IFAD's Asia and the Pacific newsletter issue dedicated to increasing commodity prices

1. Contact
Issue 21: June – July 2008
ifad@ifad.org
Food security in the context of www.ifad.org
increasing commodity prices Martina Spisiakova
Newsletter Coordinator
m.spisiakova@ifad.org
In this issue: Tel: 3906-54592295
• Food, oil and the poor
• Chinese farmers sell and buy less in response to rising food prices
Other recent issues:
• Growing vegetables helps nomadic families in Mongolia improve nutrition
and reduce food expenditures
• Rural infrastructure
Wheat crisis and rising food prices threaten food security in Pakistan
• www.ifad.org/newsletter/pi/20.htm
Filipinos change their agricultural practices and production systems to
secure enough food for their families
Climate change
• Higher food prices, fewer meals in Sri Lanka
www.ifad.org/newsletter/pi/s_4.htm
• Governments respond to increasing food prices – examples from China,
Pakistan and the Philippines
Rural finance
• China earthquake www.ifad.org/newsletter/pi/19.htm
• Occasional papers – Issue 5: Agricultural technology choices for poor
farmers in less-favoured Areas of South and East Asia Forestry:
• Upcoming events and missions www.ifad.org/newsletter/pi/18.htm
Water:
www.ifad.org/newsletter/pi/17.htm
Food, oil and the poor
Oscar Wilde quipped somewhat unfairly, “An
economist is someone who knows the price of
everything and the value of nothing.” Hardly any
economist knows the price of everything and there
China earthquake
are many who know the value of some things. That
said, this is a remarkably accurate
On 12 May 2008, a devastating
characterization in one respect: Most economists
7.9 magnitude earthquake
are in fact concerned about prices and how they
struck China's Sichuan
change, as their implications for human welfare
province. To date,
often matter a great deal. For example, the price of
approximately 65,000 people
lobsters may not matter as much as those of
died and as many as 23,150
cereals.
are still missing. It is claimed to
be China’s worst earthquake in
The recent spikes in food and oil prices have
the past 30 years.
produced a frenzied response among economists,
governments and development agencies. In 2006, the
IFAD is committed to assist the
food price index of the United Nations Food and A group of villagers waits for
Government of China during
customers in a street market
Agriculture Organization (FAO) rose by 9 per cent
at Anchetty (India) the post-emergency phase to
compared to the previous year. By December 2007,
recover as quickly as possible
the index had risen by about 40 per cent.
from the aftermath of this
terrible event.
The surge in prices is led by dairy and grains, but prices of other commodities, such as
oils and fats, have also spiked. According to FAO (2007) the price of wheat rose from
US$ 212 per tonne in October 2006 to US$ 352 per tonne in October 2007. During the For more information, please
same period, the price of other crops rose too: contact Thomas Rath
(t.rath@ifad.org), Country
- (basmati) rice from US$ 525 to US$ 713 per tonne
Programme Manager, IFAD

2. Upcoming events
- maize from US$ 135 to US$180 per tonne
and missions
- soybeans from US$ 269 to US$ 445 per tonne
- palm oil from US$ 506 to US$ 875 per tonne.
International
Some of these spikes have spilled over into the futures prices. For example, the futures
prices of wheat for December delivery on the Chicago Board of Trade (CBOT) hit a record
high of US$ 350 per tonne on 28 September 2007. Feed shortages, combined with a High-Level Conference on
buoyant wheat market, have sustained high prices of maize. By late October 2007, the World Food Security: the
CBOT futures prices of maize for March 2008 stood at US$ 151 per tonne, about US$ 20 Challenges of Climate
above the corresponding period in 2006. Change and Bioenergy,
3-5 June 2008, FAO, Rome
The unprecedented surge in prices of maize in turn http://www.fao.org/foodclimate/
influenced the oilseeds and meal market and, in particular,
the soybean complex. Moreover, steadily increasing The Asian Economic
demand for biodiesel is linked to rising demand for Renaissance: What is in it
vegetable oils, notably soybean, rapeseed and palm oil. for Agriculture? 28-30
This trend, combined with rising consumption of vegetable August 2008, Manila,
oil and weak growth of total oil production in 2006-07, has Philippines,
resulted in a gradual tightening in global supplies and the http://www.6thasae.searca.org
recent surge in prices of vegetable oil. According to FAO, in
the first half of October 2007, the CBOT contract for
Regional
soybeans for March 2008 traded at US$ 150 per tonne, 67
per cent higher than in the corresponding period in 2006.
