Working papers

WORKING PAPERS

by IFPRI | August 25, 2016

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Effects of COVID-19 and other shocks on Papua New Guinea’s food economy: A multi-market simulation analysis
Diao, Xinshen; Dorosh, Paul A.; Fang, Peixun; Schmidt, Emily. Washington, DC 2021

DOI : 10.2499/p15738coll2.134293
Abstract | View

Understanding how the Papua New Guinea (PNG) agricultural economy and associated household consumption is affected by climate, market and other shocks requires attention to linkages and substitution effects across various products and the markets in which they are traded. In this study, we use a multi-market simulation model of the PNG food economy that explicitly includes production, consumption, external trade and prices of key agricultural commodities to quantify the likely impacts of a set of potential shocks on household welfare and food security in PNG.
In this study, we use a multi-market simulation model of the PNG food economy that explicitly includes production, consumption, external trade and prices of key agricultural commodities to quantify the likely impacts of a set of potential shocks on household welfare and food security in PNG. We have built the model to be flexible in order to explore different potential scenarios and then identify where and how households are most affected by an unexpected shock. The model is designed using region and country-level data sources that inform the structure of the PNG food economy, allowing for a data-driven evaluation of potential impacts on agricultural production, food prices, and food consumption. Thus, as PNG confronts different unexpected challenges within its agricultural economy, the model presented in this paper can be adapted to evaluate the potential impact and necessary response by geographic region of an unexpected economic shock on the food economy of the country.
We present ten simulations modeling the effects of various shocks on PNG’s economy. The first group of scenarios consider the effects of shocks to production of specific agricultural commodities including: 1) a decrease on maize and sorghum output due to Fall Armyworm; 2) reduction in pig production due to a potential outbreak of African Swine Fever; 3) decline in sweet potato production similar to the 2015/16 El Niño Southern Oscillation (ENSO) climate shock; and 4) a decline in poultry production due to COVID-19 restrictions on domestic mobility and trade. A synopsis of this report, which focuses on the COVID-19 related shocks on the PNG economy is also available online (Diao et al., 2020).1
The second group of simulations focus on COVID-19-related changes in international prices, increased marketing costs in international and domestic trade, and reductions in urban incomes. We simulate a 1) 30 percent increase in the price of imported rice, 2) a 30 percent decrease in world prices for major PNG agricultural exports, 3) higher trade transaction costs due to restrictions on the movement of people (traders) and goods given social distancing measures of COVID-19, and 4) potential economic recession causing urban household income to fall by 10 percent. Finally, the last simulation considers the combined effect of all COVID-19 related shocks combining the above scenarios into a single simulation.
A key result of the analysis is that urban households, especially the urban poor, are particularly vulnerable to shocks related to the Covid-19 pandemic. Lower economic activity in urban areas (assumed to reduce urban non-agricultural incomes by 10 percent), increases in marketing costs due to domestic trade disruptions, and 30 percent higher imported rice prices combine to lower urban incomes by almost 15 percent for both poor and non-poor urban households. Urban poor households, however, suffer the largest drop in calorie consumption - 19.8 percent, compared to a 15.8 percent decline for urban non-poor households. Rural households are much less affected by the Covid-19 related shocks modeled in these simulations. Rural household incomes, affected mainly by reduced urban demand and market disruptions, fall by only about four percent. Nonetheless, calorie consumption for the rural poor and non-poor falls by 5.5 and 4.2 percent, respectively.
Public food transfers during a pandemic: Insights from Bangladesh
Chowdhury, Shyamal; Bin Khaled, Muhammad Nahian; Raghunathan, Kalyani; Rashid, Shahidur. Washington, DC 2021

