the impact of droughts and floods on food security and policy options to alleviate negative effects

The Impact of Droughts and Floods on The Impact of Droughts and Floods on

Food Security and Policy Options Food Security and Policy Options

to Alleviate Negative Effectsto Alleviate Negative Effects

Stephen DevereuxInstitute of Development Studies

University of Sussex, UK

IAAE plenary session:IAAE plenary session:

““Economics of Natural Disasters”Economics of Natural Disasters”

Gold Coast, Australia, 13 August 2006Gold Coast, Australia, 13 August 2006

Structure of PresentationStructure of Presentation

1. Analytical framework:Weather–induced natural disasters as a sequence of failures of “entitlements to food”

2. Policy responses to:(1) failures of production(2) failures of labour markets(3) failures of commodity markets(4) failures of informal transfers

3. Conclusions

Drought & Flood Impacts on Food Security Drought & Flood Impacts on Food Security as a Sequence of “Entitlement Failures”as a Sequence of “Entitlement Failures”

Production–based entitlements

Labour–based entitlements

Trade–based entitlements

Transfer–based entitlements

Source of food: What one grows

Source of vulnerability: Harvest failure

Source of food: What one works for

Source of vulnerability: Unemployment

Source of food: What one buys

Source of vulnerability: High food prices

Source of food: What one is given

Source of vulnerability: Lack of support

Impacts of Weather Shocks on Impacts of Weather Shocks on Crop and Livestock ProductionCrop and Livestock Production





“Direct entitlement decline”: (1) Reduced yields of food staples; (2) Reduced yields of marketed crops; (3) Livestock weight loss and mortality.

Risk factors: (1) Dependence on rainfed agriculture; (2) Undiversified livelihoods; (3) Limited access to non-covariant income.

Long term impacts of climatic risks: (1) Risk–averse behaviour by farmers (2) Under-investment in new technologies (3) Agricultural stagnation, persistence of low–input low–output farming systems.

Impacts of Weather Shocks on Impacts of Weather Shocks on Foodcrop Production in MalawiFoodcrop Production in Malawi


500,000

1,000,000

1,500,000

2,000,000

2,500,000Maize production in Malawi, 1984–2002

Impacts of Weather Shocks on Impacts of Weather Shocks on Foodcrop Production in MalawiFoodcrop Production in Malawi


Depletion of maize stocks in Malawi, 2000–2002

0

20

40

60

80

100

No Harvest May-Jul Aug-Oct Nov-Jan Feb-Apr Never

Cu

mu

lati

ve

% o

f h

ou

se

ho

lds

2001/02

2000/01

2002/03





Impacts of Weather Shocks on Impacts of Weather Shocks on Labour MarketsLabour Markets

Effects on rural labour markets:(1) Harvest failure forces food producers to seek alternative sources of food and cash;(2) Ratio of those offering employment to those seeking employment falls;(3) Excess supply of labour drives rural wage rates down.

“Derived destitution”:(1) Income shock reduces demand by farmers for non-agricultural goods and services;(2) Incomes of those whose livelihoods depend on agricultural incomes therefore decline;(3) Affected groups include traders, barbers.

Impacts of Weather Shocks on Impacts of Weather Shocks on Labour Markets in MalawiLabour Markets in Malawi


Labour supply and demand in rural Malawi, 1992–2002

Labour demand

Labour supply

0

1

2

3

4

5

6

7

8

9

10

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002





Impacts of Weather Shocks on Impacts of Weather Shocks on Commodity MarketsCommodity Markets

Effects on food supplies:(1) Where markets are weakly integrated, food availability decline reduces market supplies;(2) Precautionary or speculative hoarding exacerbates market supply constraints.

Effects on food prices:(1) Reduced food availability or withholding supplies causes food prices to rise;(2) Since demand for food is price–inelastic, prices can rapidly double and re-double.

Asset sales as a “coping strategy”:(1) Selling livestock or other assets to raise cash for food causes a collapse in terms of trade;(2) Selling productive assets leads to destitution.

Impacts of Weather Shocks on Impacts of Weather Shocks on Food Markets in MalawiFood Markets in Malawi


Maize and cassava prices in rural Malawi, 2000–2002

Impacts of Weather Shocks on Impacts of Weather Shocks on Asset Markets in MalawiAsset Markets in Malawi


Mean value losses on asset sales in rural Malawi, 2001–2002

Immediate risks:(1) Extended family support requires access to non–covariant income (eg. urban relative);(2) Patron–client relationships tend to be exploitative (eg. high–interest loans);(3) Covariant and protracted shocks erode community–level coping capacity.

