learning Programme Price Analysis Training 1. 1. 7

2. Why are markets important for food access? § HHs buy, sell, barter on markets, influencing their food availability, while prices they pay & receive, & their use of credit, influence HH income & expenditure § Each HH is confronted with price variation, influencing its ability to acquire food, & buying, selling, bartering patterns of HHs throughout the year & between years § HH food access influences individual food intake WFP Markets Learning Programme Price Analysis Training 1. 1. 8

3. Why are markets important for food availability? Let’s talk definitions first: § General food availability vs. local availability § Food intake: impacted indirectly by food availability, through food access Markets, or better: traders ensure that: § Food moving from food surplus zones to food deficit zones § Food being stored during surplus times for use during deficit times WFP Markets Learning Programme Price Analysis Training 1. 1. 9

3. Why are markets important for food availability? (continued) If markets don’t function well, they do not perform these functions, or only at large transaction cost Good speculation and bad speculation § ‘Good speculation’ if storage contributes to dampening price volatility § ‘Bad speculation’ if storage worsens price volatility, or if done at unreasonable profit margins WFP Markets Learning Programme Price Analysis Training 1. 1. 10

4. How can WFP use market interventions to address food insecurity? Improve market functioning / reduction of transaction cost, often with partners, to: § reduce (informal) taxes § improve infrastructure § broaden the number of traders § enhance trade credit provisioning, etc. Distribute cash or vouchers Local and regional procurement Purchase for Progress WFP Markets Learning Programme Price Analysis Training 1. 1. 11

the food security & nutrition framework (based on UNICEF Model) outcomes HH food access directly immediate influences individual food intake underlying basic WFP Markets Learning Programme Price Analysis Training 1. 2. 12

Markets Food Security markets in the food security & nutrition framework WFP Markets Learning Programme Price Analysis Training 1. 2. 13

Markets & Food Security Analysis Markets To summarise, markets: Food Security § Influence food availability, co-determine purchasing and selling conditions, have an impact on food access and, subsequently, an indirect influence on individual food intake § Play a role in addressing food insecurity, through market interventions, local procurement and cash/voucher programmes WFP Markets Learning Programme Price Analysis Training 1. 2. 14

Quick Case: Exercise 1. 2. a. Government Policies in Pakistan Task: Read the Quick Case and, with a partner, answer the questions below. Government wheat policy tries to balance competing interests of producers and consumers. On production side, policy aims at increasing wheat yields, output, & support for farmer income. Increased wheat production seen as part of overall national FS strategy of reducing dependence on food imports for national food supplies. On consumption side, government attempts to enhance HH food security, particularly through ensuring availability of wheat flour at affordable prices and maintaining price stability. Food policy options are constrained, however, by overall fiscal constraints, as well as a desire to minimize fiscal subsidies on food. Moreover, the wheat procurement price has been seen as a major determinant of overall inflation because of its role as a wage good an indicator of overall government price policy. Thus, wheat policy is somewhat constrained by inflation targets and inflation policy. § What is the Government doing to impact availability? § What is the Government doing to impact food access? Adapted from: Nyberg, Jennifer, “Pakistan Market Assessment – Earthquake Affected Areas”, WFP, 2005, page 10. WFP Markets Learning Programme Price Analysis Training 1. 1. 15

Markets and food availability Markets Food Security Sufficient food availability can be achieved through… § Domestic production § Imports (commercial and public imports) § Public transfers (e. g. food aid) § National/regional stocks …but market functioning is also crucial to food availability § Physical access (travel distance, time, seasonal access) § Market integration (transaction costs and trade flows) WFP Markets Learning Programme Price Analysis Training 1. 2. 16

Markets and food availability: Two levels of analysis Markets Food Security Understanding food availability is essential to determining likely impact of market on HH food access Food availability is analyzed at two levels: 1. Macro-level analysis 2. Meso-level analysis WFP Markets Learning Programme Price Analysis Training 1. 2. 17

Markets and food availability Macro-analysis Markets Food Security 1. Macro-level analysis of food availability – conducted through secondary data on the market environment § Market vulnerability to macro-economic conditions: economic growth & price volatility, international reserves § Policy environment : trade policies, regulations, institutions, food policy and interaction of grain reserves with markets, governance WFP Markets Learning Programme Price Analysis Training 1. 2. 18

