Value added = Return to factors + Taxes/subsidies + Profits/losses

Commodity chain analysis is a useful tool to show how entitlements arise out of the operation of the food chain, and how changing prices, in particular changing world prices, affect flows within the chain, and thus income and entitlements. It is one way of developing a framework for analysing both availability of food and access to that food.

1.2 Production and food entitlements

Domestic food production is the most important quantitative component in national food security for almost all countries, with the exception of city states such as Singapore and Hong Kong. Domestic food production, particularly of staple food crops in non-pastoral societies, as well as comprising much of the food available in the country, also forms the basis of food entitlement for much of the farming community, in terms of direct consumption of production. The surplus is sold on through the commodity chain to provide additional income for the farming community, which in turn pays for agricultural labour. The marketed surplus becomes available for distribution to non-farming members of rural communities and the urban population. As with other stages in the food chain, the food production sector gives rise to a physical flow of food and receives financial flows ultimately from consumers. What determines the size of these flows?

The physical level of food production is determined, at the national level, by factors such as area planted to food crops, soil fertility and climate, technology available and use of inputs such as high quality seed, fertiliser, labour and mechanical equipment. Some of these factors are given, and out of the control of individual or government, such as climate. Others are to some extent under the control of individual farmers, but the farmer's decision is made in response to the structure of price and non-price incentives he or she faces, which are, in turn, determined by government policy decisions. For example, how much improved seed a farmer plants will depend on the price of the seed, the availability of the seed, the price and availability of any complementary inputs such as fertiliser and pesticides, and the expected price in the market for the final commodity.

Financial profit, as determined by the financial flows moving upstream in the food chain, can play an important part in the farmer's decision as to what commodities to plant, whether to plant food crops or non-food export crops. It is not the only factor, however. Many farmers are quite risk-averse. They perceive themselves to be operating in an uncertain environment, in both physical and economic terms. Given the varying climatic conditions in their country, some crops are more variable in yield and susceptible to drought or flooding than others and will be less attractive. In economic terms, some crops may face fluctuating prices on world markets, or may face a higher probability of government intervention in domestic markets. When this is the case, farmers may retreat into producing primarily for subsistence, thus reducing their dependence on the market, but also the flow of food commodities onto the market.

The decision to plant a food commodity is not made in isolation, but in relation to the returns to be made from planting other food or non-food crops. Government can influence this by maintaining the price of food commodities relative to other crops. Attempts to boost food production should not be based solely on raising the price of food crops, however. A proper analysis has to be undertaken as to the knock-on effects of doing this, in terms of labour and input availability. Box 3.1 shows how emphasis on price policy alone can backfire.

The impact of prices is, nonetheless, crucial. A recent study in Thailand, using a technique called the Policy Analysis Matrix (PAM), examined the relative profitability of rice and soybean in a number of different regions of the country (Yao, 1995.). The Thai government has been putting resources such as subsidised credit and increased extension into encouraging diversification from rice into soybean. However, the PAM analysis showed that soybean would not give the farmer a profit in many regions, and that from the government's point of view, there would be an efficiency loss from moving into soybean. Government intervention to encourage or discourage food production has to be based on careful and regionally specific analysis of the various costs and benefits, both to the farmer and to the economy as a whole.

When analysing the food system of a country, and how national and household food security has developed over time, it is important to remember that food production is not just a component of food availability, but that the process of food production provides the basis for economic access to food, not just for farmers, but also for farm labour, who are dependent on this process for their income. As the following sub-section examines, it is also the starting point for the marketing chain which delivers food to rural and urban consumers.

1.3 The marketing function

Marketing systems have three broad functions: a logistical function; an informational function and a distributional function. These are critical in determining how well the overall commodity chain operates, and in particular for food commodities, how effectively the marketing system contributes towards maintaining food security.

The logistical function can, itself, be subdivided into three aspects: transformation over space, transformation over time and processing. Transformation over space is another way of saying that marketing systems transport food from point A where the food is in surplus, and as a result the price of the food commodity is low, to point B where the food commodity is scarce and the price relatively high. In the absence of inter-spatial arbitrage, surplus production areas will experience both lower prices, and possibly greater price variation between the pre-harvest and post-harvest periods than will be experienced in deficit areas. State marketing institutions can also be responsible for transporting food from A to B. In this case, very often the transportation is simply a result of planning decisions, rather than in response to price movements. Private sector commodity transport is usually triggered off by changes in price signals. Generally, this is the basis on which food moves from food surplus rural areas to urban areas or food deficit rural areas. A difference between international food prices and expected domestic prices is also the basis on which private sector importers make the decision to import food from abroad. In surplus years, price differentials between domestic and international prices may also encourage private sector export, which in turn should lead to an increase in the economic return to farmers and earning of foreign currency for the national economy.

Transformation over time, or storing a commodity on both an intra-annual and inter-annual basis, is the second logistic function. In most countries, harvesting of a specific crop takes place over a relatively short period, but the commodity is consumed throughout the year. Farmers can store the crop on farm and release it slowly into the market. However, often they need the money they get from the sale of the crop to pay off debts incurred in the production process. They will sell the harvest to a trader, who in turn may sell it on to a wholesaler who has storage facilities and can release the commodity gradually onto the market. When farmers sell most of their harvest in the immediate post-harvest period, the market price falls in response to the temporary surplus. A trader who has the capital to buy up stocks in the post-harvest period is recompensed for the use of his or her capital and storage facilities by being able to sell the commodity at a profit when the market is tighter. In the same way, traders can store from one year to the next. However, this has a much more speculative element as it is difficult always to predict what will happen in the next year's harvest. As a result, for food grains, inter-annual storage is often carried out primarily by government. For certain food commodities, such as fruit and vegetables, it may be very expensive to store for more than a few weeks, and these commodities are traded primarily on a seasonal basis.

Processing is the third logistic function which a marketing system undertakes. This can cover anything from the milling of grain to the canning of fruits and vegetables. Processing can be a very major part of the value of the final product, as it is in many Western countries, for example for pre-prepared meals, or it can be negligible, as with many fresh fruits.

Organisations involved in the logistics side of marketing can perform any or all of these logistical functions. In addition, they can provide finance for trade and also finance upstream production. The diversity of organisational form can be immense, even within a single region in a country. As countries become more developed, the importance of the marketing stages of the food chain increases. Processing moves outside the home and becomes larger scale. In general terms, the higher a country's income, the more important processing is as part of the value added of the food sector. It can also be an important employer. In Malaysia, after two decades of high growth, food processing now employs over 15% of all industrial workers. Similar patterns have developed in other South East Asian economies. Although the percentage of the population deriving their food entitlements directly from agricultural production may be declining over time, the numbers indirectly dependent on agricultural production for employment will tend to increase.

As for all stages in the food chain, each organisation involved in processing has to generate positive financial value added on a year to year basis, to pay the wages of those involved, to give a normal return to any capital committed to the marketing function and to give profits to the owner of the enterprise. The efficiency of the various enterprises, and the degree of competition with respect to the various functions in the marketing process, and at the producer and consumer level, will determine the number of enterprises involved in processing, transport etc., and the distribution of income from their activities.

On the information side, markets are the channel for the price signals which harmonise supply and demand. If they do not function properly then information may not reach the appropriate agents. If traders do not know that prices in one region are rising because maize, say, is scarce, then they will not transport maize to sell on the markets in that region, and regional food security will be endangered. If farmers do not know that the price of maize is rising nationally, because traders are managing to secure all the increase in consumer prices for themselves, as increased profit, then they will not plant more grain to meet the rising demand. In some countries where state institutions regulate the market and undertake most of the functions of the marketing system, these price changes may not be observed. The marketing agency has then to develop some other type of information, such as increases in the size of customer queues, or in unsold stocks of grain, to give them information about the relative demand and supply of the commodity.

