Global Prices, Local Diets: Reflections on repeated food price spikes and Undernutrition

Summary of review¹

A mother prepares a meal in Malawi

Prepared by Samuel Hauenstein Swan and Jennifer Stevenson

Samuel Hauenstein Swan is Senior Policy and Research Advisor with Action Against Hunger (ACF-UK) and Jennifer Stevenson is a Policy Research Assistant at ACF-UK.

Three major food price crises since 2007 must force both practitioners and policy makers to take notice of the problem of food price volatility. However, not enough is known yet about just how severely the most economically disadvantaged, including households of undernourished children, are affected by this type of crisis. In this article we discuss the limitations of the current indicators used to measure the severity of food price crises, and argue that lessons learnt from addressing seasonal hunger can provide us with the means for effective mitigation programming at the local level.

The most common response by economically disadvantaged households following a price spike is to cut down on the quality of food. Case studies carried out by Action Against Hunger (ACF) in Sierra Leone, Ethiopia, Liberia and the Central African Republic following the 2007- 2008 food price crisis² documented that people’s overall calorific intake often remained the same, but there was frequently deterioration in people’s dietary quality and micronutrient intake, with reductions in intake of meat, dairy products and greens in favour of cheaper, less nutritious foods.

Local witness statements on the effects of food commodity price increases in Monrovia, Liberia reveal some worrying patterns. Market retailers faced with higher costs are cutting the amount of food they sell for the same price, unbeknown to the consumer, for example by compressing the size of the cups foods are often sold in. As a result, women from the poorest families are unable to feed their families on the same budget. In some cases, their only option is to buy food on credit, a trend dubbed ‘eat and worry later’ by locals, creating an almost permanent state of debt.

While not statistically conclusive, much research supports such findings of deteriorating diets and reduced spending on essential non-food household items among the most economically disadvantaged population. Early warning systems need to be developed to document the quantitative relationship between global and local food prices, and hence access to adequate foods.

Documenting quantitative relationships

The FAO’s Global Food Price Index is the indicator most commonly used to discuss food price crises. It uses a ‘demand approach’ which does not take into account either the income level or the share of income going towards buying food. Knowing the proportion of income spent on food, is, however, key in assessing the effect that prices have on nutrition levels. The effect of a food price increase on a high income household that spends 10% of its income on food is far less severe than the effects for a poor household spending 80% or more of its income on food³. The deprived household has limited options to reduce food expenditures and more often has to make cuts to non-food expenditure, such as healthcare or their children’s education. Using a single price index can therefore dramatically underestimate the severity of price increases, as it does not recognise this income effect.

The Food Expenditure Ratio (FER)⁴ offers a better alternative that captures the effect on income available for other vital aspects of living. The FER is defined as the expenditure needed to meet essential calorific requirements divided by resources available for non-staple food after consump¬tion of essential calorific requirements, and is measured for different population income brackets for compari¬son. Figure 1 shows that the indicator demonstrates very different impacts of food prices for different income levels.

The graph for low income households sees a far larger spike in the FER, coinciding with the 2008 food crises. This shows that food prices hit the poorest hardest because of the high proportion of their income spent on food, leaving them with few options but to reduce consumption on important non-food goods and services.

Calorific oversimplification of the nutrition dimension

The cost of staple foods is a commonly used proxy to predict whether households and its individual members access an adequate diet. Monitoring based on staple food price trends, however, has a serious bias towards calorific needs. Measuring diet by calorific intake alone does not take into account the intake of pro¬tein, vitamins and minerals or the level of absorption of food, making it a highly imperfect measure.