Markets and food availability Meso-Analysis Markets Food Security Meso-level analysis of food availability • conducted through trader surveys & community interviews • Seeks to understand market structure, conduct and performance (more on this in Session 1. 4) • This is the level of food availability analysis that we will conduct via our market visit and survey WFP Markets Learning Programme Price Analysis Training 1. 2. 19

Markets and Food Access The Concept of Entitlement Markets Food Security Food access is determined by HH entitlements: The means of acquiring food is based on assets (land, labour, livestock, savings), through: § Direct entitlement (own production) § Trade/market entitlement: The set of alternative bundles of goods and services that a person can acquire by converting his/her endowments, such as land labour, through production, trade or gifts WFP Markets Learning Programme Price Analysis Training 1. 2. 20

How do markets determine food access? Markets Food Security Access to food is reduced with entitlement failures These reductions are likely due to market failures HH Food Access WFP Markets Learning Programme fall in wages rise in food prices loss of employment drop in cash crop or livestock prices Price Analysis Training 1. 2. 21

What are the market indicators of “entitlement”? Markets Food Security Many indicators of “entitlement” are asset and market-based: § relative prices § real incomes § market-related shocks Thus: to understand reductions of HH entitlement – i. e. of food access – we must understand the markets with which those HHs interact WFP Markets Learning Programme Price Analysis Training 1. 2. 22

How do markets determine food access? Effective demand is key to HH food access Markets Food Security Effective Demand Purchasing Power Market Dependence Market Accessibility Livelihoods Analysis Effective Demand: the quantity of a good or service that consumers are actually buying at the current market price. WFP Markets Learning Programme Price Analysis Training 1. 2. 23

How do markets determine food access? Markets Food Security Purchasing Power: Economic for Plenary Question access, HH income, Prices Market Dependence (involvement in markets) o …and in your country? On/in markets for goods (food, non-food, livestock…) & services (labour, credit, capital…) Which livelihoods are more/less profoundly integrated into local markets? Market Accessibility of HHs Which are generally more impacted by o Physical (distance) price shifts? severe food o Selling/buying behaviours: net seller/buyer, seasons and reasons of sales and purchases Effective Demand Purchasing Power o Social (gender, security…) Market Accessibility Financial (price, credit…) o Market Dependence WFP Markets Learning Programme Livelihoods Analysis Price Analysis Training 1. 2. 24

Markets in Food Security Analysis another view: the livelihoods perspective National food production and stocks Agricultural inputs Extension Food production Market HH Assets Non-food production Markets Food Availability imports HH CASH AVAILABILITY Microfinance Employment Market Commercial Market Food aid Market Food Security Food Access Transfers Remittances WFP Markets Learning Programme Price Analysis Training Loans 1. 2. 25

Market participation and food security Markets Food Security Markets as food source : • Evidence suggests very few, if any, HHs are autarkic • Majority of HHs buy more than they sell on markets autarkic: self-sufficient (here in terms of food) WFP Markets Learning Programme Price Analysis Training 1. 2. 26

Market Participation & FS Urban HHs - Senegal Markets Food Security Urban Food Security Assessment, Analysis of Impact of High Food Prices on FS & Livelihoods of Urban Populations in Senegal (Urban to Semi-urban Centres of Pikine, Kaolack, and Ziguinchor), FAO / UNICEF / WFP, November – 2008 WFP Markets Learning Programme Price Analysis Training 1. 2. 27

Market Participation & FS Rural HHs - Madagascar Markets Food Security Analysis of HH Food Security in Selected Districts of Madagascar WFP, Madagascar, September 2009 WFP Markets Learning Programme Price Analysis Training 1. 2. 28

Small Group Work Exercise 1. 2. c. The Marketastan File: Food Insecurity in Northern Province WFP Markets Learning Programme Price Analysis Training 1. 1. 29

Wrap-up: Markets & Food Security § Understanding how markets function, how interventions facilitate trade, helps identify how to alleviate negative impacts of shocks § Higher food prices make food access more difficult for HHs: most low-income smallholders are net buyers of food, often selling at low prices at harvest, buying back at high prices during lean season § Most vulnerable population groups: those who buy more food than they sell (net buyers), spend large share of income on food, have few coping strategies § These groups include urban poor, rural landless, pastoralists (who are particularly vulnerable: they face falling livestock prices as food prices rise, causing steep drop in purchasing power) WFP Markets Learning Programme Price Analysis Training 1. 2. 30