Regional consultations on
IFAD’s Rural Poverty
Soaring prices of petroleum (West Texas Intermediate, for
Report 2009, 22-24 July
example, traded at US$ 113.80 per barrel on 15 April 2008,
2008, Manila, Philippines
Roadside fruit vendors in the an increase of about 81 per cent over a year ago) have
Kottaibairahalli area of India contributed to higher agricultural prices in two ways: by
Afghanistan
raising costs of inputs and by boosting demand for
agricultural crops used as feedstock for alternative energy sources such as biofuels. In
addition, freight rates have increased, reflecting higher fuel costs and longer trade routes Fact-finding mission, 23-30
as a result of clogging of short routes to meet rising demand in emerging economies. June 2008
There are two distinguishing features of today’s rising food prices. Firstly, it is not just a few Design completion and
but nearly all food and feed commodities that have recorded sharply rising prices. As a quality assurance mission
result, there are strong ripple effects through the food value/supply chain, reflected in rising – Rural Microfinance Project,
retail prices of basic foods such as bread, meat and milk. The second feature is the higher 21 September – 15 October
price volatility of food such as cereals and oilseeds. While tightness of supplies is often 2008
associated with price volatility, the current situation differs from past experience insofar as
price volatility has lasted much longer. In fact, what underlies this phenomenon is the
Bangladesh
strengthening of relationships between agricultural commodity markets and other markets
in a rapidly globalizing world.
Detailed project design
How long is this surge in food prices likely to last? The boom of emerging economies and and quality enhancement
rising demand for oil and its substitutes are unlikely to taper off in the near future. mission – Participatory
Consequently, demand pressures on cereal prices will continue to be strong. Small-Scale Water
Resources Development
Some recent assessments are emphatic that supply constraints will exacerbate ‘agflation’. Project, 1-7 July 2008
Aggregate price elasticity of supply is low – typically, agricultural supply increases by 1-2
per cent when prices increase by 10 per cent. This response of supply is weaker if prices Supervision mission –
are volatile, but stronger with improved rural infrastructure and access to technology and Market Infrastructure
rural finance. There are signs of a tightening of supply constraints. Specifically, in addition Development Project in
to land scarcity, lack of water would hamper agricultural productivity. For example in India, Charlands Regions,
yields reached a plateau after more than doubling from 1.1 tonnes per hectare in 1950 to 2-12 August 2008
2.7 tonnes per hectare in 2000.
Design completion and
A recent study titled ‘Food and Oil Prices’ (conducted by Katsushi Imai, Lecturer in quality assurance mission
Economics, University of Manchester; Raghav Gaiha, Professor of Economics, University – Participatory Small-Scale
of Delhi; and Ganesh Thapa, Regional Economist, IFAD) in April 2008 throws new light on Water Resources
the dynamics of food and oil prices. It confirms significant effects of the price of crude oil on Development Project,
that of wheat, rice, fruit and vegetables. The study also confirms that, apart from the effects 17-30 August 2008
of the price of oil, rainfall has significant effects on rice, fruit and oil seed prices. So a
combination of the high price of crude oil and weak rainfall could well be devastating for Supervision/mid-term
people with low income and little flexibility in altering their consumption pattern. Combined review mission –
with inflationary expectations, even significantly higher levels of food production may not Microfinance for Marginal
lower price rise if market arrivals are lower as traders expect prices to continue rising for and Small Farmer Project,
some time. 1-13 September 2008

3. At the micro-level, whether a household benefits or loses from higher food prices depends
Bangladesh
on whether it is a net seller or buyer of food. Since food accounts for a large share of
household expenditure among low-income households in rural areas, increased prices of
Supervision mission –
staple crops translate into lower quantity and quality of food. Various studies suggest that
Microfinance and
when prices of food rise, poor people are forced to substitute inferior quality commodities
Technical Support Project,
(for example, inferior cereals). It does not hold equally for urban households to the extent
13-21 September 2008
that they have better access to subsidized food.
