Kota university day presentation

Hemesiri Kotagama

Hemesiri Kotagama, Salwa Al Jabri, Houcine Boughanmi and Nejib Guizani

Impact of Surge in Food Prices on Household Food Security in the Sultanate of Oman

Hemesiri Kotagama

Hemesiri Kotagama

World Bank Press Release: March 2011

Costs for some basic foods are nearing or beyond the peaks of 2008.

The World Bank expects volatile, higher than average grain prices until at least 2015.

In the poorest countries, where people spend up to two-thirds of their daily income on food, rising prices are re-emerging as a threat to global growth and social stability. 

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Street reactions to food price surge …

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Food Prices and Food Security

Food Security exists when:o all people, o at all times, o have physical and/or economic access (income and

prices) too sufficient, safe and nutritious food to o meet their dietary needs and food preferenceso for an active and healthy lifestyle.

World Food Summit,1996

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Scope of the study: Economics

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Food in Oman : Macro-facts

Oman would continue to depend on imports for significant proportion of its

food requirements, which stand at 100% in case of rice, 80% for meat and 60%

for fruit and vegetables.

The estimated cultivated area was 175 000 feddan in 1999 and remained same

after ten years (175 000 feddan in 2009) correlated with a small change in the

estimated production (1,287 000 ton in 1999 and 1,187 000 ton in 2009).

Oman is import depended on food.

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Food in Oman: Household The average food consumption in the Sultanate of Oman is 1.89 Kg /person /day

compared 2.5 Kg/person/day by an average American An average Omani family (average of 8 persons) spends about 161.439 OR for food

(MNE, 2001) and it has increased to 205.365 O.R in 2008 (MNE, 2010). Expenditure on food, is the largest percentage of the total household income which was

about 31% (MNE, 2010). In the United States of America the share of food expenditure of the household income is about 13% and it is 17% in Canada, 45% in Indonesia (FAO, 2010).

A family is classified as poor if it spends more than 60% of the household expenditure on food (MNE, 2010).

Based on this standard 12% of Omani families are classified as poor based on Household Expenditure and Income Survey conducted in 2007-2008 compared to 8% in 1999-2000 (MNE, 2010).

It is apparent that there has been a slight increase in the poverty level in Oman. Surge in food prices could be a reason for increased poverty.

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Consumption of energy, protein and fat in Oman ( per person per day) from 2005 to 2007 (MNE , 2009)

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Objectives of the study: Short-run

Analyze whether an average Omani family consumes the recommended nutrient intake for healthy life from the actual consumption of food.

Estimate the monetary value of the Nutritionally Adequate and Preferred Least Cost Diet (NAPLCD) for an Omani household (Benchmark, year 2003).

Estimate the impact on NAPLCD based on increased food prices (compared to benchmark).

Estimate measures that account changes in food security of Omani households with increasing food prices.

– Food security headcount (F0)– Food security gap (F1)

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Objectives: Long-run

Decompose the impact of growth in per capita income and its distribution on changes in food security in Oman.

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METHODOLOGY

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Food Security Threshold: NAPLCD Model

Objective function:

n

iii XPMin

1

… Eq.1 (Cost of food)

Subject to:

j

n

iiij NXa

1

…Eq.2 (Nutritional requirements)

n

iiii XX …Eq.3 (Food preferences)

0iX

Where:

iP = Price of food (OR/Kg)

iX = Quantity of food (Kg/Day/Family)

i = Number of food items, 1, … n.

ija = Amount of nutrient j in food i (Relevant unit/Kg of food)

j = Number of nutrients, 1, … m.

jN = Recommended nutrient intake for nutrient j (Relevant unit/Family/Day)

n

ii

ii

X

X (Proportion of a food item over the total quantity of food)

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Food Security Measures: Concept

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Food Security Measures: Head Count and Gap

𝐹∝ = 1𝑁 σ ቀ𝑠−𝑦𝑖𝑠 ቁ

∝ 𝑞𝑖=1 . 5

Where:

Fα is food security index for α = 0, 1 or > 1 .

α is a sensitivity parameter.