Finally, markets and the prices that arise from their operation are the basis for the distribution of the benefits from production and exchange as between producer, trader, processor and consumer. This distributional role is one of the main reasons governments become involved in marketing systems. The state may try to protect the consumer's economic access to food by regulating the price of food at various points in the marketing system. However, if this discourages private traders from operating in certain markets, for example in remote areas, food commodities may not be available at all, unless the state undertakes to provide them. Box 3.2 gives an example of the importance of undertaking disaggregated analysis of the distribution of costs and benefits from proposed policy initiatives, as these may not be obvious.

In summary, an effective marketing system is an important institution in terms of ensuring availability of food in different regions of a country, at different times of the year, and with the degree of processing that the customer requires. It also should provide the information to ensure that there is some stability of supply on a year to year basis. Finally, it is important in ensuring economic access to the population, both in terms of providing income for certain groups of the population and in terms of the level of the final consumer price.

Although input markets did not appear explicitly in the example of a commodity chain shown in Figure 3.1, these are also important in terms of providing appropriate quantities and varieties of seed, fertiliser and pesticides at the relevant time of year to enable farmers to respond to the price signals that the marketing system sends them. The prices at which the marketing system can supply inputs to farmers (and other agents such as processors and transporters, who also use non-food purchased inputs in their activities) will determine the use and productivity of the various productive processes.

1.4 Household food entitlement and the food chain

For simplicity's sake, actors in the commodity chain are often referred to as producers, traders, consumers, etc., as though they only had one function. In fact, all individual actors are consumers (though organisations such as transnational corporations are not consumers per se, their employees are), and many consume on the basis of what could be referred to as multiple entitlements. For example, a farm household may have a production-based entitlement, from the food it produces itself. This could be in the form of millet and maize. Some of the millet could be sold for brewing to provide income, and hence a trade-based entitlement, used to purchase meat and vegetables. One member of the family could work on a neighbouring farm, and another could engage in small-scale food trading, resulting in own-labour entitlements, part of which could be used to purchase more grain. All these entitlements result directly from food commodity chains, and could be supplemented further by entitlements, such as remittances from extended family members working in urban areas, which are not an output of the food system.

As Table 3.2 shows, in all major regions of the world, the population is becoming more urbanised. Only in Europe is the rural population actually declining, but in South America the rural population is static. Equally, in all regions, the agricultural population is growing at a slower rate than the rural population, and in Europe and South America, the agricultural population is declining. This means that, in relative terms, fewer people are growing their own food, and are increasingly dependent on some kind of commodity chain for their food security. More and more people in rural areas earn their living outside of agriculture, so the marketing system is required to distribute an increasing amount of food not just from rural areas to the towns and cities, but also to distribute commodities within rural areas. In some countries, more and more the marketing system has to move imported food from the ports or land points of entry into the countryside.

Table 3.2: 1993 Population and Rate of Population Growth, 1961-1993

Commodity chains and marketing systems become more developed and more complex as economies become richer. Production and distribution systems become more specialised, consumer demand becomes more differentiated and more demands are put on the integrating functions of the marketing system. This can lead to the rather simplistic assumption that, in a monetised market economy, the rich are more integrated into and dependent on the market, whereas poorer, less secure households continue their day-to-day existence isolated from and marginal to the market system.

In fact, in many countries the evidence indicates the very opposite. Even in rural areas, poorer households tend to be more dependent, in relative terms, on markets, in particular food markets, than rich households. A study in Kenya showed that smallholders buy at least 50% of their food from the market (quoted in Ateng, in Gittinger, 1983). All income groups bought at least one third of their food from the market, and this rose to over 60% in the lowest income group. The larger the size of smallholding, the greater the proportion of food that was provided by own production. This is not always the case. In very poor countries, such as Malawi, surveys have shown that the poorest rural households live outside the market economy and depend on social exchange and barter to meet their food needs, especially in poor harvest years. This is because of their total lack of purchasing power and assets, in a context where markets, in particular labour markets, are poorly articulated. However, this is the exception rather than the norm.

The stereotype of the small peasant subsistence farmer who is virtually self-sufficient no longer applies, if it ever did, to most poor rural households. This subsistence farmer was assumed to have control over his environment, with the exception of the climate, and could, by careful storage, protect himself against all but the worst of droughts. In reality most small farmers face the risks of changing market prices for food, labour and production inputs. Food is not the only commodity which has become increasingly monetised. Land markets have developed in many countries, and credit is much more widespread. All these developments increase the risk facing farmers. They can lose their land and become landless labourers as a result of involvement in credit markets. However, it also offers the opportunity for spreading risk, by growing multiple commodities, employing some family labour outside of the farm and giving access to improved seed and inputs. For many rural households, where population pressure has reduced the amount of land available for farming, there is no option but to employ a multiple livelihood strategy. In rural areas, that is likely to involve family members at different stages in the food chain; producing, labouring on other farms, milling, trading and processing.

The development of complex food chains undoubtedly improves national food security in an economy, as it increases the integration between different regions, and, if the commodity chain is efficient, should allow for a lower cost food supply as regions specialise in the commodities where they have a productive advantage. This does increase regional interdependence, and can lead to shortages in times of stress in poorer regions where there is less effective demand to pull in food when prices rise in the rest of the country. Equally for individual households who are fully integrated into the market economy, if the food chain operates well, then it offers the possibility of improved economic opportunities and greater food security. However, as will be discussed in section 4, when markets, for whatever reason, come under pressure, then poor households will tend to be at a disadvantage compared to those with greater buying power, or exchange entitlements.

1.5 The dynamics of the food chain

The presentation of the food chain and its marketing functions so far has been rather static in nature. However, the food chain does more than just provide price information and short term access to and availability of food. The prices arising from the operation of the chain affect resource allocation in the longer term. Thus the articulation of the food chain and its efficiency at signalling information provides the dynamic of the agricultural system in terms of its contribution to economic growth. Prices signal comparative advantage which leads to specialisation in production. Specialisation and the resulting commercialisation induce intensification in production. Intensification in turn leads to economies of scale in commodity production which reduces costs and, depending on relative market power, will result in some combination of reduced prices for consumers, increased returns to factors of production and increased prices. This again increases comparative advantage and the virtuous circle continues.

Over time, increased specialisation, technical change and changing world prices will all affect the allocation of resources both within the agriculture sector and as between agriculture and other sectors of the economy. This will, in turn, change the relative importance of production based entitlements and trade based entitlements in the economy, and will change the focus of policy relating to food security, as development and growth occurs, away from a heavy emphasis on food production as a major vehicle for improving food security towards a broader approach, including food processing, other agro-industrial activities and ultimately all forms of employment-enhancing economic growth.

The links between the agricultural sector and other sectors in the economy are important in this context and are often underestimated. Recently, attempts have been made to quantify the importance of output in the agricultural sector for income, and therefore livelihood, in the non-agricultural sectors of the economy. In Kenya, it has been estimated that an increase in agricultural output of 10% will generate an additional increase in non-agricultural income of almost 5%. This arises primarily from increased output in trading and processing enterprises. These results are another way of illustrating the importance of food and agricultural commodity chains in the level of economic activity in many developing countries.

