Food Prices and Food Security in Trinidad and Tobago Christian Romer Løvendal, Kristian Thor Jakobsen and Andrew Jacque esa working Paper No. 07-27
|
|  Yüklə 342.5 Kb.
|
Impact of Price Increases on Different Income Groups Poorer households generally are more aversely affected by food price inflation in part because they spend relatively higher proportions of their income on food. The data available indicates that Trinidad and Tobago is not exception. The 1997/98 Household Budgetary Survey indicates that households in the lowest 10% of the national income distribution spend close to 30.7% of household income on food, alcoholic drinks and tobacco20. In contrast households in the highest 10% of the national income distribution spend 13.5% of household income on food, drinks and tobacco. 20 Unfortunately, data from the 2005 Survey of Living Conditions is not yet available. Anecdotal evidence suggests that there may have been a shift towards more consumption of fast food outside the household, most likely resulting in a deterioration of diets. 19
Source: Report of the Household Budgetary Survey 1997/98, Central Statistical Office, Trinidad and Tobago Simple estimates from the data suggest that a 20% increase in food prices will cause the total expenditures of households with the lowest 10% of income to increase by 5.3% while that of households with the highest 10% of income will increase by 1.9%, assuming that households consume the same bundle of food items regardless of price increases (consumption is inelastic). This may be a more realistic assumption for the poorer than richer households, but in any case suggests an upper boundary for the impact, given that it allows the household to buy an unchanged bundle of goods. So far, we have only looked at the isolated impact of price changes, but with increasing prices typically follow adjustments to wage rates. Data in Table 8 on wage rates pertain to all workers (penultimate row) and to production and ancillary workers (last row). Approximating ‘all workers’ to the average household and ‘production and ancillary workers’ to low income households, the data suggest that since 1999 on average, households were more than compensated for the rising (overall) prices through increases in income. Table 8 also show that in the 1998-2000 - the period for which data is available - low income households were worse off because of wage rate increases that fell short of overall inflation rates. 20
1998 1999 2000 2001 2002 2003 2004 2005 Inflation (%) 5.6 3.4 3.5 5.6 4.2 3.8 3.7 6.8 Index of Weekly Earnings (all 4.7 4.8 9.1 9.3 11.6 13.2 14.5 1.4 workers/all industries) Index of Minimum wage rates (Production and Ancillary 2.4 1.6 2.6 n/a n/a n/a n/a n/a workers)
Source: Ministry of Finance, Review of the Economy, 2002 and 2006 5 Conclusion and Policy implications Trinidad and Tobago faces a situation of rising inflation, largely motivated by increases in food prices, along with declining agricultural output and increased food import dependency. Whilst the rising food prices can have an impact on the poorest groups, it is less likely that, given the significant real economic progress, it will result in any significant increase in the prevalence of undernourishment. Thus, the present hike in food prices is unlikely to derail Trinidad and Tobago’s path towards achieving the MDG 1 hunger target. However, there are likely to be welfare costs, especially for low income groups, that need to be considered. Furthermore, achieving the MDG 1 hunger target only address part of the food security challenge. Health effects of nutritional deficiencies as a result of poor dietary habits and lifestyle will remain. The Government has a number of policy options to address food price inflation and its impact on food security. These can be grouped into four main categories: 1) market interventions to alter the food prices directly; 2) support to improve competitiveness of the agricultural sector; 3) safety net interventions in support of poor households and 4) interventions to remove obstacles to free trade. Prior to the mid-1980’s, Trinidad and Tobago, like most other Caribbean countries, pursued an economic policy of industrialization through import substitution. Policy measures included price controls on most staple food items; a State-owned Commodity Marketing Board that was the sole buyer of particular commodities and/or operated a guaranteed price/purchase scheme for others; sale of agricultural inputs (including planting materials, fertilizers and pesticides) at subsidized prices; and production of some commodities. However, following the structural adjustment programmes in the latter half of the 1980s, the policy stance shifted towards support to free market mechanisms and a minimum level of direct intervention. This shift may also have reflected another reality: being a small open economy and given the high transmission of international prices, there is a limited scope for direct market intervention/management of food prices. At present, the main instruments for direct intervention in food markets relate to changes in border tariffs and a (low) level of subsidization for inputs used in agricultural production. In addition, the Government provides the infrastructure to facilitate exchange at the wholesale and retail level and to support exports. Within this framework, the Government