N is the population size.

s is food security threshold, disposable income level below which the household is food

insecure. NAPLC is used in this study.

yi is (HDIF) disposable income for food of the ith household.

q is number of households y < s (food insecure).

1. F when α = 0; Head Count Index of Food Insecurity (F0)

When α = 0 equation 5 will be as:.

𝐹0 = 𝑞𝑁

F0 is referred to as the Head Count Index of Food Insecurity (HCIFI) as it is the ratio

between the number of the people who are food insecure (y < s) over the total population of

people (N), given the HDIF.

2. F when α = 1; Food Security Gap Index (F1)

When α = 1 equation 5 becomes:

𝐹1 = 1𝑁 σ ቀ𝑠−𝑦𝑖𝑠 ቁ𝑞𝑖=1

F1 is a measure of amount of income that is required to bring all household that are food

insecure to s (food security threshold), weighted by population size and s.

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Conceptual illustration of the impact of increase in income and improved income equality on food security

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Measures of Decomposition

Food security measure at a time t (Ft) can be represented by equation 9.

Ft = F (s/ µt,Vt)

Where: s is a food security threshold, µt is the mean of the distribution of disposable income for food,

Vt is the variance of the distribution of disposable income for food. Decomposition Ft+1 – Ft = F (s/ µt+1,Vt) - F (s/ µt,Vt) + F (s/ µt+1,Vt+1) - F (s/ µt,Vt) + Residual ...Eq.10

  F (s/ µt+1,Vt) - F (s/ µt,Vt) is the impact on food security due to growth in income.

F (s/ µt+1,Vt+1) - F (s/ µt,Vt) is the impact on food security due to change in income distribution towards equality.

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RESULTS AND DISSCUSION

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Percent change of food Consumer Price Index (CPI) of all food in relation to base year 2003 (MNE , 2009)

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Percentage fulfillments of recommended levels of nutrients by an Omani household (per day per family)

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Percent of income spent on food with increasing household income

Income (OR/Month/Household) % Expense on food of total household income

less than 100 0.78

100-199 0.78

200-299 0.72

300-399 0.66

400-499 0.54

500-599 0.42

600-699 0.33

700 more 0.24

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NAPLCD value under different food access scenarios

      OR/ Month/ Household  

Scenario / Year 2003 2004 2005 2006 2007 2008

Purchased food items (PFI) 153.140 154.539 158.001 159.343 168.654 198.900

Purchase food items and

restaurant food

(PFI+PFR) (70%) 173.272 174.855 178.772 180.290 190.825 225.048

Purchase food items and

produce

(PFI+FIP) (30%) 139.440 140.839 144.301 145.643 154.954 185.201

Weighted Average 163.123 164.649 168.430 169.895 180.064 213.093

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The Lorenz curves for income distribution for years 1999/2000 and 2007/2008

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Measures of food insecurity revealing the impact of price increases on food security

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The cost of alleviating food insecurity

Parameter Data and Estimate

1. NAPLC 2008 (OR/Month/Household) 213.00

2. Estimated F0 0.29

3. Estimated F1 0.07

4. Average food insecurity gap (OR/Month/Household) (Equation 8) 50.68

5. Oman's population (Million) 2.30

6. Number food insecure [F0X(5)] 0.67

7. Total food gap [(6) x (4) x 12 months] (Million OR/Year) 405.64

8. GDP 2008 market prices (Million OR) 23185.10

9. Food insecurity gap/GDP as % .5

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Decomposition of food security changes due to growth and redistribution of income Without a change in food prices

Income Distribution

Change in incidence of Food Security

  2003 2008Actual

changeGrowth Redistribution Interaction

Food Security Headcount

Rate (F0)24.02 9.70

-14.32 -6.31 -6.92 -1.09

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Conclusions

The recent surge in food prices have decreased food security in Oman.

However in the long-term food security in Oman has improved due increased

income and its equalizing distribution.

Short term interventions by the government on assisting vulnerable low income households would alleviate the situation.

Continuing the implementation of egalitarian economic policies on investments in regional rural development, education, health etc will revert and further improve the food security situation in the Sultanate of Oman.

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Thank you