Bhutan
Recent collaborative research of Raghav Gaiha and Raghbendra Jha, Professor of
Economics at the Australian National University, corroborates a strong impact of rising
prices of food on rural poverty. Lower agricultural wages result in higher poverty. This effect Mid-term review mission –
is accentuated by lower nutritional status. In rural labour markets with efficiency wages and Agriculture Marketing and
rationing of jobs, people with weak nutritional status have a lower probability of Enterprise Development
participation. Thus a food price shock perpetuates their poverty. Programme, October 2008
Even if this bout of ‘agflation’ persists for five to ten years, if not longer, it is not inevitable to
China
conclude that the threat to poor and vulnerable people is likewise inevitable. Much will
depend on what governments and development agencies do. The panic reaction by some
Supervision mission –
governments and the slew of price and imposed quantity restrictions, such as price
Rural Finance Sector
subsidies or controls, quantitative restrictions on exports, and banning of futures markets,
Programme,
are unlikely to work even as short-term palliatives. To date, food riots have been reported in
17 May – 6 June 2008
30 developing countries.
Mid-term review mission
There are few options other than promoting greater investments in rural infrastructure,
– Environment
agricultural technology, market access, expansion of credit and insurance, and elimination
Conservation and Poverty-
of trade barriers. As smallholders have limited access to rural markets, institutional credit
Reduction Programme in
and new technologies, they are likely to benefit more. Moreover, as many of these
Ningxia and Shanxi,
investments are in public goods, they also accelerate growth in economies that rely on
15 May – 20 June 2008
agriculture as a major source of growth.
Implementation support
The full study ‘Food and Oil Prices’ will be published by IFAD shortly.
mission – Inner Mongolia
Autonomous Regional
Ganesh Thapa, Regional Economist, Asia and the Pacific Region, IFAD and
Rural Advancement
Raghav Gaiha, Professor of Public Policy, Faculty of Management Studies,
Programme,
University of Delhi
28 July – 5 August 2008
Useful links:
• Chicago Board of Trade: www.cbot.com CPMT meeting and
country programme
• Growing demand on agriculture and rising prices of commodities: an opportunity for
review workshop –
smallholders in low-income, agricultural-based countries?
26-28 June 2008
www.ifad.org/events/gc/31/roundtable/food.pdf (Discussion Paper for Round Table 3
at the IFAD’s Governing Council, 13-14 February 2008)
Design completion and
• FAO Outlook, November 2007: www.fao.org/docrep/010/ah876e/ah876e00.htm
quality assurance
• Food – who pays the price? www.ifad.org/media/video/food/ (produced by TVE for
mission – Dabieshan
BBC World in cooperation with IFAD)
Area Poverty Reduction
Programme,
29 June – 31 July 2008
Poor Chinese farmers sell and buy less
DPR Korea
in response to rising food prices
Project completion
Rising food prices are increasing the vulnerability of
mission – Uplands Food
participants in IFAD-supported projects to food
Security Project,
insecurity, as they are selling fewer agricultural
26 May – 9 June 2008
products and buying less food and of poorer quality.
While the demand for food has not changed because
India
of the price increases, and reduced availability of food
for households is not evident, the people supported
by IFAD tend to experience greater difficulties in Detailed project design
accessing food and maintaining nutritional quality. and quality enhancement
mission – West Bengal
While farmers overall benefit from increased food prices, Coastal Areas
poor rural families generally lack the capacity to adjust Development Project,
their production to this trend and are vulnerable to price 25 May – 1 August 2008
fluctuations. According to a survey conducted by the
Provincial General Survey of the National Statistical
A woman sells bean sprouts
Bureau in Fujian Province in 2007, poor farmers actually
by the side of the road

4. reduced their sale of agricultural products during the first half of 2007 as the price of food
India
increased. As a result, their income from selling agricultural products dropped by 3.7 per
cent during the first half of 2007. Poor people now tend to consume more of their own
Detailed project design
agricultural products, thus reverting to subsistence agriculture.
and quality enhancement,
and design completion and
Higher food prices force poor rural people to reduce their consumption of food such as
quality assurance mission
meat and oil. The survey indicates that poor farmers reduced their consumption of pork by
– Convergence of
15 per cent and eggs by 20 per cent. Meanwhile, farmers tend to buy food that is available
Agricultural Interventions in
at lower price, which usually corresponds to poorer quality and nutritional value.