DOI : 10.2499/9780896294080
Abstract | View

Public food transfer program provide a lifeline for the poor in both high- and low-income countries, and many countries stepped these up in response to COVID-19. But little is known about how effective these programs have been in reaching the poor during the crisis. This brief reviews the findings of an evaluation of Bangladesh’s Food Friendly Program, pointing to the difficulties encountered during the pandemic and lessons to help these program perform better in future crises.
Awareness and practices among dairy producers and consumers in Sri Lanka
Gedara, Pradeepa Korale; Roy, Devesh; Sonkar, Vinay Kumar; Weerahewa, Jeevika; Kanthilanka, Hemali; Hemachandra, Dilini; Vithanage, Kasun; Rathnasekara, Hasara; Boss, Ruchira. Washington, DC 2021

DOI : 10.2499/p15738coll2.134426
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Provision of food safety requires not only regulation but also a demand pull where value chain participants demand food safety or are able to play their role in providing safe food. In both cases, producer, and consumer awareness about requirements for food safety is a precondition for delivery of food safety. In this paper, focusing on dairy in Sri Lanka, we assess the awareness and choice of practices by producers and consumers towards food safety. Sri Lanka has unique features in the dairy sector, with very high import penetration and form of consumption, i.e., powdered milk, that actuates formalization.
Looking at different segments of the population, including rural, urban and estate, and different management systems, the evidence suggests only a moderate level of food safety awareness in dairy in middle-income consumers in Sri Lanka. Considering the differences across systems, the degree of adoption of food safety is lowest among farmers in the extensive system, while it is highest among farmers in the intensive system. However, in terms of choice between powdered and fresh milk, food safety consciousness is one of the most significant determinants where fresh milk is considered comparatively unsafe.
Even when food safety issues arose in powdered milk, only small adjustments occurred in consumption, both because the health effects were limited, and the choice sets were circumscribed by the number of brands across which some consumers switched following the food safety scare. In the push toward promotion of fresh milk consumption, ensuring food safety and convincing consumers about merits of fresh milk would be required in Sri Lanka beyond the preference change from well-established powdered milk consumption.
Contract farming, profitability, and adoption of food safety measures in broiler production in Bangladesh
Roy, Devesh; Tripathi, Gaurav; Islam, Abu Hayat Md. Saiful; Kumar, Anjani. Washington, DC 2021

DOI : 10.2499/p15738coll2.134431
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This study, based on a primary survey conducted in Bangladesh in 2016, assesses the impact of contract farming in broiler production on profits and the adoption of food safety measures at the farm level. It also estimates the determinants for participation in contract farming, finding a farmer’s education and broiler-housing structure to be significant determinants. This study uniquely assesses the association of contract farming with the provision of well-defined food safety attributes. It finds that contract participation enhances farmers’ net returns by as much as 215–280% and raises compliance with food safety measures by around 13%. Increased productivity and provision of non-price attributes such as food safety in the product account for the difference in farmer returns.
Papua New Guinea agri-food trade trends: Dietary change and obesity
Schmidt, Emily; Fang, Peixun. Washington, DC 2021