1.6 Seasonal variations in the operation of the food chain

The importance of different elements of the food chain will vary from season to season, as the production cycle varies. Food cultivation itself is a very seasonal activity, with differing labour requirements at different times of the year. Ground clearance, planting, weeding and harvesting all make different demands on the farm household and leave varying amounts of family labour available for off-farm activity, which might or might not be food-related.

Marketing too can be seasonal. Some food commodities are difficult to store and will only be available for short periods of time after the harvest. Others are available all year round, because they can be stored fairly readily. Depending on the grain, storage may be more appropriate in a milled or unmilled state. For grains which are stored unmilled, then milling will be a regular activity throughout the year. If the grain is normally stored in the milled form, milling will be concentrated in the post-harvest period.

Flows of grain can vary throughout the year, both in quantity and even in direction. In Indonesia, a combination of lower storage costs in urban areas, plus flows of imported grain, which come in through large urban ports can result in the situation shown in Figure 3.2.

In the immediate post-harvest period, a, rice is flowing from the rural areas to the urban area, and the urban price is higher than the rural price, by the amount of the marketing margin. Prices are beginning their seasonal rise. At time b, when the rice price equals p, imports of rice become competitive with domestic rice in the urban areas, and rice stops flowing from the rural areas into the urban areas. However, rural prices continue to rise, until, at time c, they start to exceed urban prices. When rural prices exceed urban prices by the rural-urban marketing margin, then imported rice starts to flow from urban areas to rural areas. As rice starts to come in from the next season's harvest, at time f, rural prices start to fall until at time g, the harvest is fully in, prices have reached their seasonal low and the process starts again.

The same phenomenon could result if the government operated a buffer-stock policy, releasing rice onto the urban market at price p.

The price changes involved in these switches in direction of grain flows will affect the food entitlements of different groups of the population in different ways. Those who earn their income outside of the food chain will only be affected by the food price rises, but those who are actively involved in trading may find that, at certain times of the season, their income goes down, as rice no longer flows from rural to urban areas. Rice is usually imported milled, and this may reduce income earning opportunities for food processors and millers at certain times of the year. Seasonal variations in food security are not simply linked to seasonality in production, but to the changes in quantities flowing through different links in the food chain, and the resulting opportunities to earn income.

Figure 3.2: Seasonal rural-urban price differentials

2. The Open Economy and the Role of Food Imports and Exports

Much of the discussion above has been in the context primarily of the domestic economy. Yet most countries are involved in the importation and export of food commodities. Indeed, as can be seen from Table 3.1, over a third of Africa's cereal consumption is from imported grain. This means that, in the same way that households and regions become interdependent when they become integrated into the domestic food chain, so countries become more interdependent with one another when they specialise in order to benefit from international trade.

2.1 Historical trends

Historically, international food markets were quite slow to develop. The cost of transportation and the difficulty of preserving many foods meant that there was little international trade in foods prior to the middle of the nineteenth century. Before then, trade was concentrated on high value cash crops which were difficult to grow in temperate climates. Spices had been traded since the middle ages. By the early 1800s, sugar was being grown in the West Indies for export and the slaves working in the sugar plantations were being fed on imported foods such as wheatflour and salt fish.

By the late nineteenth century, certain patterns in the flows of international trade were becoming established, which still linger on today. The colonising powers of Western Europe were developing markets for their industrial exports in third world countries, which were paid for through the export of cash crops such as coffee, tea, rubber and palm oil. Many of the Western European countries had reduced their tariffs on imported grain, following the lead of Britain, who had repealed the Corn Laws in 1846, to enable cheap imports of grain from North America and later Australia. Thus at the turn of the century, Europe was exporting primarily industrial goods to pay for imports of grain and livestock from the New World and cash crops from Africa and Asia. This pattern was to change during the Depression of the 1920s and 1930s as all the developed countries became more protectionist, and the USA became more industrialised and reduced its imports of manufactures from Europe. Overall trade levels fell dramatically, and many of the colonies were badly affected by plummeting world prices. This period marks the institution of marketing boards in countries like South Africa and the then Rhodesia, to support farmers who were badly hit by the world recession.

Since World War II, exports of cash crops are still the major source of foreign exchange for many developing countries, but many African countries are now importing food crops direct from Europe and the USA, as well as manufactured goods. Some Asian countries now export manufactured goods as well as cash crops and import food crops. North America is responsible for about 80% of cereal exports. Cereals make up about 40% in value of the developing countries' total food imports, a change from the 1930s when all the major developing regions, Africa, Asia and Latin America, were self-sufficient in cereals.

Cereal imports have grown to all continents, except Europe, in the last three decades. The average annual rate of growth of cereal imports in the world as a whole was 3.8%, roughly the same as for total food imports. The extent to which cereals are traded across international borders varies by category. Overall, about 12% of cereal production was traded in 1993. However, this varied from 4% for rice, through 13% for maize to a high of 22% for wheat. For comparison, 99% of coffee production was traded in 1993.

The nineteenth century patterns, of Europe and North America exporting commodities which are consumed domestically, and developing countries exporting commodities for which there is a minuscule home market, still holds with relatively few exceptions, and those mainly among the fast developing countries of East Asia. Developing countries still trade primarily with the developed world, rather than amongst themselves, in spite of the advantages that could arise from greater regional trading in food commodities as Box 3.3 examines. It is argued that this kind of specialisation in production, leading to greater integration into world markets, can increase national wealth. In the next sub-section, this argument will be examined.

2.2 The competitiveness of international markets

The argument for greater integration into world markets has always been based on the classical doctrine of free trade and comparative advantage. This can be summarised as follows: if a nation consumes both commodities A and B, which it can also produce, then concentrating its production on the commodity which it can produce with greater relative efficiency, say A, and trading that for B on the world market, it can increase its overall consumption of A and B combined.

Leaving aside for the moment the question as to whether developed countries produce and trade according to their comparative advantage, it is interesting to examine what determines comparative advantage. Some part of this, in agricultural products in particular, is determined by climate and soil type, but much of it is the result of decades of investment in production methods, research into seed varieties and development of appropriate infrastructure. It has been argued that this has tied some countries into producing agricultural commodities which have poor long-term prospects in slow-growing markets. Might these countries be better advised to stop following 'comparative advantage', decide to try to produce manufactures, initially for the domestic market but with a view to long-term exports, and move away from cash crop production back to food production? In thirty years time, the country could have developed a comparative advantage in manufacturing.

For many developing countries, however, the immediate choice facing them is between increasing their production of cash crops to earn foreign exchange for manufactured imports and probably increased food imports as well, or to encourage increased self-sufficiency in food, possibly through increasing protection to domestic farmers. What has been the nature of the international food markets within which context they have to make the choice?

It would be difficult to describe these markets as free and competitive. Most industrialised countries have been heavily protective of their domestic farmers, particularly those producing food crops. Over the past few decades, there has been slow growth in domestic food markets in developed countries. Low elasticities of demand for basic grains has meant that domestic markets were potentially quite unstable. In addition, farming in the industrialised countries had become a high technology area, with quite low unit profits. As a result, farmers were driven to produce on a larger and larger scale, to earn an adequate return on their capital. Farmers have historically had considerable political influence in many developed countries, and over the past few decades, the major agricultural exporting nations of the West have been trying increasingly inventive ways of providing protection to farmers at as low a cost as possible, including concessional sales of surplus production, set aside schemes and use of sanitary and phytosanitary regulations to protect home markets.

