The short and medium term impacts of rises in staple food prices

There is widespread concern about the impact of recent price rises on the welfare and food security of poor people and about future impacts of high prices. Responses to these concerns are, however, sometimes clouded by lack of clarity about the nature of short and medium term impacts of food price changes for different people. This paper reviews both theory and empirical evidence on these impacts. It finds that theory and empirical evidence are broadly complementary and consistent, with a high degree of variability in impacts. In broad terms staple food price increases have had very serious effects on the poor in national or local economies which have experienced high food price shocks without broad based growth processes. Poor net buyers of food, in both rural and urban communities, have been most negatively affected, with limited second order benefits from high staple food prices tightening labour markets in poor rural economies. Short term impacts can be ameliorated by economic growth and, for international food price increases, by limited price transmission. Economic growth and lower domestic price transmission of high international prices in different countries, notably India and China, have led to lower increases in global poverty, hunger and malnourishment than hunger and poverty simulations have suggested. However these findings should not detract from the very serious impacts high food prices have had for very large numbers of very poor people in poor countries, and the need for policies and action to address this

How can agricultural interventions contribute in improving nutrition health and achieving the MDGs in least developed countries?

There are strong conceptual linkages between agricultural development and nutrition improvements which may be categorised into three main pathways: the development, own-production and market pathways. Evidence on the efficacy of these pathways is mixed with some strong, some negative and some weak impacts. These findings reflect both the importance of agriculture for nutrition and the conditionality of that importance on contextual factors. They are also the result of insufficient high quality empirical research investigating these linkages. The most effective ‘pathways’ and interventions linking agricultural change to improved nutritional outcomes change with economic growth and development, with declining importance of the development and own-production pathways and increasing importance of the market pathway. Substantial challenges in operationalizing agricultural-nutrition linkages need to be overcome to better exploit potential opportunities

Livelisystems: a conceptual framework integrating social, ecosystem, development and evolutionary theory

Human activity poses multiple environmental challenges for ecosystems that have intrinsic value and also support that activity. Our ability to address these challenges is constrained, inter alia, by weaknesses in cross disciplinary understandings of interactive processes of change in socio-ecological systems. This paper draws on complementary insights from social and biological sciences to propose a ‘livelisystems’ framework of multi-scale, dynamic change across social and biological systems. This describes how material, informational and relational assets, asset services and asset pathways interact in systems with embedded and emergent properties undergoing a variety of structural transformations. Related characteristics of ‘higher’ (notably human) livelisystems and change processes are identified as the greater relative importance of (a) informational, relational and extrinsic (as opposed to material and intrinsic) assets, (b) teleological (as opposed to natural) selection, and (c) innovational (as opposed to mutational) change. The framework provides valuable insights into social and environmental challenges posed by global and local change, globalization, poverty, modernization, and growth in the anthropocene. Its potential for improving inter-disciplinary and multi-scale understanding is discussed, notably by examination of human adaptation to bio-diversity and eco-system service change following the spread of Lantana camera in the Western Ghats, India

Conceptualising seasonal financial market failures and credit rationing in applied rural household models

A wide variety of farm household models have provided a valuable theoretical basis for empirical and conceptual analysis of interactions between production and consumption resource allocations of poor rural people. A weakness of common applications of many such models, and unfortunately of much analysis, is failure to routinely also recognise and adequately describe the fundamental seasonal nature of most agricultural production and the effects of pervasive seasonal finance market failures on poor rural people’s behaviour and welfare. This is despite considerable theoretical work demonstrating the importance of seasonal financial market failures as constraints on agricultural development. A general model recognising this is presented, with graphical applications showing the potential importance of seasonal finance constraints on farm households’ behaviour and welfare . Formal methods for allowing for the effects of seasonal finance constraints on household responses to policy and other change should be standard tools used by applied rural development economists

