MARKETS AND DETERMINANTS OF FOOD PRICES - Food Security, Food Prices and Climate Variability - page 110

The increase in international commodities in 2007-08 appears to have marked a funda-
mental shift in the dynamics of regional and global commodity markets (Trostle, 2010;
Moseley et al ., 2010). In some regions, information on prices, adequate transportation,
improved ability to sell goods to the international markets and a variable need for importing
food from international markets with higher prices have contributed to the variability of local
prices (Badiane and Shively, 1998; Deaton and Laroque, 1992; Wodon et al ., 2008). Central
America and Southern Africa show only a small increase in variability over the period of
record, but a significant and enduring integration into the international commodity market-
place. East Africa continues also to be integrated into the international markets, but only for
cereals and not for non-cereals that may be a significant source of food for the poorest and
most food insecure. Southern and West Africa are not integrated into the international markets
according to the analysis.
Poorly functioning and poorly provisioned regional markets in Africa are of considerable
concern to policy makers. Urban consumers in countries with significant local production of
staple cereal crops face a more complex reaction to sharp increases in global cereal prices.
Local farmers may be exposed to high food prices without being able to reap the benefit of
higher prices in their own marketplace, if they only have a limited ability to produce surplus
food and cannot get that food to market without inordinate cost. Consumers may shift to
locally produced non-cereal staple foods (e.g., sorghum, millet, teff, cassava, yams, beans) if
imported goods increase in price, but this increases the price of these goods locally through
increased demand. The result is that these previously affordable goods become more expen-
sive, affecting the food security of the poorest members of the population. In coastal cities
where higher prices for globally traded cereals are passed through to the consumer quickly,
the impact on these local staple foods is the most rapid. Thus local producers of these non-
cereal staple foods benefit somewhat from increased global prices, and consumers are affected
by the general rise in all food prices, particularly in the poorest segments of society. It remains
unclear if the farmer in subsistence regions will benefit from higher producer prices, or if their
exposure to higher food prices because of their inability to produce adequate surpluses will
simply increase their food insecurity through higher demands on income.
Brown et al . (2012) also present the regression results between the FAO cereals index and
the country index, as well as the polynomial least squares regression prediction of local food
prices with both the FAO cereals index and the annual NDVI estimate. The results show that
in countries that are integrated with international markets, the regression results are signi-
ficant, and the NDVI unimportant in the results. This lack of significance does not mean that
the weather (as reflected in the health of the vegetation) is not important. It may reflect the
fact that price information is much more rapidly transmitted down the marketing chain into
market prices in these countries. In a sense, it is a sign that these markets are functioning well.
On the other hand, when the NDVI is significant, it may mean that information is not com-
pletely transmitted down the marketing chain, thus resulting in prices that reflect imperfect
information. It is in these countries that NDVI data may greatly aid the food security
analyst.
Summary
Previous research has highlighted the negative impact of increasing food prices for the food
security of the poor. High food prices have been shown to affect nutrition outcomes through