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FOOD SECURITY
 Concepts, Basic Facts,
and Measurement Issues

     June 26 to July 7, 2006
       Dhaka, Bangladesh
Rao 2a:
 Analytics 1: Food Availability
      and Food Deficits
Learning: Based on the concepts of the
basics of the aggregative models and of the
different types of food deficit, trainees will
develop facility with graphical
representations in the analysis of any given
real-life situation.
Brief Contents
• three analytical approaches relating to
  availability, access and nutrition
• an aggregative model of the basics:
  requirements, demand and supply
• three types of deficit: production deficit, supply
  deficit, demand deficit
• market imbalances versus food deficits
• graphical representation of the basics and of
  deficits
Analytic Approaches
• Food Availability Approach
  – Aggregate Level
  – Key Concepts: Production, Supply, and types of
    Food Deficit
• Food Access Approach
  – (Mainly) Individual or HH Level
  – Key Concepts: Economic and Social
    Access, Effective demands or Entitlements
• Food Utilization Approach
  – (Mainly) Individual or HH Level
  – Concepts: Nutrition, Health, and valued or
    functional Outcomes
Factors Determining
            Food Availability
• the volume and stability of food production
  (whether subsistence or market oriented)

• available food stocks (farm-
  level, commercial, government stocks)

• food imports (commercial and concessional).
Factors Determining Access to Food
• For the market-dependent: the purchasing
  power, or level of real income
  – At HH Level: wage levels, employment, prices, etc.
  – At National Level: availability of F/E for food
    imports
• For subsistence producers: productive assets
  available & non market transfers
  – [At National Level: resource endowments & food
    aid respectively)
Factors Determining
             Utilisation of Food
• Basic (physical) Factors
   – Dietary intake
   – Body metabolism
• Complementary (socio-environmental) Factors
   –   Water, sanitation and food safety
   –   Health care, disease prevention and control
   –   Education and awareness of food-nutrition factors
   –   Food culture and food norms
An Aggregative Model
           of Food Deficits

• To analyze FS of a country (both at point in
  time and changes over time) we use the
  following REQUIREMENTS--DEMAND--
  SUPPLY graphs
Fig. 2.1: Closed Economy Case
        (w/ neither food imports nor exports)
• Basic model of aggregate food situation in closed economy




     Note: real economies will be neither completely closed nor completely open
Fig. 2.2: Open Economy w/ Imports
• Basic model of aggregate food situation in open economy




     Note: real economies will be neither completely closed nor completely open
5 Basic Elements of the Model
•   1. Production Curve

    –   shows the volume of aggregate food production at
        varying market prices of food

    –   food production includes subsistence production
        as well as production for sale on the market
5 Basic Elements of the Model
• 2. Supply Curve
  – shows total food supplies at varying market prices;
    incorporates food production (see
    previous), modified by stock changes and food
    imports/exports.

  – For a closed economy with NO stock
    changes, Supply Curve = Production Curve

  – For open economy, this is so only until domestic
    price reaches world price level
5 Basic Elements of the Model
•   3. Demand Curve
    –   shows total food demand (effective market
        demand plus home consumption from subsistence
        output)
    –   Why negative slope? Real income effects.
•   4. Food Requirements
    –   approximately given by calorie or staple food
        requirements on the basis of food balance sheets
    –   IMP. NOTE: more unequal is food
        distribution, higher will be requirements
5 Basic Elements of the Model
•   5. Market Prices
    –   major factor determining food production, supply
        and demand.

    –   In closed economy, regulated OR competitive OR
        quasi-competitive
    –   In a free, open economy: price is world-market
        determined (CIF or FOB)
Food Deficits
• The following types of food deficits can arise:
  – in PRODUCTION

  – in SUPPLY

  – in DEMAND

  – MARKET IMBALANCES (deficit or surplus)
Types of Food Deficit (defined)
A production
                     A supply           A demand
[or structural]
                      deficit             deficit
    deficit

     production          supplies
                                        there are people
   insufficient to   (prod.+Δstocks+
                                        without effective
   meet total food   {M-E}) less than
                                        market demand.
    requirements       requirements

  FP < FR [does
                         FS < FR           FD < FR
   not necessarily
                        [necessarily       [necessarily
     mean FIS
                       implies FIS]       implies FIS]
     e.g., Japan]

                                           NOTE: A
                                        demand deficit is
                                          the result of
                                            poverty.
Types of Food Deficit (graphs)
     2.3a: Areas of production deficits
  (& supply deficits in a closed economy)

            •
Types of Food Deficit (graphs)
      2.3b: Area of supply deficits
          in an open economy

           •
Types of Food Deficit (graphs)
     2.3c: Area of demand deficits

          •
Types of Food Deficit (graphs)
2.3d: Areas of market imbalances (surpluses & deficits)
                 in a closed economy
                  •
Market Imbalances
• Market imbalances (deficits or surpluses)
   – ←→ market price differs from equilibrium price
   – [set below (market supply deficit) or above (market demand
     deficit) "market-clearing" P]

• Question: Is this statement true?
   If the market price is fixed below equilibrium price … food demand
       would rise, so demand deficit would diminish.
   However, food supplies from domestic production as well as
       food imports (in the open economy case) would go down.

• Market imbalances either require Government
  Regulation or Market Collusion.
Table 2.1: Types of Food Deficits
 Type of deficit                            Definition                       Examples referring to
                                                                            Closed            Open
                                                                           economy          economy
 Production deficit         food production < food requirements               R-A              R-C

 Total supply deficit       total food supplies < food requirements           R-A              R-B

 Demand deficit             effective demand < food requirements              R-A              R-B

 Import deficit             market production < effective demand                -              B-C

 Market imbalances:*                             IF                          market prices are set:*
 - Market (-supply)         market supplies < effective demand             below po         above pm
 deficit
 - Market surpluses         market supplies > effective demand              above po        below pm


* Prices set apart from equilibrium prices lead to an overall change of the deficit structure, see above.

