Food Price Inflation And Its Effect On Food Security

by Olalekan Abdulsalami and Toluwalemi Oluwadare. on 04 Oct 2019 • 2 comments
4 min read

Agriculture is the most important sector of Nigeria's economy, engaging about 70% of the labor force.  Small farms produce about 80% of the total food and about 30.7 million hectares (76 million acres), or 33% of Nigeria's land area, are under cultivation. 


Food security is a measure of the availability of food and individuals' ability to access it. At the 1974 World Food Conference, food security was defined as the "availability at all times of adequate, nourishing, diverse, balanced and moderate world food supplies of basic foodstuffs to sustain a steady expansion of food consumption and to offset fluctuations in production and prices".

Generally, food price inflation is a result of supply and demand. When demand for a commodity rises on constant supply, prices usually rise.  Conversely, when demand falls at constant supply, prices usually fall.  The same thing works with supply.  Rising supply on constant demand causes a fall in prices while falling supply on constant demand causes prices to increase. But what is really going on behind the scenes? What are the factors causing the rise and fall of food prices?

Drier and hotter weather trends in farming areas generally reduce crop yield and drive prices higher. Import tariffs and export taxes distort supply and demand, and hence, increased food prices around the world. Changes in government subsidies for crops impact food prices. Food gets transported daily across the world, therefore, high oil prices raise shipping costs thereby causing food price inflation

According to trading economics, the cost of food in Nigeria increased 13.17 percent in August of 2019 over the same month in the previous year. Food Inflation in Nigeria averaged 11.63 percent from 1996 until 2019, reaching an all-time high of 39.54 percent in September of 2001 and a record low of -17.50 percent in January of 2000.

What effects could food price inflation have on food security? Let’s take a look.

  1. MALNUTRITION
The Food and Agriculture Organization of the United Nations (FAO) State of Food Insecurity for 2010 assesses that nearly 1 billion people are estimated to be undernourished, representing almost 16 percent of the population of developing countries.
 
Food price inflation forces households to buy cheaper brands, such as generic store brands. In addition, rising food prices made high-quality food scarce for poorer households, forcing households to resort to cheaper or less nutritious foods.

According to the infographic from UN Office for the Coordination of Humanitarian Affairs, food insecurity remains a major concern as more than 22 percent of the population across Borno, Adamawa and Yobe states are estimated to be food insecure (nine percent increase compared to the projection made in 2018), with pockets of malnutrition. Acute malnutrition in children under the age of five is above emergency thresholds in various areas across the three states.
 
  1. CHANGES IN FOOD HABITS
 Food price inflation causes a change in food habits and patterns. The food system is bending under the intense pressure of the world population growth, increasing demand for food, in particular, meat and meat products as well as milk and dairy products, scarcity of water and land resources and the fight for arable land with the producers of biofuels, industry and urbanization.
 
In a study carried out by Marion Napoli, Prof. Pasquale De Muro and Prof. Matteo Mazziotta on the effects of food price inflation on food security, the majority (58%) of participants indicated that their eating habits had changed owing to rising food prices. Approximately 60% of the participants indicated that they bought food in bulk as a short term strategy to cope with rising food prices.
  
  1. RELIANCE ON SUBSISTENCE FARMING TO ALLEVIATE FOOD UNAVAILABILITY
 In the same study, approximately 50% had a vegetable garden to alleviate food unavailability, and harvested for subsistence to meet non-food expenses.
 
In Nigeria, more than 80 percent of farmers in Nigeria are smallholder farmers. With a rising population and a high demand for food production, small-scale farming will play an important role in feeding our nation and solving the many problems of food insecurity.
 
In conclusion, climate change, the vanishing of biodiversity of ecosystems and the diversity of agricultural cultivars, new plant, and animal diseases, and increasing energy and food prices, the losses food and waste food, as well as speculation on the food market, will have a disadvantageous impact on global food security.
 
Food Inflation in Nigeria is expected to be 13.10 percent by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, we estimate Food Inflation in Nigeria to stand at 12.70 in 12 months' time. In the long-term, the Nigeria Food Inflation is projected to trend around 11.00 percent in 2020, according to trading economics model.







References

Marion Napoli Prof. Pasquale De Muro & Prof. Matteo Mazziotta. (2011). Towards a Food Insecurity Multidimensional Index (FIMI)

Mariola Kwasek. (2012). Threats to food security and common agricultural policy. Economics of Agriculture 4/2012 UDC: 663/664:658.562:338.43.02.

Steve Odland. (2012). Why Are Food Prices So High? Retrieved from https://www.forbes.com/sites/steveodland/2012/03/15/why-are-food-prices-so-high/#5f2795d56962

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