Many of these programmes, which are discussed in more detail in Chapter 6, stabilised the country's domestic food prices, but at the cost of destabilising international market prices, because surplus production was forced into exports, both commercial and concessional. International food prices were also depressed, which was good for consumers in developing countries, but, in many cases had a disincentive effect on producers. Isolated efforts were made to offset this negative impact, notably the EEC-ACP Lome agreements, which provided preferential access to European markets for certain developing countries. However, the underlying factors affecting international food markets were untouched until the Uruguay round of GATT, which was finally signed in December 1993. This was the first GATT round to include trade in agricultural commodities to any extent and is also discussed in Chapter 6.

It could be argued that the degree of protection of international food markets is only marginally relevant to the issue of whether or not to become more closely integrated into world agriculture markets. If this means, as it will for most developing countries, specialising to a greater extent in cash crop production, are there any particular considerations from the perspective of food security which weigh for or against this?

2.3 International specialisation and food insecurity

A good case can be made that international specialisation may actually improve food security in a country. It spreads risk and sources of income, so that in the event of a domestic food crop failure, the export earnings from cash crops can be used to pay for food imports. A country which is integrated into international markets will also have developed good transport infrastructure which will allow easier access to imported commodities. Countries which have little outside trade often have high transport costs, which indicates long delivery lead times, congested ports and low-volume carrying capacity. These are not consistent with food security in times of crisis when fast imports may be necessary. Insofar as greater external trade implies greater national prosperity, then this in turn indicates improved economic access to food.

However, this all assumes that international markets are not inherently more risky than domestic markets. In fact, international prices can be highly unstable yet countries have somehow to decide what strategy they should be following over a period of years. A country cannot switch between export orientation and a self-sufficiency approach from year to year. International prices are difficult to predict, and usually it is difficult to do more than calculate past trends on which to base the decision. Most international commodity markets are out of the control of any individual country. Past efforts for groups of countries to operate commodity agreements to stabilise prices have been, for the most part, abject failures. Most developing countries end up both buying and selling in unpredictable markets.

Some grain markets are notoriously thin, such as the market for rice. Such a small proportion of world rice production is traded that variations in domestic production, or indeed demand, can result in very high relative movements in international supply and demand. Other markets, such as the wheat market, are rather more robust, but are dominated by a few major suppliers. This can lead to dependence on one supplier, which has caused difficulties when political issues have influenced trading agreements.

The decision to follow an export oriented strategy may benefit a country overall, but there may be significant changes in the distribution of benefits from trade internally within the country. There will be changes in the quantities of food moving through the marketing system, and changes in the direction of flow. Domestic food processors and traders may well be adversely affected. Equally there will be changes in the commodity chain for exports. If export production is concentrated among larger farms and if export processing is carried out by larger companies than are involved in domestic food processing, then national income could rise, but the food security of the poorest could fall. However, export production could also create more employment opportunities for landless labourers and have the opposite effect on household food security.

There is one very important way in which international markets differ from domestic markets. If a national economy becomes heavily monetised and, for some reason, one section of the population suffers a dramatic and sudden failure of entitlements, say because of a localised drought, then there is a national government which can step in and take action to restore some form of food entitlement for that group. If a country suffers some major entitlement failure, for example because of a complete failure of the coffee crop, there is no international institution to step in and restore the country's entitlements. There have been various attempts to provide some form of insurance, such as the EC's STABEX fund, but these are partial and not always reliable.

None of the issues outlined above, as to why increasing export orientation and international market integration may create problems for a country's food security are sufficient reasons in themselves to justify withdrawal from international markets. The discussion has simply indicated possible dangers and areas of concern to which attention must be paid when contemplating greater international specialisation and openness to trade.

3. The Political and Institutional Environment of the Food System

3.1 The institutional context

Much of the discussion in this chapter has centred on market relationships, how people use their resources to produce food, and how the overall food supply moves through market channels to become available to those who have income to purchase it. In most countries nowadays, markets are undeniably the dominant institution. Markets, however, do not operate in a vacuum. As recent experience of liberalisation has shown, particularly in the former communist countries of the Eastern bloc, there are a number of underlying institutions necessary for the effective operation of the market system. The market as an institution concentrates on the process of exchange of rights, rights to property, to labour and to commodities. One of the first requirements for effective market operation is that there should be a system of well defined property rights, plus a system for enforcing them.

Information is also important if markets are to function effectively. Buyers and sellers must be able to identify one another, and have access to information as to the prices at which other agents are transacting. For markets to be competitive, there have to be many buyers and sellers. When markets are only emerging, it can be difficult to avoid domination by a few wealthy and risk-taking agents. Once a few agents have developed a monopoly position in a market, they often have sufficient power to block entry to that market by other agents. Buyers are then forced to pay monopoly prices if they wish to undertake transactions. This is frequently a problem in small localised credit markets.

However, markets are only one type of institution which governs economic activity in a country. Other institutional arrangements can be important in governing economic activity as it relates to food security. (The term institution, or institutional arrangement is used to indicate the various rules and regulations which determine what is acceptable in custom, or legal, the "rules of the game".) Governments may intervene to prevent certain kinds of exchanges, or to enable others, because of some notion of over-riding human rights. For example, in some countries, it is illegal for a household to indenture their children, regardless of how hungry they are. In many developed countries, the state provides certain minimum benefits to the eligible poor because it is felt unacceptable that a wealthy country should not protect its citizens from dying from hunger in the street. Not all activity takes place in response to financial rewards and incentives. In many countries, particularly in rural areas, people join together to undertake activities either which will benefit them all collectively, or because it is seen as culturally or morally important that these activities are undertaken.

Governments are particularly likely to intervene in food markets in various ways, to improve food security for poorer sections of the population. This is often justified in terms of the need to provide a safety net in society or for the sake of common humanity. In many cases it also appears that the popularity and even the legitimacy of the government is based on its ability to deliver stable supplies of cheap food to the population, of the cities in particular.

It is not uncommon for countries to overrule large sections of the food market in times of crisis in national security. During World War II, the British government instituted a system of rationing for almost all the basic food commodities, and made it illegal to trade these commodities out of the rationing system. This was to ensure equal access of all the population, regardless of wealth, to the limited quantities of food available. For similar reasons, Cuba's population were subject to a food rationing system during the 1970s and 1980s. Up until the late 1970s, most of the Sri Lankan population were entitled to a weekly rice ration.

These are perhaps extreme examples, but many countries have developed less comprehensive programmes which improve the access of the poor to food, whether for moral or political reasons. In some countries this has taken the form of subsidising the basic foodstuff. The price of bread in Egypt was almost constant for a long period in the 1960s and 1970s. In other countries the poor are entitled to participate in specific targeted programmes, such as the food stamp programme in the USA. In yet other countries, the social safety net is not specifically linked to food commodities, but some kind of income support increases the food entitlements of the poor. Any assessment of food security has to include these state institutions in addition to those of the market.

A third type of institution which is often overlooked is that related to collective action. This term includes those activities where members of a community organise themselves to undertake economic activity, or organise the delivery of a service, or manage a communal resource. These can be of particular importance in societies which are not fully integrated into the monetary economy, or where traditional customs are still an important element of daily life. However, collective activity can also play an important role in modern societies. Many voluntary organisations and community based organisations in Western societies rely on collective action and can play an important role in the provision of services. Indeed, collective action is an important element in the governing of water resources in some districts in southern California.

Collective action is important in many countries in areas of water management and irrigation. Building of dams can be undertaken communally in a very organised way, such as in China, where collective activity was one way to mobilise the large amounts of labour necessary to build large scale dams, but can also be much more informal, as in many semi-arid African countries, where local communities build dams and shallow wells to catch as much water as possible in the short rainy season. Irrigation systems may be collectively managed with local committees to allocate access to water to ensure equity and sustainability in the use of water.