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Rao 2a analytics 1 availability & deficits

  • 1. FOOD SECURITY Concepts, Basic Facts, and Measurement Issues June 26 to July 7, 2006 Dhaka, Bangladesh
  • 2. Rao 2a: Analytics 1: Food Availability and Food Deficits Learning: Based on the concepts of the basics of the aggregative models and of the different types of food deficit, trainees will develop facility with graphical representations in the analysis of any given real-life situation.
  • 3. Brief Contents • three analytical approaches relating to availability, access and nutrition • an aggregative model of the basics: requirements, demand and supply • three types of deficit: production deficit, supply deficit, demand deficit • market imbalances versus food deficits • graphical representation of the basics and of deficits
  • 4. Analytic Approaches • Food Availability Approach – Aggregate Level – Key Concepts: Production, Supply, and types of Food Deficit • Food Access Approach – (Mainly) Individual or HH Level – Key Concepts: Economic and Social Access, Effective demands or Entitlements • Food Utilization Approach – (Mainly) Individual or HH Level – Concepts: Nutrition, Health, and valued or functional Outcomes
  • 5. Factors Determining Food Availability • the volume and stability of food production (whether subsistence or market oriented) • available food stocks (farm- level, commercial, government stocks) • food imports (commercial and concessional).
  • 6. Factors Determining Access to Food • For the market-dependent: the purchasing power, or level of real income – At HH Level: wage levels, employment, prices, etc. – At National Level: availability of F/E for food imports • For subsistence producers: productive assets available & non market transfers – [At National Level: resource endowments & food aid respectively)
  • 7. Factors Determining Utilisation of Food • Basic (physical) Factors – Dietary intake – Body metabolism • Complementary (socio-environmental) Factors – Water, sanitation and food safety – Health care, disease prevention and control – Education and awareness of food-nutrition factors – Food culture and food norms
  • 8. An Aggregative Model of Food Deficits • To analyze FS of a country (both at point in time and changes over time) we use the following REQUIREMENTS--DEMAND-- SUPPLY graphs
  • 9. Fig. 2.1: Closed Economy Case (w/ neither food imports nor exports) • Basic model of aggregate food situation in closed economy Note: real economies will be neither completely closed nor completely open
  • 10. Fig. 2.2: Open Economy w/ Imports • Basic model of aggregate food situation in open economy Note: real economies will be neither completely closed nor completely open
  • 11. 5 Basic Elements of the Model • 1. Production Curve – shows the volume of aggregate food production at varying market prices of food – food production includes subsistence production as well as production for sale on the market
  • 12. 5 Basic Elements of the Model • 2. Supply Curve – shows total food supplies at varying market prices; incorporates food production (see previous), modified by stock changes and food imports/exports. – For a closed economy with NO stock changes, Supply Curve = Production Curve – For open economy, this is so only until domestic price reaches world price level
  • 13. 5 Basic Elements of the Model • 3. Demand Curve – shows total food demand (effective market demand plus home consumption from subsistence output) – Why negative slope? Real income effects. • 4. Food Requirements – approximately given by calorie or staple food requirements on the basis of food balance sheets – IMP. NOTE: more unequal is food distribution, higher will be requirements
  • 14. 5 Basic Elements of the Model • 5. Market Prices – major factor determining food production, supply and demand. – In closed economy, regulated OR competitive OR quasi-competitive – In a free, open economy: price is world-market determined (CIF or FOB)
  • 15. Food Deficits • The following types of food deficits can arise: – in PRODUCTION – in SUPPLY – in DEMAND – MARKET IMBALANCES (deficit or surplus)
  • 16. Types of Food Deficit (defined) A production A supply A demand [or structural] deficit deficit deficit production supplies there are people insufficient to (prod.+Δstocks+ without effective meet total food {M-E}) less than market demand. requirements requirements FP < FR [does FS < FR FD < FR not necessarily [necessarily [necessarily mean FIS implies FIS] implies FIS] e.g., Japan] NOTE: A demand deficit is the result of poverty.
  • 17. Types of Food Deficit (graphs) 2.3a: Areas of production deficits (& supply deficits in a closed economy) •
  • 18. Types of Food Deficit (graphs) 2.3b: Area of supply deficits in an open economy •
  • 19. Types of Food Deficit (graphs) 2.3c: Area of demand deficits •
  • 20. Types of Food Deficit (graphs) 2.3d: Areas of market imbalances (surpluses & deficits) in a closed economy •
  • 21. Market Imbalances • Market imbalances (deficits or surpluses) – ←→ market price differs from equilibrium price – [set below (market supply deficit) or above (market demand deficit) "market-clearing" P] • Question: Is this statement true? If the market price is fixed below equilibrium price … food demand would rise, so demand deficit would diminish. However, food supplies from domestic production as well as food imports (in the open economy case) would go down. • Market imbalances either require Government Regulation or Market Collusion.
  • 22. Table 2.1: Types of Food Deficits Type of deficit Definition Examples referring to Closed Open economy economy Production deficit food production < food requirements R-A R-C Total supply deficit total food supplies < food requirements R-A R-B Demand deficit effective demand < food requirements R-A R-B Import deficit market production < effective demand - B-C Market imbalances:* IF market prices are set:* - Market (-supply) market supplies < effective demand below po above pm deficit - Market surpluses market supplies > effective demand above po below pm * Prices set apart from equilibrium prices lead to an overall change of the deficit structure, see above.