has tried 21 several mechanisms intended to reduce prices, with the major initiatives being the reduction of taxes (tariffs and duties, and value-added tax) on a wide range of imported food items, including poultry meat, but with limited success. The interventions to support increased competitiveness of the agricultural sector have focused on removing constraints to domestic production and increasing the efficiency of domestic and export marketing arrangements. There are major programmes for improving access roads and repairing water management infrastructure, particularly for the higher-valued commodities short-term commodities such as vegetables. Success has also been achieved in improving the domestic marketing infrastructure and the infrastructure to support exports, particularly of fresh vegetables. The recent initiative establishing farmers markets, for direct exchange between farmers and consumers, generally has been regarded as successful. However, significant constraints still remain including high levels of praedial larceny (which farmers consistently rank as their number one problem), flooding and low levels of institutional support. An alternative strategy to address the impact of increasing food prices is with social protection type interventions aimed at ensuring a minimum food consumption of particular poor groups through targeted income transfer. Along these lines, the Trinidad and Tobago Smart Card, which was launched in mid 2006, is the primary income transfer mechanism in response to food price inflation. This card, which is available to families with low levels of income, provides a monthly cash transfer that varies with family size. The card can only be used at participating merchants and only for the purchase of specified food items, although this is in practice difficult to monitor. However, if this is to serve as a safety net, it should not be limited in time and selection should be means based on a continued basis. As a means to confine food inflation, another option is to establish a system of forward contracts for specified key domestic commodities. This may reduce food price inflation in the short-term while contributing positively to agricultural growth and development in the log-term. The forward contracts would make farming of these commodities more attractive by reducing price risk and thus augment supplies and lower prices. However, to reduce the negative impacts of reduced prices on non-contract farmers, a complementary programme of deficiency payments may be needed. The Government has recognised the need to remove impediments to free trade and thus assure the operation of competitive markets, but as seen above, the mark-up on a number of commodities has increased significantly over the last few years. The Government has generally followed a policy of zero involvement in markets, requiring no license for imports, imposed no regulation on mark-ups and not been involved in the functions of buying and selling. In certain commodity markets, scope for gaining significant profit by exercising market control has materialised into oligopolistic behaviour of wholesalers. To the extent that such inefficiencies are a function of restricted access to infrastructure, informal entry barriers etc., these needs to be addressed to ensure functioning and competitive markets for specific commodities. A recent initiative proposed by the State is for the importation of food by two state enterprises, the National Flour Mills (NFM) and the National Agricultural Marketing Development Company (NAMDEVCO). As reported in the daily newspapers the intent is for these state enterprises to locate cheaper sources of food (such as in Latin America) and distribute with 22 low mark-ups to the existing retail system, but the question is whether these enterprises can do this more effective than the expanding supermarkets? It is noteworthy that the Government is active in all of the four areas of intervention but also that the measures deployed so far have had varying success. The continued food price increased may relate both to whether the mix of policy interventions is effective. Whilst it is still early days to see the effects of the Smart card, it is generally considered that it has improved food security of the most vulnerable households – but if this is the case, entitlements should not be limited in time. The introduction of farmers markets has been well received and is considered to have brought benefits of lower prices to consumers. However, the programmes that have reduced taxes have not brought discernible reductions in prices. The choice of a policy indicator to monitor the impact of food price interventions depends on the choice of the criteria of success for such policy. Is it stabilising the general price level, the access to food of the poorest, contributions to a more balanced diet through brining down prices of vegetables and fruits or?. If the policy goal is to cap general food price increases, CPI food price increase should be monitored. If the goal is for food prices not to deviate from international prices, the indicator should be commodity specific border parity prices. However, if the goal is instead to keep poorer household above a minimum threshold, the share of income used on food could be used. The major defect with the initiatives so far is that they have not simultaneously addressed the classical challenge of addressing the needs of consumers for lower prices and that of farmers for good returns within the context of an overall objective of growth and development of the agricultural sector. International food prices are expected to increase in the short to medium term and so import prices will continue to put upwards pressure on national food prices. If Trinidad and Tobago wants lower food inflation and a have sustainable agricultural sector that can turn the tide of food imports, it needs to develop just that, requiring a mix of welfare, agricultural support and trade promoting interventions, whilst addressing the structural challenges that hinder competitive price formation. 23
