POLICY IMPLICATIONS OF PRICE DYNAMICS AND THE WAY FORWARD - Food Security, Food Prices and Climate Variability - page 181

ultimate objective of many governments' food policies is to reduce or remove these impacts
on the poor, not necessarily to reduce food price volatility per se, then social safety nets may
be an effective alternative to national-scale trade policies or large-scale storage schemes. The
focus of safety net programs is to improve people's capacity to deal with large food price
movements, not to change the actual price of food directly. They can complement market-
based policies and be part of a broader intervention that can have very positive impact on
welfare and reduce food insecurity directly.
Unfortunately, safety net programs are difficult to implement, since they require increasing
spending during bad years and reducing spending during good years. For the program to
protect consumption during food price spikes, benefits would need to be extended to new
households pushed into poverty when prices are high and then removing these families from
the benefit roles after prices decline. These programs can protect both against shocks to
income due to production declines as well as increases in expenditures due to increasing food
prices. Most safety net programs were not designed to serve this insurance function, however,
as they are often used to boost development and permanently raise the incomes of the poorest
segment of the population. Thus most safety net programs move only slowly, whereas food
prices can double in a matter of months. These programs are also very difficult to scale back
after expansion.
In addition to administrative challenges in ensuring responsiveness, paying for large
increases in assistance during times of high prices requires flexible financing on the part of
governments and institutions (Alderman and Haque, 2006). Grosh et al . (2008) state that the
reliance on food (and fuel) subsidies put the governments at significant fiscal risk. Between
2005 and 2008, the food subsidy bill in Morocco, Tunisia and Egypt grew 0.5 to 1.5 percent
of the gross domestic product. Without effective targeting, social safety programs can take up
an increasing part of the national budget while simultaneously increasing local demand for
food during times of scarcity (Do et al ., 2013). Local food prices may increase due to this
increase in demand unless supplies can be increased.

The models and concepts presented in this topic could be useful in improving the target-
ing of the populations needing assistance, if it were combined with information on livelihood
and vulnerability. Unlike trade policies that tend to over-react to price spikes through clo-
sures of borders, accumulating stocks and banning exports during times of crisis, flexible social
safety nets are considered an effective policy response to high food prices. High quality
information about the interaction between local production anomalies due to climate shocks
and high food prices can improve targeting of such systems.

The models and concepts presented in this topic could be useful in improving the target-

Technical responses to food security challenges

The next sections focus on practical ways that food price and climate variability modeling can
be integrated into government programs and food security analysis. These include improved
information on food prices, small farmer insurance programs and public investment in higher
yielding crop varieties.

Food price database systems for improved analysis

Although there is a great need for more information about the cost of food in both rural and
urban markets in the developing world, rapidly updated, high frequency (monthly and