Collective management is also important in the development and use of common property resources, most often common grazing but also fishing rights in lakes, rivers and even local sea-fishing. What many of these systems have in common is the need for careful management so that land does not become degraded or rivers become over-fished. A market solution would be possible, where grazing or fishing rights were sold out to individuals, as happens in countries where grazing rights and fishing rights are individually owned. However, here the property is held communally and either because there are customary rules and regulations for land use, or because it is felt less likely to exclude poorer members of the community, access is based on non-market principles such as individuals having the right to graze so many cattle per year, or catch so many fish per year.

Where communities lack certain services or where it is felt that existing service providers are exploiting a monopoly position, they may form cooperatives to provide these at an affordable price. Although co-operatives often develop an important financial and market element, very often they start out based on non-profit principles with a strong collective input from the community. Many institutions are complex mixtures of market and non-market elements. Often collective activity has a strong element of self-interest, but may represent a way of mobilising resources, in particular labour power, when financial resources are lacking.

There is a final sphere of activity, which some analysts call the moral economy, which is composed of a series of customary rights and obligations which link different groups of the population together, and may be particularly important in times of food stress. For example, in northern Namibia, women and children had the right to go to the kraal of the traditional chief during times of famine, when food had run out. He kept the communal food stores and had an obligation to feed any of his dependent subjects who came to his enclosure. Similar obligations have been noted in other parts of the world. Box 3.4 discusses the various types of relationships which used to be typical in parts of Bengal in India.

It is important to keep these other types of food entitlement in mind when assessing the nature of food security problems in a society. For the most vulnerable, non-market institutions may be critical in determining survival, particularly in times of crisis. They can mitigate the effects of the market on those who have little purchase or labour power. They can also make a considerable difference in the way the benefits from the food chain are distributed. Unfortunately, in many countries emergent markets are reducing the incidence and effectiveness of non-market mechanisms, as societies become more monetised and communal rights are increasingly privatised by the rich and affluent.

Non-market institutions are not just important in the local and national economy, but also in the international sphere. The GATT negotiations discussed in section 2 above are a major example of the recognition of the need for collective action to improve trade regulations. Any individual country may stand to lose by removing trade barriers unilaterally, but if enough countries do this at the same time, then they can, in theory, all benefit. Equally conferences such as those on the law of the sea, and the Rio conference on the environment are acknowledgement of the need for collective institutions to supplement the operation of the market.

3.2 The role of the state

In one sense the state has a privileged position in the institutional framework, in the sense that it has the power to change institutions, i.e. the rules of the game. Most countries have some form of constitutional division between the judiciary and the executive, but this is not a perfect division and there is usually some way for the executive to modify the legal structure within which the judiciary operates.

In the 1990s, the power of the nation state is rather more limited than in previous centuries because of the role of international finance. Many countries, particularly in the developing world, rely on access to overseas capital, both private and public sector, to finance their development programmes and their recurrent expenditure requirements. Thus they are constrained to follow policies and develop institutions which make them creditworthy in the eyes of either private capital or foreign aid donors.

There is, at present, very much a consensus that the appropriate role for government is to facilitate the operation of the market economy and encourage the development of the private sector. Thus, instead of the interventionist policies which many states operated in the past, whether their economies were centrally planned or mixed economies, the role of the state is now seen to be much more limited. The state should institute a legal framework which facilitates the exchange of property rights and set up a regulatory framework, such as recognised weights and measures which increases the transparency of exchange.

In addition, where there are clear market failures, such as in the provision of public goods, it may be appropriate for the state to provide these directly, or to finance their provision by appropriate private sector organisations. This is particularly important for the provision of market facilitating infrastructure, such as roads. In agriculture, there is a case for the state to finance research into improved seed and technology, particularly for food crops, where a private firm might have difficulty recovering its costs. The state may also have a role in providing social goods, such as education and health services, though this must not be done in a way which endangers the fiscal probity of the economy.

This more restricted view of the state arises, to some extent, from an acknowledgement that, far from being a benign but fundamentally neutral institution whose main purpose is to further the wellbeing of its citizens, the state is an organisation like any other, with its own objectives and internal incentive structures. The political economy analysis of the last two decades emphasises the tendency for agents of the state to pervert the operation of markets, by investing their time in rent-seeking activities to improve their own welfare at the expense of the efficiency of the economic system as a whole. It is thus seen as important to curb the ability of state employees and decision-makers to undermine productive economic activity, and restore the discipline of the market place.

Thus the prime role of the state is seen as setting up a legal framework which stipulates the rights and obligations of both individuals and the wide range of organisations which operate within an economy, including government ministries and the various public sector bodies which carry out policies and projects on behalf of government.

3.3 Food sector organisations

It is impossible to make a comprehensive list of the wide range of organisations which play a significant role in the food economy. However, the following give some idea of the variety and characteristics of some of the major players.

3.3.1 The private commercial sector

The significant role of the private commercial sector in the food chain and in achieving food security has become evident throughout the discussion of the food chain. Under adjustment, with market liberalisation and privatisation constituting key elements of most economic reform programmes, its role will be further strengthened. This is true for all stages of the food chain, from production up to the retailing level, specifically to all types of marketing functions involved in the food system, such as:

• input supply


• procurement


• transport


• storage (including the management of food buffer and food security stocks)


• wholesaling


• retailing

The size and structure of private sector operations can vary from small female dominated village level processing, to the vast scale of operations of transnational companies running vertically integrated operations from plantation production through processing to retail sales, covering a number of countries. All share the need for a stable and predictable economic environment to enable appropriate forward planning.

3.3.2 Co-operatives

The basis of most farmer co-operatives is to achieve economies of scale in transport and other services, and to raise the bargaining power of farmers over the price and other conditions of sale of their produce and of farm inputs. This is particularly attractive where markets are poorly developed and farmers have poor and unreliable links with the national market.

Co-operatives are normally run by their members and do not set out to be profit-making organisations. Unfortunately many of them have proved to be loss-making. It may be difficult to find the necessary management skills in rural areas to ensure effective operation. Training needs may be high. In some countries co-operatives have been particularly vulnerable to co-option by the political system. Overall, the co-operative movement has had very mixed fortunes over the last three decades in many developing countries. Where education levels are high and institutional support is well developed, then co-operatives have been successful in improving the economic situation of their members and creating greater security for them. Where institutions are poorly developed and members' supervisory abilities are weak, then co-operatives have been very susceptible to mismanagement and even corruption.

3.3.3 Parastatals

With the changing role of the state, the number of major parastatal organisations has fallen significantly. In the 1960s, many countries had large government-run marketing organisations which were an important arm of government policy. They allowed government to directly influence prices by trading either as monopolies or along side other enterprises. Their objectives varied according to policy. In some cases, the main objective was to stabilise prices. In others, it was to ensure that profits from export crops remained in the country and did not accrue to transnational corporations (though frequently these profits went into government coffers rather than into the pockets of producers). Economies of scale in marketing were a major justification for setting up these large operations.

As the tide turned against state intervention in markets, so parastatals fell from favour. They were seen as too political in their function, many of them were inefficient and made massive losses and their presence in the market distorted incentives for private sector operation. Over the past decade, considerable attention has been focused on how to privatise the operation of parastatals in such a way as to encourage private sector activities, while protecting consumers and producers from transitory disruptions.

3.3.4 Local and community organisations

Households are usually embedded in local communities which play a highly important role in ensuring social security of their community members, specifically in rural areas. These local communities provide social security in many respects, including food security. This can occur at various levels from spontaneous actions of neighbourhood support if a family or a member of the community suffers destitution up to different forms of community based social security institutions.