Longer–term risks:(1) “Modernisation” – changing social norms;(2) Commercialisation – from “moral economy” to “market economy”;(3) HIV/AIDS is also undermining community coping capacity, especially in Africa.





Impacts of Weather Shocks on Impacts of Weather Shocks on Informal TransfersInformal Transfers

Policy Responses to Failures of Policy Responses to Failures of Crop and Livestock ProductionCrop and Livestock Production





“Productivity–enhancing safety nets”:(1) Fertiliser subsidies (making a comeback?);(2) Free inputs (“Starter Packs” in Malawi);(3) “Livelihoods packages” (Ethiopia).

Longer–term risk–reducing strategies:(1) Agricultural intensification (eg. irrigation)(2) Agricultural diversification (risk–spreading)(3) Agricultural commercialisation(4) Livelihood diversification (non-covariance)(5) Migration (“resettlement”)(6) Sedentarisation (pastoralists)(7) Urbanisation (“up & out” or “down & out”).


Policy Responses to Failures of Policy Responses to Failures of Crop and Livestock ProductionCrop and Livestock Production

Alternative scenarios for “future agricultures” in Africa

Low Growth High Growth

Low Vulnerability

Diversification

(On–farm;off–farm)

Migration

(Rural–rural; rural–urban)

HighVulnerability

Intensification

(Access to inputs)

Commercialisation

(Land reform)





Policy Responses to Failures of Policy Responses to Failures of Labour MarketsLabour Markets

Employment–based safety nets:

+ Self–targeting (work, time, low wage/ ration);

+ Consumption smoothing (if well timed);

+ Can create durable assets with food security potential (micro-dams, feeder roads).

– Work norm excludes labour–constrained; – Bad timing interferes with on–farm labour; – Low wage/ ration reduces nutritional impact; – Public works assets are rarely maintained.

Principles (EGS & NREGA in India):(1) Flexible, demand–driven, guaranteed;(2) Payment in cash rather than food;(3) Assets generate value for beneficiaries.





Policy Responses to Failures of Policy Responses to Failures of Commodity MarketsCommodity Markets

Buffer stocks or grain reserves: + Inter-temporal arbitrage – buy cheap after harvest, sell later to dampen price rises; – Expensive, inefficient, undermines markets; – Vulnerable to political corruption (Malawi).

Price policies and subsidies: + Protects producers against low prices; + Protects consumers against high prices; – Expensive, inefficient, undermines markets; – Leakages (elite capture, porous borders).

However: Re-emergence of price seasonality (since agricultural liberalisation abolished most policy instruments to address it) is a major source

of vulnerability that needs urgent policy attention.

Food aid:+ Smooths consumption, protects assets;– High transactions costs;– Disincentives to food production and trade;– Does not address non-food needs;– Requires accurate targeting (as does cash).

Cash transfers:+ Cheaper than food to transport and deliver;+ Stimulates markets and local economies;+ Invested in agriculture as well as consumed;– Real value falls as food prices rise (‘FACT’ in Malawi pegged transfers to market prices);– Could exacerbate food price inflation;– Possible negative gender impacts.





Policy Responses to Failures of Policy Responses to Failures of Informal TransfersInformal Transfers


Policy Responses to Failures of Policy Responses to Failures of Informal TransfersInformal Transfers

Coping Strategy Index in rural Malawi, 2005–2006

ConclusionsConclusions

1st best: PRODUCTION – Prevention is better than cure: Strengthen and “drought / flood–proof” agricultural production; Strengthen markets and infrastructure (to reduce supply failure); Reduce chronic poverty (to minimise demand failure).

2nd best: LABOUR – Insure against weather shocks Weather–based insurance; Guaranteed employment schemes.

3rd best: TRADE – Correct for market failures New approaches to open market operations (eg. call options); New approaches to subsidies (eg. vouchers / inputs–for–work).

4th best: TRANSFERS – Compensation as a last resort Cash transfers are usually preferable to food aid, but neither

addresses structural failures of production and markets. Don’t reify the 4th best!

www.ids.ac.uk

www.future–agricultures.org

the impact of droughts and floods on food security and policy options to alleviate negative effects

Education

food markets

food supplies

food security

impacts of weather shocks

unemployment source

rural malawi

food availability decline

harvest failure source