Considering these flaws, a more useful indicator would capture how the complete nutritional needs of a population are met as the cost of a healthy diet changes, especially for children under five years. The Cost of Diet Approach⁵ could go some way to doing just this. It calculates the cost of a diet based on the dietary requirements needed for the ideal growth of a child (as opposed to energy only requirements) and is based on local prices and food availability, taking into account seasonal price fluctuations. It shows that a healthy diet is generally more expensive by a factor of 2 to 4 fold, than a diet measured in calories only. By combining the FER and the Cost of Diet Approach, the result¬ant indicator would consider both the effect of price changes on the income a household has to spend on goods other than food, and the cost of a healthy, nutritious diet. This would go a long way in helping us to understand how far vulnerable populations are affected by food price increases.

The final piece: comprehensive local monitoring

In addition to these issues, other nutrition and food security data should be collected all year round, rather than on an ad hoc basis to help us predict where there may be future outbreaks of malnutrition. Useful process indicators might include trends in the number of families reporting food shortages for that time period, monitoring the quality of diets, Individual Dietary Diversity Score (IDDS), school attendance (as a proxy for household level spending), in addition to the FER.

Once we build up systematic indica¬tors and monitoring, an improved assessment of the precise impact of food prices on poor populations can be made, and the information can be acted upon in a timely manner.

Action at the household level

Once we know how far the economically vulnerable are affected by food price spikes, there are simple interventions at the household level that can go some way to help households to maintain a healthy and nutritious diet throughout the year and in the face of higher market prices.

In Haiti, ACF has implemented a Fresh Food Vouchers programme, partly in response to rapid increases in price volatility in 2011. Families can exchange the vouchers for food and staple foods at local markets, enabling them to restore food security and simultaneously support the local economy. As a result of the programme, the nutritional status of participants and their children has increased, with improved dietary diversity scores and intakes of high quality micronutrients.

On the other side of the Atlantic, ACF’s Health Gardens Project in the Kita region of Mali, has helped local women to cultivate their own vegetables, both for family consumption and for sale in markets. By giving women access to more varied diets, the project has seen great successes in reducing micronutrient deficiencies in their children and in the wider community.

Global inaction on food price volatility

Moving the focus to the global level, greater action is also needed to address the underlying trends driving greater international food price volatility.

The G20 focus on mar¬ket transparency and policy coordination since the 2007/08 food crisis has been narrow and failed to prevent grain prices increasing dramatically in 2012. Initiatives such as the Agricultural Markets Information System (AMIS), which has the mandate to create greater transparency around crop production, could be criticised for simply documenting the problems of food price volatility and production, rather than dealing with their root causes. Financial market speculation on the price of food, western policies on biofuel and land use and low grain stocks all need decisive and legally binding measures to reduce the likelihood of food prices spiking again.

We have argued in this article that a key lesson to come out of the numerous food price spikes is that current surveillance of the impact of food price vola¬tility on the poorest households is inconsistent and too scattered to allow for firm learning. Linear indicators of prices give too little indication of how different communities are affected. As well as seasonal price changes for different food commodities, the proportion of the household budget spent on food fluctuates greatly between the richest and poorest segments in communities.

The prevailing calorific measure to document the impact of price volatility, we argue, has contributed to the misinterpretation that bolstering food production is all that is needed. Three food price crises within a decade alongside stalling progress in the global reduction of hunger should be sufficient political impetus to tackle uneven distribution of access to food resources, which is the cause of much of the hunger in the world. As practitioners, our monitoring must be up to the task to identify areas of greatest need and document the progress made.

For more information, contact: Samuel Hauenstein Swan, email: s.hauensteinswan@actionagainsthunger.org.uk

Download the full report at: http://www.actionagainsthunger.org.uk

¹This article summarises arguments made by the authors in ACF’s recent report: History Repeating Itself? Global food price volatility and its impact on malnutrition, ACF 2013.

²ACF (2008). Feeding Hunger, Feeding Insecurity. Available at http://www.actionagainsthunger.org

³Dorward, A,2011. Getting real about food prices. Development Policy Review, 29 (6). pp. 647-664.

⁴Dorward, A, 2012. The short and medium term impacts of rises in staple food prices Food Security, 4 (2)

⁵Save the Children, 2007. The Minimum Cost of a Healthy Diet. London: Save the Children UK