The Malawi Agricultural Input Subsidy Programme: 2005-6 to 2008-9

Malawi’s implementation of a large scale agricultural input subsidy programme in 2005/6 and subsequent years has attracted significant international interest. This paper reviews the background, processes, achievements and outcomes of the programme over the period 2005/6 to 2008/9. The very large scale disbursement of heavily subsidised fertilisers and (mainly hybrid and composite maize) seed to very large numbers of beneficiaries across the country represents a significant logistical achievement and led to significant increases in national maize production and productivity, and this has contributed to increased food availability, higher real wages and wider economic growth and poverty reduction. However the latter years of the programme have also been accompanied by very high international fertilizer prices and costs and by high maize prices, the latter undermining the programme’s food security, poverty reduction and growth benefits for the majority of Malawian farmers, who are very poor and rely on purchased maize for significant amounts of their staple food requirements. Estimated economic returns to the programme have been satisfactory, given other benefits of the programme not captured in cost benefit analysis. With substantial reductions in both prices and subsidised volumes of fertilisers in subsequent years, there is considerable scope for building on achievements to substantially raise programme effectiveness, efficiency and benefits. Any application of Malawi’s subsidy experience to other countries needs to take account of special characteristics of the Malawian maize economy and of measures needed to raise such programmes’ effectiveness and efficiency and ensure their best fit with and contribution to sustainable development policies

Improving benefit cost analysis for Malawi’s farm input subsidy programme, 2006/7 to 2010/11

This paper develops improved estimates of benefits and costs of the Malawi Farm Input Subsidy from 2005/6 to 2010/11. It sets out principles and purposes for Benefit Cost Analysis (BCA) for the programme and applies them to develop a relatively formal partial equilibrium methodology for BCA that distinguishes between real income gains to subsidy recipients, other producers, and consumers. This allows differential multipliers to be applied to these income gains to allow simple analysis of wider equilibrium and dynamic effects of the subsidy programme. Benefit cost analysis faces difficulties due to lack of reliable data on the number of farm households in Malawi and on cropping parameters needed for estimation of the programmes’ impact on production. Nevertheless the modified benefit cost analysis leads to increased estimates of returns to the subsidy programme. The benefit cost ratio averaged across 2005/6 to 2010/11 was previously estimated at 1.22, with an average fiscal efficiency of 0.31, using moderate assumptions regarding prices and yield responses to fertiliser and improved maize seed. Precise estimate of returns to the programme are difficult due to a variety of methodological and data quality difficulties, but with the revised methodology the average benefit cost ratio is estimated at around 1.6, with fiscal efficiency of around 0.45. The analysis provides important pointers to ways in which programme design and implementation can be improved to make the programme more effective and efficient. It also suggests that with good implementation the programme can provide returns that are comparable to and exceed those achievable from alternative and complementary investments in infrastructure, education and agricultural research. The programme therefore has an important role as a critical element in a strategy of balanced government investments promoting poverty reducing growth in Malawi

Impacts of the Farm Input Subsidy Programme in Malawi: Informal Rural Economy Modelling

This paper presents a partial equilibrium model of the impacts of the Malawi Farm Input Subsidy Programme on smallholder livelihoods in two major and contrasting livelihood zones over the period 2005/6 to 2010/11. Despite inherent difficulties in modelling the multi-scale and complex relationships that are involved, model findings show direct impacts on subsidy recipients (increasing maize production and real incomes), differences between poorer and less poor households (with poorer households normally gaining more proportionally but not necessarily absolutely from the same subsidy package), and differences between central and southern region maize growing areas with different rates of poverty incidence and land pressure (with greater absolute and proportional gains in poorer southern region areas). The results also show the impacts of the programme on wages and maize prices. However, a significant finding of model simulations is that beneficial indirect effects may be greater than direct impacts in maize growing areas with high rates of poverty incidence and high land pressure. These indirect effects arise through increases in the ratio of wages to maize prices, and benefit poorer households (who sell ganyu labour and buy maize) while potentially harming in the short term the incomes of less poor buyers of ganyu labour and sellers of maize (these households should however gain in the medium and long run from increased livelihood opportunities with wider economic growth). This finding has important implications for programme design, implementation and evaluation. Much more emphasis should be placed on ensuring that the programme and other policies are managed to maximise these indirect benefits, and on assessing these benefits in programme evaluation. There are particular implications for the design and management of area and household targeting and graduation