Maharashtra Programme,
25 June – 31 August 2008
Those who are relatively better off will produce more agricultural products and raise more
livestock to take advantage of higher prices. For them, a fair part of the income they earn
Lao PDR
from selling grain at a higher price compensates the increased cost of production. For
example, the increased price of pork enables a farmer to sell a pig for an additional 300
Supervision mission –
Yuan (US$ 43). At the same time, the increased price of piglets and feed almost matches
Oudomxai Community
the increased sale price of a pig.
Initiatives Support Project,
12-23 May 2008
In 2007, the price of food for producers increased on average by 10 per cent compared to
2006. Based on national averages (which differ among provinces), the increase is
Joint ADB/IFAD Detailed
particularly significant for the following products:
project design and quality
enhancement mission –
• soybean and maize – price increased by 24 and 15 per cent, respectively Agriculture Natural
• oil crops – price increased by 33.4 per cent Resources Programme,
• vegetables – price increased by 6.9 per cent 1-11 June 2008
• livestock – prices increased by 31.4 per cent (price of pork increased by 45.9 per cent,
eggs by 16 per cent and milk by 6 per cent Design completion and
quality assurance mission
For consumers (buyers), food prices increased by 23.3 per cent between February 2007 – Agriculture Natural
and February 2008. Following are some examples based on national averages (which differ Resources Programme,
among provinces): 10-28 August 2008
• meat and meat products – prices increased by 45.3 per cent Mid-term Review – Rural
• grain – price increased by 6 per cent Livelihoods Improvement
• oils – price increased by 41 per cent Programme,
• 23 August – 9 September
vegetables – price increased by 46 per cent
2008
In China, food continues to be widely available and the grain harvest has been average and
above during the last few years. The problem falls on the poorest members of society, who
Nepal
are unable to afford the price of more expensive food.
Detailed project design
In addition, rising food prices and increased government subsidies to producers are
and quality enhancement –
encouraging farmers to increase the quantity of their agricultural products, implying
High Value Agriculture
increased demand for land. Areas for the cultivation of soybean, maize and vegetables
Project, July 2008
have increased in northeast China provinces. For example, over the last year, the
cultivation area in Jilin province increased by 1.44 per cent, of which soybean by 17.12
Monitoring and evaluation
percent, maize by 0.2 per cent and vegetable by 13.2 per cent.
mission – Leasehold
Forestry and Livestock
High prices of food may become a routine phenomenon for the years to come given the
Project and Western
world trend of demand and supply. Developing counties will have to find effective ways to
Uplands Poverty Alleviation
prevent their poor rural population from becoming poorer. Continued investment in
Project,
infrastructure and agro-technology would certainly help them benefit from increased food
7-27 June 2008
prices. As consumers, poor rural people are also more vulnerable to increasing prices, so
certain policy schemes would also be necessary to shelter them from those negative
Supervision mission –
effects (read the article ‘Governments respond to increasing food prices – examples from
Western Uplands Poverty
China, Pakistan and the Philippines’)
Alleviation Project,
October-November 2008
Sun Yinhong, IFAD Sub-Regional Officer, China
Useful links: Pakistan
• IFAD in China: www.ifad.org/english/operations/pi/chn/index.htm
Joint interagency mission
of FAO, IFAD and WFP to
assess the response to
food crisis and safety nets,
9-15 June 2008

5. Growing vegetables helps nomadic families in
Pakistan
Mongolia improve nutrition and reduce food
expenditures Joint interagency
mission of FAO, IFAD
and WFP to assess the
Through the Rural Poverty Reduction Programme
response to supply and
(2003-2011), IFAD supports poor nomadic herders living
policy support,
in four of the poorest provinces of Mongolia to secure
end of June 2008
sufficient food and income for their families. Nomadic
families often have limited food supply and practically
Philippines
no cash income. The programme supports them
especially in growing vegetables for consumption and
Loan administration and
sale to increase income. The recent dramatic increase
procurement training –
food prices is having a negative impact for the
3-6 June 2008, Cavite
Mongolian population and particularly for poor rural
households.
