The Impact Of Food Prices On Poverty And Food Security

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There is little doubt that biofuel production has major impacts on poverty and food security, both at the national and local level. The implications of increasing prices for the poorest households are substantial. As a major part of their income is spent on food, price change will directly affect food security, mainly by affecting the availability and access both at national and local level.
At the household level, access to food is a major factor when it comes to determining the level of food security. Two indicators used to measure the impacts of biofuel production, are food prices and household incomes. The effect of food prices will depend on the extent to which domestic prices reflect international prices. In many cases the government
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Most people living in urban areas are net food consumers, but not all rural people are net food producers. This creates an issue for many smallholders and agricultural laborers who do not possess adequate land to feed their families. According to empirical evidence presented by FAO, it is confirmed that the majority of poor rural dwellers living of agriculture and staple food production, are indeed net food buyers. The figures range from 45.7% in Cambodia to 87% in Bolivia, measuring the proportion of poor that are net buyers in 12 different countries (AgricultureOrganization, 2008, p. 75). It becomes evident that a large part of poor households will lose in the case of increased staple food prices. This again will have effects on welfare and nutrition. Research conducted in Indonesia for example, showed that a price increase in rice led to mothers in poor families reducing their calorie intake to be able to feed their children. The result was an increase in maternal wasting. Many families had to reduce their purchase of other nutritious foods to be able to afford rice. Although this research from Indonesia measured the response to a price change that occurred during the 1990s, it still provides a good example of the effects of price change on poor households. Farmers who own more land or produce at a larger scale, will typically benefit …show more content…
It takes time for market structures and wages to adjust. In respect to market structure, farmers with the ability to expand their production will need years to set up new machinery, clear land for expansion and make other necessary structural adjustments. On the household level, wages need time to adjust as well. Therefore it is likely to take years before the increase in household income due to higher wages, will exceed the increase in expenditures. Other positive effects of price increase on local communities are the multiplier effects generated by higher income amongst farmers. Generally this will create demand for other goods and services as well, which in many cases are locally produced (AgricultureOrganization, 2008).
According to the report by Agricultural Organization (2008), the net effect of higher food prices on food security is generally expected to be negative. It was estimated that “a 20 percent increase in food prices in 2025 relative to a baseline will lead to an increase of 440 million in the number of undernourished people in the world” (AgricultureOrganization, 2008, p. 79). The report also points out that expected biofuel expansion would raise the prices of maize by 26%, oilseeds by 18% and wheat by 8%. The exact effects would differ greatly across regions and

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