DOI : 10.2499/p15738coll2.134433
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The onset of the COVID-19 pandemic has presented a unique challenge to governments across the globe, reinforcing the need to improve understanding of domestic and international trade trends to provide more informed options for policy response. During the last several months, IFPRI has been analyzing a variety of Papua New Guinea (PNG) national and global datasets with the goal of expanding analytical tools to evaluate potential production shortfalls and food price shocks, and their associated impacts on household food security and livelihoods. This research note focuses on agri-food import and export trends during the last two decades to better evaluate potential changes in related import demand and export potential in PNG. In doing so, this research note informs an upcoming economy-wide multi market model analysis that will model a variety of potential shocks to household welfare to identify policies to manage potential ensuing food security threats.
PNG’s growth in international agri-food trade (both export and import) will continue to be important to overall food security outcomes among rural and urban households. Rural households that produce key export cash-crops (e.g., coffee, cocoa, palm oil) depend on the cash economy to supplement overall food consumption, while urban households depend on rice and other agri-food imports (as well as domestic goods) for consumption. Agri-food imports are also contributing to important increases in the availability of protein-dense foods, with the value of poultry imports growing, on average, 30 percent per capita per year from 2001 – 2016. Although PNG’s agri-food import data suggest a greater demand for higher value food items such as animal-sourced foods, the total import value of ultra-processed foods, such as sugary drinks, are also increasing rapidly within PNG.
The profitability and growth of agricultural exports and imports are driven by several factors, including levels of public investment in infrastructure, weather and climate shocks, security and political stability, and conditions in the world market. Government economic policies, including exchange rate, trade and price policies, also heavily influence agricultural trade. Policy to promote and facilitate domestic movement of goods, as well as macro-economic policies that influence the relative price of tradable to non-tradable goods (the real exchange rate) should be managed appropriately to support and incentivize greater agri-food production and trade. These policies could also be paired with an expanded set of education programs that integrate nutrition-sensitive information to address current increases in demand and consumption of high-saturated and sugary processed goods, of which total import values are rapidly increasing in PNG. Finally, a greater portfolio of organized databases, analytical tools and policy resources are warranted to facilitate real-time policy analysis that can inform key development investments and initiatives.
Effects of COVID-19 on Papua New Guinea’s food economy: A multi-market simulation analysis
Diao, Xinshen; Dorosh, Paul A.; Fang, Peixun; Schmidt, Emily. Washington, DC 2020

DOI : 10.2499/p15738coll2.134174
Abstract | View

Developments in the agricultural economy of Papua New Guinea have major impacts on household food consumption decisions. A household’s ability to produce and sell food is affected by climate and associated agricultural potential, market opportunities (domestic, import and export) and unexpected shocks. Each of these factors affects the overall food system, thereby influencing production and consumption of all food products and the markets in which they are traded. The COVID-19 pandemic has presented a challenge far more complex than an agricultural production shock, such as those due to El Niño or pests. Rather than directly affecting agricultural output and rural household welfare, the COVID-19 pandemic has affected economies across the globe via trade disruptions (logistic challenges; international trade barriers), social distancing policies (domestic food market and nonessential business closures), and transportation restrictions (road closures; air travel cancellations). The measures aimed to curb the spread of COVID-19 have affected household incomes via urban job losses, reduced market interaction, and dramatic changes in world food prices. While rice prices have increased, luxury food prices, such as for chocolate (i.e. cocoa), have decreased. PNG’s unique and highly varied biophysical landscape has shaped agricultural production patterns, outcomes, and livelihoods for centuries. Understanding how the PNG agrifood economy and resulting household consumption is affected by COVID-19 therefore requires attention to linkages and substitution effects across various products and the markets in which they are traded.
Assessing agricultural trade comparative advantage of Myanmar and its main competitors: Findings from UN Comtrade
Zhang, Huaqi; Chen, Kevin. Washington, DC 2019

DOI : 10.2499/p15738coll2.133204
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This paper aims to provide a better understanding of Myanmar’s agricultural export performance against its competitors in different regions and determine the policy actions for improving Myanmar’s export performance. The normalized revealed comparative advantage (NRCA) index is computed to compare the agricultural competitiveness between Myanmar and its competitors from 2007 to 2016. The results show that: 1) Myanmar’s agricultural export sector enjoys comparative advantage in the global market, but it is not competitive when compared with its major competitors; 2) Myanmar reveals a high level of NRCAs in black gram & pigeon peas, natural rubber, sesame seeds, rice, and frozen fish, while it has low NRCAs in crustaceans and dried fruits; and reveals no comparative advantage in bananas, fish fillets, maize, nuts, and watermelon in certain years. Three major policy implications are drawn, including diversifying Myanmar’s export portfolio, strengthening export promotion and development, and attracting foreign direct investment to upgrade the cross-border value chain.
Production shocks, exports and market prices: An analysis of the rice sector in Myanmar
Dorosh, Paul; Win, Myat Thida; Van Asselt, Joanna. Washington, DC 2019