The principal advantage of community structures is their close relation to the community members. The community is best aware of its members suffering destitution and able to respond spontaneously. These capacities can and should be used in implementing targeted policy interventions to improve food security in various ways:

• Identification of the people in need for food assistance,


• Determination of the type and volume of assistance needed,


• Distribution to the beneficiaries (e.g. through community fair price shops, community kitchens, schools, health centres).

3.3.5 Non-governmental organisations (NGOs)

NGOs offer a potential vehicle for supporting or complementing public sector measures in achieving food security objectives. They have an especially important role in countries with weak infrastructure and low administrative capacities. Due to their presence in the field and their decentralised approaches, NGOs may play a particularly effective role in providing targeted assistance to vulnerable groups. This refers, in principle, to international as well as local NGOs, depending on their objectives, experience, and scope of activities.

The important role that NGOs can play in supporting and complementing government efforts to alleviate poverty and to improve food security derives from the following factors: (World Bank, 1990):

• their ability to reach poor communities and remote areas that have few basic resources or infrastructure and where government services are limited or ineffective;


• their lobbying function for the poor and underprivileged;


• their ability to promote local participation in the design and implementation of public programmes by building self-confidence and strengthening the organisational capability among low-income groups;


• their usually low cost of operation due to using simple low cost technologies, streamlined services and low operational budgets;


• their innovativeness and adaptability in identifying local needs, building upon existing resources and transferring appropriate technologies developed elsewhere.

• there is a limited replicability of many NGO sponsored activities as they are often small and localised. In attempting to scale up their operations with support from the public sector, some NGOs may lose their innovative quality and may become top-down, non-participatory and dependent on further external government support;


• NGO activities may have a limited self-sustainability as they are often conceived as being primarily relief-oriented rather than developmental;


• limited managerial and technical capacities of many NGOs;


• lack of a broad programming strategy for a region or a sector and poor co-ordination of NGOs at different levels;


• Controversial political or religious orientation of some NGOs.

4. The Food System Under Stress

In this section, three types of food insecurity will be examined in terms of how they can be identified, and how governments and households develop appropriate policies and coping strategies. The first sub-section looks at chronic food insecurity, where countries, regions or households have insufficient food to meet their needs on a year to year basis. The second category examined is transitory food insecurity of a seasonal or cyclical nature, where food insecurity appears at regular and broadly predictable times of the year, or on a year to year basis. Finally we examine temporary food insecurity resulting from shocks such as such as drought, flooding or pest attacks.

These types of food insecurity are not completely separable, either in terms of definition or in terms of impact. It may be difficult to distinguish between an extremely bad year of a cyclical pattern of food insecurity and a shock. The impact of a food shock will be more severe in an area already suffering from chronic food deficits. On the other hand, a country which suffers from significant seasonal or cyclical food insecurity may have mechanisms in place which allow it to respond more readily to a one-off food shock. However, for purposes of analysis it is useful to examine the different categories separately.

4.1 Chronic food insecurity

Individuals, households, regions and countries who suffer from chronic food insecurity have inadequate access to food on a day to day basis, regardless of the season or time of year. It is difficult to identify those suffering from chronic food insecurity simply by looking at indicators of market operation. Chronic food insecurity does not often manifest itself in terms of price rises, because the most common cause is lack of resources translatable into food purchasing power.

Where market mechanisms are impeded or displaced by state intervention then there can, under some circumstances, be indicators of chronic food insecurity. When movement controls hinder the transport of grains from surplus to deficit regions, then food insecurity can manifest itself in food prices in the deficit region which are consistently higher than in the rest of the country by more than the appropriate transport costs. In a country where rationing is the chosen mechanism for food distribution, persistently long queues for basic food staples can indicate chronic food insecurity. However, care must be taken in interpreting these signs, so as not to confuse food insecurity with excess demand for underpriced commodities.

National and regional food balance sheets can give some evidence as to the availability of food, and the adequacy of that food supply relative to the specific population. However, this does not give any indication as to economic and physical access to the food supply. A food balance sheet may show adequate food supply, but distribution may be very uneven. Chronic food insecurity, at whatever level, must be identified in context with evidence of low calorie intake at the household level, preferably supported with physical evidence of malnutrition. The various techniques discussed in Chapter 2 for measuring food consumption and malnutrition are all relevant in this context.

The concept of food insecurity should also include the notion of vulnerability. Where households' access to food is adequate at the margin, but they have very few assets as a cushion against any food shock, then they should be considered chronically food insecure. This is difficult to measure at any degree of aggregation, and this broader concept can probably only be applied effectively at a micro-level.

Chronic food insecurity is almost always closely associated with poverty, and responses to the problem will usually require an injection of external resources. At a household and regional level, this could mean the introduction of targeted programmes, as will be discussed in Chapter 5. When a whole country appears to be food insecure, this can be seen as a reflection of the country's economic assets relative to its population, the distribution of those assets amongst the population or the overall governance of the economy. It is unduly pessimistic to assume that a poor asset base dooms a country to food insecurity. Japan, one of the world's most successful economies has a poor natural resource base, but has developed largely on the basis of its skilled labour force. The problem is more likely to stem from poor policy, both in the food sector and more generally, sometimes compounded by civil war. In these cases, a successful attack on chronic food insecurity may require a change in both political priorities and overall economic policy.

4.2 Seasonal and cyclical food insecurity

Seasonal food insecurity is the outcome of regular patterns usually in weather related activity. The most obvious is the crop production cycle, which affects levels of output, market prices for the output and agricultural employment opportunities. However, there are other aspects of economic activity which may have a strong seasonal element. Employment in the tourist industry and in crop and livestock processing may have a strong seasonal element. In countries with marked rainy seasons, construction work can have a strong seasonal component. All these factors can result in seasonal food insecurity as the source and size of food entitlements vary over the year.

Seasonal variations in income, production and food prices need not cause problems of food insecurity, if individuals and households have the ability to even out the incoming flows by storing or saving on an intra-annual basis. These variations are not usually seen as problems for a region or a country as a whole, but for the poorer individuals within the country. The underlying problem may be one of inadequate entitlement for the year as a whole, in other words chronic food insecurity manifesting itself as seasonal food insecurity. Often in agricultural households, this may be compounded by problems of indebtedness. It is not uncommon for agricultural households to build up debts during the growing season which have to be repaid immediately after harvest, when output prices are at their lowest. In some countries in south Asia, the problem is compounded by the interlinking of credit and output markets. The farmer borrows from a merchant and is required to pay back in grain valued at the merchant's prices. Again, the underlying problem is one of poverty, manifesting itself in insufficient resources to see the household through the year.

Seasonal food insecurity can be identified by measuring food consumption at different periods of the year. Seasonal variation in malnutrition can also occur, but these are often the result of seasonal variation in the incidence of diseases such as malaria and respiratory infections, which can also result in fluctuations in body weight.

There are a number of approaches which can be taken to alleviate the problem of food insecurity. At the household level, they include encouragement of better storage, crop diversification to stagger harvest periods and mixed farming. Governments can provide support to develop off-season sources of employment and non-farm activities. Price stabilisation boards and buffer stocks can be effective in reducing seasonal price variation, though often at considerable cost. Provision of alternative sources of credit can help break the cycle of indebtedness.