Abdulai, A. and Aubert, D. (2004). Nonparametric and parametric analysis of calorie consumption in Tanzania. Food Policy, Vol. 29, pp.113-129. Best, R. and Placide, L. (2006). An Assessment of the Agri-Food Distribution Services Industry in CARICOM. Caribbean Regional Negotiation Machinery. St. Lucia. Best, R. (2006) Note on Retailing and Pricing of Broilers in Trinidad and Tobago. Caribbean Poultry Association. Port of Spain. BP (2007). BP Statistical Review of World Energy June 2007” (http://www.bp.com/sectiongenericarticle.do?categoryId=9010943&contentId=7021566). Block, S.A. et al. (2004). Macro Shocks and Micro Outcomes : Child Nutrition during Indonesia’s Crisis. Economics and Human Biology, Vol. 2, Issue 1, pp 21-44. Central Bank of Trinidad & Tobago Data Centre (2006). (http://www.central-bank.org.tt/statistics/index.php?pid=4002). Central Statistics Office, Trinidad & Tobago (2002). Household Budget Survey 97/98. Port of Spain. Central Statistics Office, Trinidad & Tobago (2005). Agricultural Census Preliminary Report. Port of Spain. Central Statistics Office, Trinidad & Tobago (2006). Index of Average Weekly Earnings. from 1998 to 2005, 2006. Port of Spain. Central Statistical Office, Trinidad and Tobago (2007). Selected Micro/Macro Economic Indicators (http://cso.gov.tt/files/cms/Selected%20Leading%20Indicators.pdf) Dawson, P.J. and Tiffin, R. (1998). Estimating the Demand for Calories in India. American Journal of Agricultural Economics, Vol. 80, No. 3, pp. 474-481 Dawson, P.J. and Tiffin, R. (2002). The Demand for Calories: Some Further Estimates from Zimbabwe. Journal of Agricultural Economics, Vol. 53, No. 2, pp. 221-232 Economist Intelligence Unit (2007). Trinidad and Tobago – Country Profile 2006. EIU. London. FAO (2003). Nutrition Country Profiles – Trinidad and Tobago. 2003. FAO. Rome. FAOSTAT (http://faostat.fao.org/default.aspx) Gulliford, M.C; Mahabir, D. and Rocke, B. (2003). Food insecurity, food choices, and body mass index in adults: Nutrition transition in Trinidad and Tobago. International Journal of Epidemiology, Vol. 32, pp. 508-516 24 Kannapiran, C. (2000). Commodity Price Stabilization: Macro-economic Impacts and Policy Options. Agricultural Economics, Vol. 23, No. 1, pp. 17-30 Handa, S. and King, D. (2003). Adjustment with a Human Face? Evidence from Jamaica. World Development, Vol. 31, No. 7, pp. 1125-1145 IMF (2007). International Financial Statistics Online (http://ifs.apdi.net/imf/logon.aspx) Ministry of Finance (2002). Review of the Economy 2002. Government of the Republic of Trinidad and Tobago, Port of Spain. Ministry of Finance (2007). Review of the Economy 2007. Government of the Republic of Trinidad and Tobago, Port of Spain. Myers, R.J. (2006). On the costs of food price fluctuations in low-income countries. Food Policy, Vol. 21, pp.288-301. TANGO International, Inc. (2006). Trinidad and Tobago: Overview of Food/Nutrition Security and Natural Disaster Risks. Tango International. Arizona. Timmer, C.P. (2002).Agriculture and Economic Development. In Gardener B. and G. Rausser “Handbook of Agricultural Economics Vol. 2”, pp. 1487-1546 UNDP (2006). Human Development Report 2005. UNDP. World Bank (2005). Managing Food Price Risks and Instability in an Environment of Market Liberalization. World Bank, Agriculture and Rural Development Department. Washington. World Bank (2007). World Development Indicators Online. World Bank. Washington. 25
The ESA Working Papers are produced by the Agricultural Development Economics Division (ESA) of the Economic and Social Development Department of the United Nations Food and Agriculture Organization (FAO). The series presents ESA’s ongoing research. Working papers are circulated to stimulate discussion and comments. They are made available to the public through the Division’s website. The analysis and conclusions are those of the authors and do not indicate concurrence by FAO. ESA The Agricultural Development Economics Division (ESA) is FAO’s focal point for economic research and policy analysis on issues relating to world food security and sustainable development. ESA contributes to the generation of knowledge and evolution of scientific thought on hunger and poverty alleviation through its economic studies publications which include this working paper series as well as periodic and occasional publications. Agricultural Development Economics Division (ESA) The Food and Agriculture Organization Viale delle Terme di Caracalla 00153 Rome Italy
Office of the Director Telephone: +39 06 57054358 Facsimile: + 39 06 57055522 Website: www.fao.org/es/esa e-mail: ESA@fao.org 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||