Viet Nam
The Rural Poverty Reduction Programme supports nomadic
families in Mongolia mainly by providing them with potato
Design completion and
and vegetable seed, hand tools, greenhouses, funds for
quality assurance
potato storage, and training related to growing and A child holds potatoes from a mission – Sustainable
preserving vegetables. family garden. The Land Use for the Upland
vegetables help the family to Poor (Bac Kan),
improve nutrition and reduce
Initially, the programme aimed to support some 18,000 7-27 July 2008
expenses
households in growing vegetables. By the end of 2007, it
had supported more than 22,400 households in vegetable Supervision mission –
cultivation. Rural Income
Diversification Project
The programme is working in 79 villages or soums (second-lowest administrative unit) of four (Tuyen Quang),
provinces (Arhangai, Bulgan, Hentii and Huvsgul), located in different climate, forest and 8-20 July 2008
steppe regions. Before the programme was implemented, in some villages people believed
that it was impossible to grow vegetables in cold weather conditions and on rocky soil.
However, with the support of the programme, people learned to cultivate potatoes and
vegetables.
Nomadic herders move throughout their own and neighboring provinces, following better pastures. With the support of the
programme, they formed groups to grow potatoes and vegetables in permanent areas. In this way some members could
tend to the flocks while others (those who own fewer than 200 livestock, primarily sheep and goats) took care of the
vegetables. Herders share the harvest depending on their contribution in cultivation.
Herders claimed that the sharing of responsibility is one of the major advantages of becoming a member of a group.
Families living in soums are now growing vegetables such as beans, peppers, tomatoes, soybeans, melons and others
that are not common for rural residents, or even generally in Mongolia.
The recent dramatic increase food prices has had a negative impact on the Mongolian population, and particularly poor
rural households. The consequences for one of the programme participants, Ms D. Oyunjargal, resident of Ogiinuur soum
in Arhangai province, is a common one. Though she is not a nomad, this example has implications on nomadic
households since they have to rely on flour products when vegetables are unavailable. Hence, they are directly affected
by increased prices.
In 2006, the programme provided Ms Oyunjargal with an oven for her small bread-making business. “My business is
getting worse due to the increased price of flour,” she says. Ms Oyunjargal makes 34 loaves of bread per day which
she sells in her soum (made up of 800 households) for MNT 600 (US$ 0.52) each.
She claims that just at the beginning of April 2008 she bought a 50 kg sack of flour for MNT 34,000 (US$ 29.2). Today,
the same amount of flour costs MNT 46,000 (US$ 39.5) – 35.3 per cent more. Nevertheless, she continues selling
bread for the same price as before.
As some shops in the soum bring bread from Ulaanbaatar and sell it for MNT 650 (US$ 0.56), Ms Oyunjargal is afraid
that she would not sell any bread if she increased her price. She claims that her profit decreased from 60 to 30 per
cent following the increased price of flour.
According to programme participants, IFAD’s support helped them improve their food security. The main food in rural
areas for the whole year is meat and flour. The cultivation period for vegetables is from mid-May to September. Now, with
programme’s assistance, herders claim to eat vegetables (mostly potatoes) from September to at least February. During

6. this period they are also able to sell more vegetables, while in spring it is difficult since they lack storage and therefore try
to sell their products soon after the harvest. Because of lack of vegetables during spring, herders eat more flour products.
Increasing prices of bread has significant implications on their food security during this period.
The Government of Mongolia has taken some measures to reduce the burden of increasing prices on the Mongolian
population. This includes tax exemption on imported flour and soft loans to local wheat farmers to prevent wheat prices
from increasing yet again in autumn. However, the price of flour (produced in the country and imported) is increasing,
which is making it very difficult for poor (also less poor) rural residents, since products made of flour (such as bread, buns,
snacks and noodles) are among the main foods in rural areas of Mongolia, especially when vegetables are not available.