Preliminary analysis of coupon receipt and use reported in the IHS3

This paper provides a preliminary analysis of coupon receipt in the 2008/9 and 2009/10 seasons as reported by households interviewed in the 2010/11 Malawi Integrated Household Survey (IHS3). Information on the 2008/9 season was obtained from a smaller number of households than for the 2009/10 season, with a longer recall period that may have affected the accuracy of some data. The sampling population included urban and rural households and broadly but not exactly comparable with sample populations for the household surveys conducted in the FISP evaluations in 2006/7, 2008/9 and 2010/11. Estimates of total fertiliser coupon distribution are similar to but lower than estimates from the FISP evaluation surveys but there is consistency in apparent increased reduction in diversion after the 2008/9 season. General patterns of targeting of fertiliser coupons and of ‘sharing’ are similar across the different surveys. Across the surveys there is no evidence of pro-poor targeting and some evidence of bias against poorer households, but not against female headed households. IHS3 respondents reported very few of irregularities in coupon distribution and redemption. Estimates of seed coupon receipts are, however, very low

The Farm Input Subsidy Programme (FISP) 2009/10: A review of its implementation and impact

This report reviews the 2009/10 implementation of the Farm Input Subsidy Programme 2009/10 in the context of experience from 2005/6 to 2008/9. The 2009/10 programme differed from previous years in restriction of fertiliser subsidies to maize production, reduced fertiliser distribution budgets which were also adhered to, large increases in maize (particularly hybrid) and legume seed distribution, considerable carry forward of fertiliser stocks from previous year purchases, and earlier sales of fertiliser. These changes all have important positive implications for the programme’s effectiveness and efficiency as a result of reduced displacement, improved targeting, reduced programme costs (which also benefited from lower fertiliser prices), improved returns to use of subsidised fertiliser on hybrid maize, and food security, diversification and soil fertility benefits from the increased legume seed sales. Increased maize and legume seed sales through private retailers should also stimulate input market development. The economic benefit cost ratio for the programme is estimated at 1.12, a respectable result (despite the many difficulties with this analysis and its blindness to many longer term and intangible benefits) with considerable potential for further improvement. The macro-economic costs of the programme have also been substantially reduced as compared with the previous year and the year on year rises in costs halted. These are important achievements. There are two main areas where it is proposed that programme implementation could look for substantial improvements in the future: first in achieving greater transparency in beneficiary identification and coupon issues and second in allowing earlier sales of inputs. Greater transparency in beneficiary identification and coupon issues should build on achievements over the last four years (for example in improved targeting and use of open meetings) by (a) resolving inconsistencies both in changing MoAFS farm family numbers across regions and with NSO estimates, (b) improving effective communication about coupon allocation and distribution systems, (c) increasing the transparency and accountability of these processes with, for example, the involvement of different stakeholders representing farmers, and (d) sharing and implementing good practice in particular districts or areas more widely across the country. Earlier input sales are important for reducing the costs and risks faced by farmers in redeeming coupons, promoting higher yield responses from earlier planting and fertiliser application, reducing pressures and costs in fertiliser deliveries to markets, and giving farmers more voice and choice when redeeming coupons. This requires that the 2009/10 improvements in fertiliser deliveries and in seed contracting are sustained and accompanied by earlier finalising of coupon allocations and printing than in 2009/10 – as has already been recognised by strenuous attempts to achieve earlier commencement of sales in 2010