Food Prices, Consumption and Nutrition in Ethiopia:Implications of Recent Price Shocks
1. Food Prices, Consumption and
Nutrition in Ethiopia:
Implications of Recent Price Shocks
Paul Dorosh
International Food Policy Research Institute (IFPRI)
(Ethiopia Strategy Support Program, ESSP-2)
Institute of Medicine Workshop on
Mitigating the Nutritional Impacts of the Global Food Crisis
July 14-26, 2009
2. Outline of Presentation
• Background: Geography, Economy, Nutrition
• Determinants of Food Prices in Ethiopia
– Nominal and real price movements
– Changing determinants of wheat prices over time
• Implications for household consumption and
nutrition
– Household food consumption patterns
• Safety nets
• Concluding observations
4. Annual rainfall varies across space
Rainfall is highest and least variable in the western part of the country
and the western slopes of mountains
5. Population is concentrated along
the primary road network
But only 16 percent of the population resides in urban areas
(cities of 5,000 or more people)
6. Much of Ethiopia is remote
(>10 hours travel time to a city of 50k or more people)
45% of the population lives >5 hours from a city of 50k+
Source: Schmidt (2009).
7. Ethiopia: Cereal Production and Real Prices
16 200
14
180
Real Price Index (2000/01 = 100)
12
Production (mn tons)
160
10
8 140
6
120
4
100
2
- 80
2001/02
2002/03
2003/04
2004/05
2007/08
2000/01
2005/06
2006/07
Cereals (mehrer) Total Cereals Real Price Index
Source: Dorosh and Ahmed (2009); Ethiopia Central Statistics Agency (CSA)
and Ethiopian Grain Trade Enterprise (EGTE) data.
8. Measures of Malnutrition
for Ethiopia and Kenya
Prevalence of
Proportion of Underweight in
undernourished in the children under 5 years Under 5 Mortality
population (%) 1/ (%) 2/ rate (%) GHI 2009
Ethiopia 2003-2007 2005 2007
46.0 34.6 11.9 30.8
Kenya 2003-2007 2003 2007
32.0 16.5 12.1 20.2
Notes:
1/ Proportion of the population with calorie deficiency. Average over a three year
period from FAO.
2/ Figures shown are for the latest years available for the period 2002-2007. Based on
the WHO Child Growth Standards revised in 2006.
GHI denotes Global Hunger Index, an unweighted average of the other three
measures of malnutrition shown in the table.
9. Ethiopia: Poverty Trends
1995/96 to 2004/05
1995/96 1999/2000 2004/05
Po P1 P2 Po P1 P2 Po P1 P2
Rural 47.5 13.4 5.3 45.4 12.2 4.6 39.3 8.5 2.7
Urban 33.2 9.9 4.1 36.9 10.1 3.9 35.1 7.7 2.6
National 45.5 12.9 5.1 44.2 11.9 4.5 38.7 8.3 2.7
Notes: P0 denotes % of population below the poverty line; P1
measures the average depth of poverty; P2 is a measure of the
severity of poverty.
Source: Ethiopia Central Statistics Agency, Household Income,
Consumption and Expenditure Survey (HICES) data.
14. Determinants of Wheat Prices
Four Market Regimes
• January 2000-June 2005: Domestic wheat prices were generally between
import and export parity
– Given levels of official imports (including food aid), there was little incentive
for private sector imports of ordinary wheat
– Domestic prices were determined by domestic supply (including official
imports) and demand
• July 2005-March 2007: Domestic wheat prices were generally at import
parity levels
– Private sector imports adjusted to equate total supply and domestic demand
at the import parity price
• April 2007- May 2008: Domestic wheat prices were again below import
parity
– Given sharp increases in world prices, private sector imports were not
profitable
• June 2008 – May 2009: Domestic wheat prices were above import parity
– Restrictions on foreign exchange for imports prevented private imports from
taking advantage of profitable import opportunities
17. Summary: Wheat Markets
• Wheat price formation regimes have changed several
times between 2000 and 2009:
– For most of this period, domestic prices have NOT been
determined by international border prices
• Given foreign exchange rationing starting in March
2008, private sector wheat importers have had
restricted access to foreign exchange
– Domestic wheat prices have been above wheat import
parity prices since May 2008
• Government sales of its wheat imports from July to
October 2008 successfully reduced domestic market
prices
– Sizeable rents accrued to those with access to wheat
imports at official prices
19. Ethiopia: Calorie Consumption
2004/05
Urban
Teff
Wheat
Other Cereals
Enset/ Root Crops
Pulses/ Oilseeds
Animal Products
Other
Source: Calculated from Ethiopia Central Statistics Agency (CSA) Household Income, Consumption
and Expenditure Survey (HICES) 2004/05 data; Seyoum et al. (2009).
20. Livelihoods Analysis
• Livelihoods Integration Unit (LIU)
– Part of Government of Ethiopia’s early warning system
within the Ministry of Agricultural and Rural Development
– Baseline data on 173 livelihood zones using key informant
questionnaires
– Includes calculations of impacts of shocks on household
access to food based on changes in prices or losses of
production
– Able to highlight sub-regional food security issues that may
not be captured in regional analyses (e.g. effects of
production losses of non-cereal food crops such as enset
and sweet potatoes)
See http://www.feg-consulting.com/spotlight/feg_liu_pp8opt.pdf
21. Productive Safety Net Program (PSNP)
• PSNP introduced 2005
– Initially covered 264 chronically food insecure woredas in four
regions (out of approximately 500 woredas in Ethiopia)
– Pastoralist areas initially excluded
– Two sub-programs
• Public works (PW) schemes: pays workers in cash or in-kind for their
labor on labor-intensive projects designed to build community assets
• Direct support (DS): provided to labor-scarce households including
those whose primary income earners are elderly or disabled
• Other Food Security Programme (OFSP)
– Provides at least one of several productivity-enhancing
transfers or services, such as access to credit and agricultural
extension services
– Designed to encourage households to increase income
generated from agricultural activities and to build up assets.
– Covered one-third of PSNP recipients in 2006 baseline survey
22. Impact of the PSNP
• An evaluation of the PSNP in 2006 showed impacts varied
by household participation
• Households that received at least half of the amount of
transfers it should have received according to the design of
the program:
– Had a reduced likelihood of having a very low caloric intake
– Increased their mean calorie availability by 183
kcals/person/day
• Households that also received access to any component of
the OFSP are more likely to
– Be food secure (increase mean calorie availability by 230
kcals/person/day from 2347 to 2577)
– Borrow for productive purposes
– Use improved agricultural technologies
– Operate nonfarm own business activities
Source: Gilligan, Hoddinott and Tafesse (2008).
23. Concluding Observations
• Over the last two decades, Ethiopia has made impressive
strides in enhancing food security by
– Increasing domestic production
– Investing in infrastructure to improve markets and
– launching the Productive Safety Net Program (PSNP)
• Recent price shocks in Ethiopia are not, in general, due
to increases in food prices in international markets
• Many households remain vulnerable to food production
shocks due to droughts or disease that may be specific to
small regions within the country
• Food security could be further enhanced through
– Continued high growth in agricultural production and
incomes of poor households
– Expansion of the Other Food Security Program (OFSP) and
– Targeted nutrition efforts