POVERTY: MOZAMBIQUE: Cheaper new food subsidy coming

MAPUTO, 11 May 2011 (IRIN) -

 Photo: Guy Oliver/IRIN :
Election posters of the ruling Frelimo party

Mozambique's government will again attempt to curtail subsidy expenditures for essential foods and services, but this time its approach will be more nuanced so as to avoid a repeat of the cost-of-living protests in 2010.
Antonio Cruz, director of policy analysis in the planning ministry, recently told local media that subsidies on fuel, bread and rice, estimated to cost the donor-dependent government millions of dollars each month, would be phased out by the end of June 2011.
At least 13 people died during widespread civil unrest in September 2010 in the capital, Maputo, after the government announced the immediate ending of all subsidies, which were subsequently reintroduced in the face of the protests.
On 21 September 2010 the Mozambique news agency reported that registered bakers would receive a subsidy of 200 meticais (US$6.60) for every 50kg bag of wheat flour - costing 1,050 meticais ($37.75) - they purchased.
Other relief measures included halving water connection fees for low-consumption households - considerably reducing the cost of piped water to the poor - giving free electricity to households consuming 100kWh or less, and prepaid electricity consumers would no longer pay for refuse collection.
The subsidies had been introduced in 2008, ahead of the 2009 national elections. The government said they were required to mitigate the rising cost of living for the poor in the wake of the global financial crisis.
Economic analysts warned at the time that such blanket subsidies would be unsustainable, as the long-term global trend indicated rising food prices, although there would be fluctuations at the local level.

Improved prospects
Prices of [Mozambique's] main staple, maize, declined markedly between March and April [2011] in all monitored markets, reflecting the start of the 2011 harvest
"Prices of [Mozambique's] main staple, maize, declined markedly between March and April [2011] in all monitored markets, reflecting the start of the 2011 harvest," said the Global Food Price Monitor, published on 5 May 2011 by the Food and Agricultural Organization (FAO).
"The sharpest decreases (between 29 and 33 percent) were recorded in the surplus northern provinces of Zambezia and Nampula. Prices are lower (between 12 and 18 percent) than in April last year [2010] due to satisfactory crop prospects," the FAO noted.
However, the price of rice in Maputo, a staple food in the area, declined slightly in April from its almost record levels in March, but "remain 16 percent above the high levels seen a year ago [in 2010]", the FAO said.

New subsidy model
Planning and development minister Aiuba Cuereneia told the state-run newspaper, Noticias, that savings accrued from discontinuing the generalized subsidies would enable the introduction of a new food basket and transport benefits for families earning less than two dollars a day.
The new subsidy system is expected to come into effect between June and August 2011 and the first phase of the scheme, which will take place between June and December, will focus on the urban poor.
The goods envisaged in the new basket include maize, flour, rice, fish, beans, groundnuts, vegetable oil and bread, and those eligible would be identified through a "census" based on income rather than wages. Bus passes would also be issued to workers, students and the elderly.
The census is being conducted in the country's 11 provincial capitals, but according to a recent Survey of Household Budgets, the government estimates that 1.8 million people in urban areas have a monthly income below the threshold of 2,500 meticais ($82) and would be eligible to buy the food basket, which would cost 840 meticais ($28).
In February 2011 the government warned that the country's food security needed to be "deeply improved" after 37 percent of households were found to be subsisting on one meal a day or less during the lean season - the three months leading up to the main harvest.
Diplomatic sources, who declined to be named, said the effects of global economic uncertainty had made Mozambique's food security situation "more precarious", as some donor countries and aid agencies were struggling to maintain the budgetary support they had provided in the past.
Donors also embarked on a "strike", in which budget support was suspended between December 2009 and March 2010, demanding action on electoral reforms, corruption, and the often blurred line between the state and the ruling Frelimo party, among other things.
Citing Finance Minister Manuel Chang, Noticias reported in February 2011 the government was facing a $2 billion shortfall in this year's budget.