DOI : 10.2499/p15738coll2.133220
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Since 2012/13, rice exports to China (which may have reached two million tons in 2015/16) boosted total demand for Myanmar’s rice and rice prices. In mid-2016, however, China stopped rice imports through the main land entry point, putting substantial downward pressure on prices. Analysis presented in this paper, based on econometric estimates of consumption parameters and a simple model of Myanmar’s rice supply and demand, suggests that market prices would fall by 26 to 43 percent or more (in real terms) in the absence of increased exports to the world market and/or government domestic procurement. Such a decline in prices could have seriously harmed Myanmar’s rice producers, including many poor farmers with marketable surpluses. Model simulations suggest that government procurement of about one million tons would limit the estimated price decline to only 17 to 30 percent. Further refinements in the simulations are needed to take account for the seasonal nature of paddy production in Myanmar, possible price-responsiveness of export demand and the effects of changes in paddy incomes on farmer demand for rice. Medium-term analysis of procurement, storage and future sales is needed to analyze fiscal costs under various scenarios, as well, covering alternative shocks to production, export demand and world prices. Nonetheless, the main results are clear: without substantial market interventions on the order of one million tons (milled rice equivalent), the paddy (rice) price could fall dramatically when production increases or export demand declines.
Dairy contract farming in Bangladesh: Implications for welfare and food safety
Islam, Abu Hayat Md. Saiful; Roy, Devesh; Kumar, Anjani; Tripathi, Gaurav; Joshi, Pramod Kumar. Washington, DC 2019

DOI : 10.2499/p15738coll2.133227
Abstract | View

Contract farming is emerging as an important institutional innovation in the high value food chain in developing countries including Bangladesh, and its socioeconomic implications are topic of interest in policy debates. This study is an empirical assessment to explore the determinants of participation and the impact of contract farming on welfare and adoption of food safety practice in Bangladesh. Our analysis indicates that contract farmers are more likely to have better access to agricultural extension services, attended proportionately more community meetings, households members are member of organizations, access more credit, are located farther from output market, and have larger herd sizes. We also find that network variables such as time spent with cooperatives and other institutions and price fluctuation and average prices received experience before participation in contract are strongly associated with participation in contract farming. We find that contract farming has a robust positive impact on welfare measured by expenditure, farm profit and farm productivity, and food safety practice adoption even after innovatively controlling for observed and unobserved heterogeneity among dairy farmers. More specifically results indicate that a one unit increase in the likelihood of participating in contract farming is associated with a 42, 35,34 and 9 percent increase in household expenditure, gross margin and net margin per cow, and food safety practice adoption rate respectively, among other positive impacts.
Drivers of the Bangladesh fish economy: Projections of future fish supply and demand
Comstock, Andrew; Dorosh, Paul A.. Washington, DC 2019

DOI : 10.2499/p15738coll2.133251
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Fish play a major role in the Bangladesh food system. Fish production, processing and marketing are major source of incomes for many households, and fish consumption accounts for a significant share of protein consumption in the Bangladeshi diet. Moreover, fish production and consumption are growting rapidly, with the aquaculture subsector as a major driver of change of both supply and demand. In this paper, we present estimates of demand elasticities for four categories of fish (aquaculture, inland capture, mixed production, and marine) using a modified Quadratic Almost Ideal Demand System. These demand estimates are then used in projections of future supply and demand for these different types of fish under different productivity growth assumptions. Our results show that, at current rates of productivity increase, growth in fish production will outpace increases in demand from population and income growth, resulting a decline in real prices over time. A more rapid increase in productivity would lead to even larger supply increases and corresponding price declines. These effects are most keenly felt by the poorest households who see significant increases in fish consumption. Fish production from aquaculture is likely to have higher rates of productivity growth than the more extensive inland capture and marine systems, leading to a long term shift increase in the share of aquaculture production and consumption.

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