Gun-Uyanga Soninbayar, Monitoring and Evaluation Officer, Rural Poverty Reduction Programme
Useful links:
• Rural Poverty Reduction Programme: www.rprpmongolia.mn
Wheat crisis and rising food prices threaten food security in Pakistan
In Pakistan, IFAD is currently supporting about 500,000 people, especially
herders, landless people and smallholders. These poor rural people live in
marginal, mountainous and rainfed areas that are generally food-deficit.
Unable to produce enough food for themselves, the majority of these
people purchase food most of the time. However, the wheat crisis and
rising prices of food items might result in increased under- and
malnutrition as their purchasing power is further weakened and they cut
back on food consumption.
Wheat crisis
A man stirs milk with a stick to produce
ghee, a semi-liquid clarified butter
Food is generally available in Pakistan except for wheat at certain times of the
year. The country experienced one of the worst wheat crises towards the end of
2007 as a result of exports of wheat in early 2007.
To stabilize the prices of wheat, which were expected to fall in view of surplus production, the Government of Pakistan
decided to allow wheat to be exported. Based on its estimated excess harvest – 23.5 million tonnes against an estimated
consumption of 21.5 million tons – the government lifted the ban on exporting wheat and set an export target of about 1.3
million tonnes. Private traders anticipated high demand – and higher prices – from neighboring countries, including
Afghanistan, India and Iran, and began an aggressive buying campaign as well as smuggling wheat to neighboring
countries. These factors created the wheat crisis.
The government eased the situation by importing some 2 million tonnes of wheat at the cost of about US$ 1 billion.
However, it created fiscal problems due to the high prices of wheat in the international market. Fiscal problems were
exacerbated by rising oil prices.
Because of the importance of wheat as Pakistan’s leading agricultural commodity, the government has intervened heavily
in wheat markets, with the objective of stabilizing prices at levels affordable to consumers. For example, it has been
procuring wheat at administratively set prices to support incomes of farmers and subsidizing wheat sales to flour mills or
directly to consumers.
Rising food prices
Latest figures show that food prices are increasing for Pakistani consumers. Inflation rates based on the Consumer Price
Index, Sensitive Price Index and Wholesale Price Index in February 2007 increased by 11.3 per cent, 14.6 per cent and
16.4 per cent respectively by February 2008.
Since most IFAD-supported people are net buyers (consumers), the current situation of rising food prices is a threat to
their food security. Higher expenditure on food commodities is negatively affecting their purchasing power and is leading
them to cutting back on consumption. According to a survey conducted by the World Food Programme in March 2008,
the number of people deemed “food-insecure” in Pakistan had risen by 28 percent – from 60 million in March 2007 to 77
million in March 2008.
The current trends of increasing prices, food insecurity and another expected wheat crisis in 2008 due to lower-than-
expected output are likely to result in increased under-nutrition and malnutrition. In addition, increasing oil prices and
inflation during the last two years have contributed to higher prices of all crops. Under such conditions, IFAD’s “target
group” is likely to grow more wheat mainly for household consumption. If the current trends continue, and no appropriate
safety net measures are put in place, there is a risk that poor households will have no option but to begin to sell their
assets, such as livestock.

7. IFAD’s response
In Pakistan, IFAD launched a special “Food Prices Impact and Beneficiary Response” survey of its beneficiaries in eleven
districts of its project area. The results and analysis of the survey (expected to be available at the beginning of June
2008) will guide IFAD’s country programme response to meet the challenges of increasing food prices.
Based on the outcomes of the survey, IFAD in consultation with the Government of Pakistan, will initiate a reallocation
and realignment process of the existing portfolio. IFAD also recommended to the Government of Pakistan that the focus
of a new project planned for 2008/09 should be on boosting agricultural production in the context of the food crises.
Additionally, at the initiative of IFAD, the three Rome-based agencies made a joint presentation to the United Nations
Heads of Agencies/Country Team on Food Price Hikes in Pakistan. The presentation resulted in establishing a United
Nations Inter-agency Task Force on the impact of food prices.