Cyclical patterns of food insecurity can be defined as the result of year to year variations in the level of output, specifically in the agricultural sector and usually climatically induced. It is frequently difficult to identify what is normal annual variation in rainfall or temperature, and therefore distinguish between cyclical food insecurity and transitory food insecurity resulting from a shock, such as drought or flood. There has been considerable work done in recent years on how to define drought, or abnormally low rainfall. One way of doing this is to use the concept of dependable rain, the annual rainfall which may be 'reasonably' expected to be exceeded in a given year. A common interpretation of 'reasonable' is the rainfall to be expected in four years out of five. Clearly this has to be defined in relation to a country's past history. The definition of a drought, which could be when rainfall is lower than that expected in nineteen out of twenty years would be quite different for a semi-arid country such as Namibia, compared to a country like Thailand.

There is no question that most countries experience considerable year on year variation in output of agricultural products, both food and cash crops. Figure 3.3 shows the levels of crop production over an eleven year period for Kenya.

All the crops included in the graph show considerable variation on a year to year basis. This could cause considerable cyclical food insecurity to farmers who grow food crops, such as maize, wheat and beans, which they will consume in part and sell the surplus. In some years they may grow insufficient for their own consumption. In others they may have insufficient surplus to sell to meet their other food needs. Cash crop farmers too can suffer from cyclical food insecurity, though their food entitlement will also be affected by the price the crop makes in the international market. For example, in 1984, tea production was slightly lower than in the previous year, but export earnings from tea reached record heights because of the level of world prices.

It is difficult to tell just by looking at Figure 3.3 which commodity has the greatest inter-annual variation. Both maize and beans appear to have high variation, but the absolute amounts being produced are very different. One way to compare variability is to compute the coefficient of variation (CV) for each time series. This is the standard deviation divided by the mean output. This shows that beans have the highest CV, at 28.5, coffee has the lowest at 15.2 and the CV for maize is relatively low, at 17.5.

Figure 3.3: Production of major crops in Kenya, 1982-1993

Table 3.3 Variation in Maize Production by Country

Some crops are more susceptible to differing weather conditions and cyclical variation can be reduced by careful choice of crop and diversification. However, some countries have much more variable climate, resulting in differing variability for the same crop in different countries. Table 3.3 shows the variation in maize production over time for a number of different countries. Care must be taken not to attribute all variation in crop output to weather variation. Policy changes and civil strife can also affect the level of crop output. Adopting different technologies, such as the use of irrigation and drought resistant seeds can also reduce output variation.

Figures are given for growth rates as well as the CV of production for each country, because for a true comparison of variation, series should be compared net of growth rates. All things being equal, a higher growth rate will result in a higher CV. Of the three countries with highest CVs, Tanzania, France and Zimbabwe, growth rates are an important factor in increasing the CV in the first two, but Zimbabwe's CV shows a very high level of year on year variation. So to do South Africa and Zambia. However, Burundi and Kenya both have relatively low CVs, taking into account their respective growth rates. The USA has similar variation to Kenya, though it is likely that output variation in the USA is policy-induced rather than climatic in nature.

Time series can be decomposed into the seasonal element, the trend element, the cyclical element and a random element. This allows for a more complete analysis of expected variation both within year and between years. It is easier to do this on monthly figures, where a seasonal pattern can be identified, both in terms of output and price levels. It is very much more difficult to decompose a time series where there is no seasonal element.

The reason for trying to understand better cyclical variation at the national level is to allow for better planning for poor harvest years. Most households would not be in a position or wish to store against annual variations in output. However, governments can, and often do. One way is to try to store domestically an amount of grain to cover the average shortfalls in poor years. However a cheaper and often more effective way to plan for cyclical shortages is simply to assess the time lag necessary between ordering grain imports and their arrival in the port, and ensure that adequate grain is stored on buffer stocks to cover that time period. In other words, if commercial imports take three months to arrive in port from the time of ordering, a risk averse government will ensure that it maintains a buffer stock of three months' national consumption.

4.3 Household coping strategies under stress

The third type of food insecurity to be discussed is transitory or temporary food insecurity. Sudden shocks which lead to food insecurity can be transitory in the sense that in the next time period, the situation reverts to normal and provided the household can survive that shock, then there is the possibility of life returning to normal, though this is not inevitable. The classic shocks of this nature are drought, flooding and pest attacks causing crop failure. However, loss of employment or the illness of a wage-earner could also fall into this category.

There is another type of shock, which may initially lead to similar responses as drought. However, here the situation does not revert to normal in the next time period and the household rapidly descends into chronic food insecurity. This is the effect of shocks such as asset loss, for example the death of livestock, war, theft and civil conflict, and more recently the onset of AIDS.

The impact of a sudden shock will also vary according to the context within which the shock takes place. A single year famine which occurs after a bumper crop year will have a very different effect on food insecurity from a famine which occurs after a few years of rather poor harvests.

Since the early 1980s, there has been considerable analysis of response to famines and food shocks (famine is differentiated from a temporary food shock insofar as individual households can experience transitory food insecurity in isolation, because of illness, or localised pest attacks, whereas a famine is a food shock which affects a considerable proportion of the population in a locality.) Much recent work has put considerable emphasis on coping strategies, or short-term responses to famine. Initially it was believed that a general sequence of responses could be identified, on the basis of the severity of food stress which the household was suffering. It is now acknowledged that coping responses are rather more complex than this, but it may still be useful to categorise responses into broad groupings. One suggested typology is insurance mechanisms, the disposal of productive assets and destitution.

Figure 3.4 shows a stylised representation of a sequence of responses to a food shock, based on a study undertaken amongst the Hausa in Nigeria. The first six responses, crop and livestock adjustments, diet change, famine food use, grain loans from kin, migration and smallstock sales, could be categorised as insurance responses. The next four are various forms of disposal of productive asset and the final response, outmigration, is indicative of destitution. Box 3.5 contains a more detailed description of the coping strategies of an individual farm household in Ghana.

The term, coping strategies, can be misleading as it implies that households are, in fact. coping, whereas often the strategies employed are not sustainable. After a short period, transitory food insecurity turns into chronic food insecurity. For this reason, care has to be taken in using information on coping strategies to inform policy and programme decisions. It has been suggested that it is better to reinforce household coping strategies in famines rather than implement top-down approaches such as emergency public works programmes, or feeding programmes. Whereas a grassroots approach may well prove more fruitful in addressing issues of short-term famine relief than conventional relief programmes, the emphasis should be on increasing the options open to households.

Figure 3.4: Responses to household food shortage

In developing approaches to famine prevention and the mitigation of the effects of food shocks, it is important to recognise that these food shocks are not simply a function of production and market failures, but may also result from institutional and policy failures. There is a need to strengthen responses in this area. Food crises are usually not simple 'acts of God, but the result of long sequences of events, where human decisions have played an important part. Humans are not the passive recipients of food crises, and institutional structures must be developed which allow them to respond more effectively to the situations they find themselves in.

5. Monitoring Food Security

Over the last two decades, a number of countries, particularly in Africa, have set up food early warning systems, often with the assistance of agencies such as FAO. In addition the Global Information and Early Warning System on Food and Agriculture in FAO produce bulletins for their member countries such as the quarterly Food Supply Situation and Crop Prospects in Sub-saharan Africa. In this section, the function of these monitoring systems will be discussed, and the appropriate food security indicators which should be monitored.

5.1 The need for a food security monitoring system

The general rationale for food security monitoring systems is to provide information about developments in food security that can form the basis for government policy intervention and programme design. Food emergencies can be averted if information reaches the relevant decision makers at an early enough stage. Food imports can be ordered, or pesticides can be delivered to the regions under pest attack, or, if all else fails, food distribution systems can be activated. Food and financial aid can be requested through donor appeals. To do this, reliable information is necessary, which is accepted by national and international institutions as reasonably accurate.

