FOOD SECURITY C oncepts, Basic Facts, and Measurement Issues

1. FOOD SECURITYConcepts, Basic Facts,and Measurement Issues June 26 to July 7, 2006 Dhaka, Bangladesh

2. Rao 4a:Factors in Food Security 1: The Food Chain, and Sources of Its Instability Learning: The learning goal is to understand the nature and role of the food chain in determining FS and the most common problems of supply and price instability.

3. Brief Contents • definition and aspects of the food chain • general and special food chain dependency • physical versus financial flows along the food chain • functions of the marketing system: information, physical and social access • the concept of food entitlements; direct or exchange entitlement failures • seasonal variations in operations of the food chain • supply instability

4. The Food Chain • Recall 3 aspects of FS (other than utilization): availability, access, stability • We now examine their determinants and how they might become sources of vulnerability. • We do so by looking at the features of the "food chain" & entitlements • Food chain refers to the sequence and steps from planting to final consumption.

5. Figure 4.1

6. General and SpecialFood Chain Dependency • We all are dependent on many different commodity chains • The complexity of "our" food chains depends on what we consume. • To access the food we need food entitlements. • For many HH, their food entitlement results directly from the food chain. • Such HH are doubly dependent on the food chain, for both access and availability. • The size of this doubly dependent group depends on the population dependent on agriculture

7. Physical Flows Along a Food Chain • Agents (producers, transporters, processors, wholesalers, retailers, consumers) are linked by physical and financial flows • Physical flows can be shown in a supply utilisation account as at right:

8. Financial Flows Along a Food Chain • Financial flows correspond to the physical flows • They go in reverse direction - from final consumer to primary producer • Financial & physical flows determine income distribution in the chain • At each stage, Revenues = Cost of purchased inputs + Value added • In turn, Value added = Return to factors + Taxes/subsidies + Profits/losses • So VA entitlements go to labor, capitalists, landowners, etc. and to government • Commodity chain analysis helps us analyze how entitlements arise

9. Functions of the Marketing System • Marketing systems have 3 broad functions: • logistical function • informational function • distributional function. • Logistical function subdivided into 3 aspects: • transformation over space (transportation) • transformation over time (storage, seasonal or long-term) • processing (e.g., milling, canning, etc.) • marketing and VA in marketing rises with economic development

10. Information • Markets channel price signals and so help allocate food • Market failures produce information failures and so coordination failures • In regulated markets, prices may be fixed and so cannot be information signals

11. Distribution • Markets and prices also help distribution the benefits of the division of labor • The distribution role is politically sensitive and invites government interventions.

12. The Food Chain andHousehold Food Entitlement • Typical HH has "multiple" sources of food entitlement • Own-production, exchange, labor, land rent, profits are all examples • Are the poor more dependent on exchange than rich? No generalization possible • Well-known U-shaped marketed surplus share • Growing specialization and long-distance trade produce greater all-round dependence on markets • Evolution of complex food chains can be good for national FS: due to gains of specialization. But it can lead to more instability, especially under scarcity and more so for poorer regions • The same can be said for household FS: there are gains but also threats, especially to the poor

13. Key Determinantsof Entitlement • Employment opportunities and the terms of employment; • Access to productive physical assets, and the terms of that access, whether agricultural or non-agricultural, whether privately owned, borrowed or rented • Access to productive public goods & services supplied with or without subsidies • Access to skills/knowledge helpful in getting and using resources and opportunities • Rates of return on productive assets owned or operated by the household • Terms of consumption • Access to public consumption goods & services supplied with or without subsidies • Access to transfers, from government, non-government groups or other households

14. The Entitlements Argument: Supply Shortfalls or Entitlement Failures? • The argument that food insecurity has much more to do with insufficient access to food (due to entitlement failures) rather than a general shortage in production or supplies is really quite central. • A precondition for food security is, therefore, not only the availability of adequate and reliable food supplies but also sufficient access to food supplies for the household to meet their requirements. • The importance of access to food as the other essential precondition of food security was emphasized at the World Food Summit and reflected in its Commitment number two "We will implement policies aimed at eradicating poverty and inequality and improving physical and economic access by all, at all times, to sufficient, nutritionally adequate and safe food and its effective utilisation".

15. Entitlements Concept and Argument Applies to HH AND National Levels, Too. • At national level, entitlements means availability of foreign exchange to pay for imports. • When poor countries get low prices for what they sell and pay high prices for what they buy, this is a kind of national entitlements failure of the market. Other factors include: • tendency for declining internationalterms of trade • running into external debt traps • over-dependence on foreign capital leading to financial crisis e.g., Indonesia • international rules of the game that may actually impoverish the poor further

16. Seasonal Variations in the Operation of the Food Chain • Seasonal variation arises in many parts of the food chain • Food cultivation and harvests are obviously seasonal • But so can food marketing on account of storage and transport constraints

17. Seasonal Rural-Urban Price Differentials in Indonesia

18. Supply Instability • Supply instability is a principal cause of temporary food insecurity • Caused by unfavorable weather, regular seasonality or other temporary or regular supply disruptions • Supply instability may affect particular groups or regions more than others • HH with no credit, usually the poor, may be especially hard-hit