Food price volatility, rising undernourishment

Updated November 10, 2014


A study by two UN agencies on food price volatility and natural hazards in Pakistan has estimated that the per capita wheat consumption has been declining in recent years as a result of high prices and falling incomes.

Applying the Shock Impact Simulation Model, the study was designed to gauge the notable rise in the number of people facing various types of food-related shocks.

The combined effect of price increases and flood resulted in an increase of the food gap from 3.96-6.20m tonnes of wheat nationwide, when using the minimum requirement of 2,350 kilo calories per adult a day.

Pakistan is the first of the five countries, where the case study on ‘food price volatility and natural hazards’ has been carried out jointly by the FAO and WFP. Its results just released suggest Punjab and Khyber Pakhtunkhwa are the most at risk wheat producing areas for monitoring weather shocks.

The study estimates that an additional 18m people became undernourished because of the price increase and severe floods of August 2010, increasing the undernourished numbers from the baseline of 77.6m in 2005-2006 to 95.7m.

On average, the undernourished population is about 603 kilo calories below the minimum requirement of 2,350 kilo calories per adult per day and about 6m tonnes of wheat per annum is necessary to meet their requirements. Increasing purchasing power is essential for the undernourished to gain access to the staple food — wheat. However, both the national reserves and private imports alone are insufficient to meet this gap.

Pakistan had been impacted by rising global food prices, fuel and financial crises and a series of climate shocks, which have significantly increased undernourishment

The study identified the market channels and climate shocks to household food security. The impacts of the shocks were measured through the percentage of people consuming less than the dietary energy consumption requirement, the number of people affected, the depth of hunger, and the food needs to meet their post-crisis food requirements.

Research points out the key wheat markets that are most sensitive to international price shocks, and therefore, important for monitoring: Hyderabad and Peshawar.

In the case of domestic price shocks, Karachi, Rawalpindi, Multan and Peshawar are the leading wheat markets that need monitoring. The IRRI rice markets - key for monitoring domestic price changes - are Islamabad, Karachi, Lahore, Quetta, Rawalpindi, and Multan. For IRRI rice, Multan, Sukkur, Peshawar, Rawalpindi, and Quetta are the leading markets for international price shocks.

Among the basmati rice markets, Peshawar, Hyderabad and Multan are the domestic price-setting markets. Monitoring of the identified leading markets can provide early warning signs of a price shock.

In case of price increases on the provincial level, Sindh and Balochistan were the two most affected provinces. Households of employers, paid employees and pastoralists in rural areas, and service sector and industrial based households in urban areas were the most affected livelihood groups.

The main income source of employers, paid employees, service and industrial sector livelihoods is non-agricultural wage income, which accounts for over 80pc of income on average in all four of the main provinces in Pakistan. Among the various livelihood groups, paid employees and pastoralists are most sensitive to the impact of market shocks on undernourishment.

In the case of floods, the households that are most affected are sharecroppers and owner cultivators. Among the livelihood groups, the share of income sources is well distributed among the three income sources mentioned earlier, for all groups except the paid employees.

Sharecroppers are the most at risk of increased undernourishment from the flood shocks. Among the four provinces, over 80pc of sharecroppers’ income is derived from farming.

Sindh was most affected by floods in the simulation model and sharecroppers in Sindh derive roughly 88pc of their income from farming. Furthermore, the most affected livelihood groups from the combined impacts of market and flood shocks are sharecroppers and paid employees, according to the assessment.

Pakistan had been impacted by rising global food prices, fuel and financial crises and a series of climate shocks, which have significantly increased undernourishment. These events have also sent shock waves through the national economy.

The report points out that the results of the relationship between baseline wheat production and natural disasters can provide early warning information on production areas most likely to show the first signs of a climate shock.

The outcome of the household vulnerability and food security module show that a household’s relationship with the agricultural sector for sustenance of its livelihood plays a large role in the type of shock and the extent to which it is affected.

Livelihood groups who depend on the agricultural sector have a more distributed share of income sources among the crop income, agricultural wage income and non-agricultural income, and would be impacted by both market and climate shocks.

Floods and droughts in Pakistan have caused tremendous damage to livelihoods and infrastructure, with severe implications for food security. As exemplified by the August 2010 flood, the biggest losses and impacts were suffered by the agriculture, livestock, and fisheries sectors.

Damage to the already old irrigation infrastructure caused by the 2010 floods, combined with the increasing scarcity of water resources in Pakistan, pose serious risks to the agricultural production. This is particularly alarming when a large portion of the national wheat output depends on irrigation.

Published in Dawn, Economic & Business, November 10th, 2014