This gives some indication as to the necessary attributes of a monitoring system. Most important of all, it must be instituted in such as way as to be part of or report to an organisation which has a response mechanism. Monitoring systems are expensive to set up and this expense can only be justified if the collection of information informs action and policy. Monitoring cannot be an academic exercise. It should result in improvements in programme design and delivery and more appropriate policy implementation. The issue of the linkage between the monitoring system and the relevant decision making body is as important as the structure and content of the monitoring system itself.

Monitoring systems can be loosely classified into two types. National and Global monitoring systems have strengths in reporting on food availability at national and regional levels, but tend to be weak in reporting on household physical and economic access to the food available. Local and household based monitoring systems tend to be much stronger on monitoring access, but are often poorer at building up a picture of overall food availability.

Information may be explicitly collected for the monitoring system, but it is frequently possible to use information which is already collected as part of the country's statistical programme, or as a by-product of existing programmes. When existing data collection systems can be utilised as part of a monitoring system this can cut down costs considerably. Cost effectiveness should be a major criteria in the development of a monitoring system. Money spent on collecting and analysing data could otherwise be spent on programme implementation. This should be kept in mind when the expansion of data collection is being considered.

Timeliness is another important element to be considered when developing a monitoring system. This is most obvious when examining an early warning system, where the major purpose is to warn of upcoming food crises. This may be of limited use if it takes three months to analyse the information and report to government. It is also an important factor in other types of monitoring system, whether at the household level or for programme assessment.

5.2 National and global monitoring systems

The most common form of national food security monitoring system is the early warning system. These were instituted in many countries in the period immediately after the 1974 World Food Conference. They are based on the assumption that the scale of food crises could be monitored at the macro- level in an economy and that the major issue is one of food availability. Early warning systems often tend to be donor oriented, and one of their major purposes is to alert the donor community to food crises which may require emergency concessional imports.

To assess likely food supply, a number of indicators are collected. In most countries, estimates are made of agricultural production in the months leading up to the harvest period. These are supplemented by, and in part may be based on meteorological information. Rainfall may be collected from weather stations and allow for the determination of the probability of rainfall failure. Rainfall monitoring has been enhanced in many countries by satellite remote sensing for monitoring cold cloud formation. In the past few years in southern Africa, satellite sensing has also allowed assessment of vegetative growth, particularly important in assessing grazing in livestock economies. All this improves the estimates of domestic food production.

This then can be combined with other information, on planned commercial and concessional imports and estimates of national consumption requirements, to from a simple food balance sheet, which can identify food gaps. More sophisticated and developed early warning systems may also collect information on local market prices, to assess the extent of shortages in various local and regional markets.

Although this is referred to food security monitoring, in practice in most countries, the information collected is primarily on cereals. This reflects the existing bias in agricultural statistical systems. This can lead to overestimates of problems in countries where people move quite readily between cereal and root crop consumption.

Nutrition monitoring at a national level is not as common as the early warning system, but a number of countries do have operational systems. However, these are frequently disappointing in terms of the information that can be derived from them and the use to which it can be put. All too often, information on nutritional status of children is collected in isolation from the kind of socio-economic information which would allow relevant causal analysis to be undertaken. This is particularly likely to be the case if data are collected from the health system. This reinforces the tendency in many countries to regard nutrition problems as primarily the responsibility of the health sector, and irrelevant to problems of food security and poverty.

Nutritional information can often be collected as a by-product of national health programmes, such as information on low birth-weight babies from maternity hospitals, and information on child anthropometry collected as part of a growth monitoring programme. This can be a relatively low cost way of collecting information at a national level, but again may not be collected in conjunction with relevant social information.

However, it is often perceived as difficult to train enumerators to collect accurate anthropometric information. Sometimes medical personnel are reluctant to train non-medical interviewers in these skills. In the past few years, more has been done to try to incorporate nutritional data into monitoring systems, and this should increase our understanding of how effective child nutritional data are, both as indicators of chronic food insecurity and of transitory food crises.

5.3 Local and household food security monitoring

Local and household food security monitoring systems concentrate on monitoring access to food rather than national availability. The two approaches can be mutually supportive, as is indicated by the example of Namibia, described in Box 3.6.

The emphasis on collecting information at local level and through household surveys allows the monitoring of coping strategies, such as distress sales, particularly of productive assets, consumption of famine foods and outmigration. The impact of these strategies on local markets, for example on livestock prices, can also be monitored. These indicators are often very location specific and have to be collected at a disaggregated level.

Respondents in household surveys can also be asked about household food stocks and their own perceptions of their food needs and food security.

Nutrition status information can also be collected, but this has to be done in conjunction with information on health status, sanitation and maternal care, so as not to give a misleading impression of food security problems. It is often too expensive to collect comprehensive information on food consumption, though questions on the frequency of consumption of major food items may be cheaper to collect. As with national monitoring systems, the temptation must be resisted to develop comprehensive, but expensive questionnaires which cover everything but are not cost-effective.

In some countries, certain vulnerable regions have decentralised, locally-based information systems, where the information is reported to the local community in the first instance. This can be very effective if there is some local autonomy and control over resources which allows for a quick response to emerging problems. Communities may well have local information which allows then to interpret the results of monitoring systems more accurately than statistical teams in the capital, and local planning committees are often more immediately responsive and responsible to the community. Turkana district in Kenya, which is extremely drought prone, has had such a system for a number of years. A pilot scheme is also being implemented in Kilifi district, where the problems are those of chronic food insecurity rather than those of transitory food shocks.

In recent years a number of countries have experimented with vulnerability mapping. This is a process whereby existing information on income, food insecurity, malnutrition, teenage pregnancy, low birth weight babies etc. is disaggregated by geographical location and sometimes socio-economic category, to identify those groups of the population who have multiple risk factors. This can then be used as a basis for more closely targeted monitoring, as well providing the information on which to base economic and social support programmes.

The causes of food insecurity at the household level tend to be complex and to vary by location and socio-economic grouping. This means that the analyst faces a major challenge to present information to decision makers in a way which allows them to understand the issues without misleading simplification. It is much easier to understand the message delivered by early warning systems, which usually can be simplified into the need for more imports. The message at the household level is much more complex. One of the problems of household monitoring systems up until now, has been the difficulty in translating information into action. Until the usefulness of this type of data collection can be clearly shown, it will be difficult to raise the finance to develop these systems more fully. Yet until an effective methodology for household level monitoring is developed, food security information systems will continue to emphasise availability of food at the expense of access to existing food supplies.

Activities related to Chapter 3

Introduction

1. Activities 1, 2 and 4 proposed below should refer to a specific country case. Depending on the available data, this could be the country where the course is held or the country of origin of the participants.

Activity 1: Description of the food chain

Choose one of the major staples in your country and draw a commodity chain for it. Try to assess how much of the commodity (either in absolute or percentage terms) goes through each channel.

Activity 2: Calculation of dependency ratios

From Food Balance Sheet data, calculate the dependency ratio (% of imports relative to total consumption) for the major food commodities in your country. Then do the same exercise for total calories consumed.

Activity 3: Measuring food production variability

The table below shows yearly data for maize and sugar production in Zambia. Using a spreadsheet programme on a computer, graph the series. Calculate the mean and coefficient of variation of the data. Calculate the time trend in the data using regression analysis, and then the variation around the regression line.

What, if any, are the policy implications of your results, in terms of national and household food security?

Activity 4: Developing a food security monitoring system

Using your knowledge of your own country, identify appropriate indicators for inclusion in a food security monitoring system. Are these indicators already being collected? Prioritise the information you have suggested, giving reasons.