Rural adversity
"The rural people in Mozambique face many challenges when it comes to ensuring they have enough food to eat, not least because our country is incredibly prone to natural disasters that can devastate crops," said Marcela Libombo, an official in the disaster management secretariat of the agriculture department.
"In the past, farmers have reported losing 30 to 40 percent of their crop, especially maize, because of an inability to get crops [from the north] to markets down south [to the main urban areas such as Maputo, which sources food from neighbouring South Africa] and a lack of storage silos," she told IRIN.
"But the reality is our northern provinces grow plenty of food. The main problems we have relate to storage and transport infrastructure."
http://www.irinnews.org/report.aspx?reportID=92679

POVERTY: Five Causes of Rising Food Prices

February 16, 2011: Jacob Goldstein

  trimmer741/Flickr

Global wheat prices more than doubled in the second half of last year, according to a new report from the World Bank. The price of corn, sugar and cooking oil also soared.
Why are global food prices skyrocketing? Who is going to go hungry as a result? And what does it mean for the U.S.?
I recently put these questions to Abdolreza Abbassian, a food economist at the UN's Food and Agriculture Organization. Here's what he told me.



 FAO

Skyrocketing Prices
Abbassian attributed the price rise to several factors — some familiar to me (and probably to you), some less familiar.
1. The rise of biofuels, like ethanol made from corn. This market, driven largely by government subsidies, has created demand that is what economists call "price inelastic" — demand stays strong even as prices rise.
2. More demand from the developing world, particularly for meat. Livestock eat grain, so increasing demand for meat means increasing demand for grain. This source of demand has also been price inelastic, Abbassian said.
3. Disappearing stockpiles.
Because of WTO rules, the U.S. and Europe have been moving away from subsidies that led to vast reserves of wheat and corn.
Subsidies still exist in the U.S. and Europe, but they've taken a different form. Governments used to buy and stockpile surplus food from farmers. Now it's more common for governments to give farmers subsidy payments without actually buying any of the food they produce, Abbassian told me.
This sounds super wonky, but it has a huge impact on the price of food.
Big stockpiles mean that the supply of food remains relatively constant, even when there are disasters like the vast fires that destroyed last summer's Russian wheat crop.
But in the absence of stockpiles, unexpected shocks like those fires in Russia last summer have a huge impact on supply. That, in turn, contributes to huge price spikes.
"What you get is a world market that is increasingly tight, without much of a buffer," Abbassian told me. "Without a buffer, you have volatility. It's as simple as that."
4. Speculation
The volatility created by declining stocks is in turn compounded by speculation — traders betting on the rise or fall of prices.
Abbassian argued that bringing more transparency to commodities futures markets might mitigate this issue.
"If we know who is buying it and what are they buying it for, that may get those who are just there to gamble to be more cautious about their positions," he said.
Who is going to go hungry?
At any given moment, there are about a billion people in the world who don't have enough food to eat. When food prices go up, more people do go hungry — but the increase isn't as dramatic as you might think.
That's partly because many of the world's poorest people simply have no money and no access to food. Many live in countries where wars and other crises make it hard to get food to people. They would be hungry even if the price of food had not spiked.
What's more, in many poor countries, the local harvest is a more important factor than the price of global commodities. And many countries in Africa have had strong harvests of staples such as white corn and cassava.
One often overlooked region likely to be hit hard by the price increases is Central Asia, Abbassian said. This recent FAO report has lots of region-by-region detail.
What does all this mean for the U.S.?
Despite the fact that the price of staples like wheat, corn and sugar have risen by more than 50 percent in recent months, the price of food in the U.S. has barely budged — food prices here rose only 1.5 percent over the past year.
That's because the price of food in the U.S. is driven largely by labor costs and other factors, rather than by the price of the ingredients.
"If you eat a loaf of bread in the West, 2 percent of the price may be the wheat-flour price," Abbassian said. "In the developing world, it's 70 percent."
What's more, Americans only spend about 10 percent of their income on food — a far lower percentage than what people in the developing world typically spend. So even when food prices do rise in the U.S., it takes a smaller bite out of the average household's budget.
http://www.npr.org/blogs/money/2011/02/16/133744524/why-are-food-prices-going-crazy

MALNUTRITION: CAP -- The EU Common Agricultural Policy

The Guardian,  3 January 2011
James Armstrong (Letters, 29 December) points out that £3.9bn is paid to farmers through the EU's common agricultural policy. However, total income from farming in the UK in 2009 was £4.07bn, so without this money, income from farming would have been almost non-existent. While money from the CAP does allow a dwindling number of farmers to stay in business and produce food for the nation, its principal effects, intended or not, are to enable the supermarkets to make massive profits and consumers to buy food at prices which do not reflect the true costs of production. By all means abolish "farm subsidies". But be prepared to spend a far higher proportion of your household budget on food.

Huw Rowlands : Chester

http://www.guardian.co.uk/world/2011/jan/03/eu-farming