FAO, IFAD and WFP also received a request from the Government of Pakistan for assistance in assessing the soaring
food prices and preparing short-, medium- and long-term action plans. The Task Force is now initiating a comprehensive
study on the issues and options for addressing the impact of soaring prices on food security, and seizing the opportunity
offered by higher demand to expand agriculture and fight rural poverty.
Qaim Shah, Proxy Field Presence, Pakistan
Useful links:
• IFAD in Pakistan: www.ifad.org/english/operations/pi/pak/index.htm
• Pakistan heading for yet another crisis: www.independent-bangladesh.com/200804013859/business/pakistan-
heading-for-yet-anther-wheat-crisis.html
• Signs of increasing desperation as food prices rise further: www.irinnews.org/Report.aspx?ReportId=77683
• The world’s growing food-price crisis: www.time.com/time/world/article/0,8599,1717572,00.html
Filipinos change their agricultural practices and production systems
to secure enough food for their families
In the Philippines, IFAD assist rural poor people, particularly farmers,
fisherfolk, indigenous peoples and beneficiaries of agrarian reforms who are
sellers and buyers of agricultural and aquaculture products. IFAD also
supports micro-entrepreneurs engaged in food businesses. Affected by
continuously increasing prices of food, farmer participants in IFAD-
supported projects and programmes started changing their agricultural
practices and production systems, with the objective of generating higher
income for their families.
Farmers transplant rice seedlings in
Prices of staple food and other crops are increasing in the Philippines too. In 2007, Bulak, on Cebu Island
the buying price of palay (unhusked rice) ranged between PHP 8.50-9.50 per kg
(US$ 0.20-0.23). In 2008, the price had increased by almost 50 per cent. Buyers in Northern Mindanao pay PHP 1,300
(US$ 31.4) for a 50 kg pack of premium rice this year – about 30 per cent more than in 2007.
The poverty incidence in the Philippines increased from 24.4 per cent in 2003 to 26.9 per cent in 2006. This means that
about 32.9 million, or one out of three Filipinos, live on less than US$ 1 per day. The vulnerability of poor people is
exacerbated by continued increases in the prices of food. With their limited means, most poor people may not have
enough food to eat, especially for their growing children, which could lead to malnutrition and even higher instances of
hunger.
To cope with rising food prices and secure sufficient food for their families, many farmers participating in IFAD-supported
projects and programmes in the Philippines have endeavoured to increase their productivity by improving, if not
altogether changing, their agricultural practices and production systems. Some farmers have switched to organic farming
mainly because of the low cost of inputs, since organic farming does not require chemical fertilizers. Furthermore, organic
products sell at higher prices, which means higher revenue for farmers. Others have heeded government’s advocacy of
planting high-value cash crops by planting jathropa to supply the growing demand for biofuels. Their goal is to earn more
money and to be able to buy more expensive food.
Yolando Arban, Country Programme Management Facilitator and Knowledge Management Officer, the
Philippines
Useful links:
• IFAD in the Philippines: www.ifad.org/english/operations/pi/phl/index.htm

8. Higher food prices, fewer meals in Sri Lanka
About 7 per cent of the Sri Lankan population lives on less than US$ 1 per day. IFAD
supports small-scale producers who fall into this category. Most of them have to rely
on their agricultural products to meet their subsistence needs. “About half the
population of Sri Lanka is living in a situation where prices are beyond their reach.
This should have been given much more attention a long time ago,” said Mr Sarath
Fernando, a smallholder and farmer leader from Sri Lanka, during the BBC World
Debate “Food – who pays the price?” Improving farmers’ income is one way of
enabling farmers to ensure enough food for their families.
Food in Sri Lanka is widely available mainly because of high imports of essential items to
meet the local demand. Out of the total consumption in 2004, about five per cent of paddy,
30 per cent of potatoes and 78 per cent of dried milk were imported from abroad.
These figures indicate that there is sufficient food at the national level. However, prices are
increasing. “In recent months, food prices in Sri Lanka have more than doubled,” said
Sarath Fernando during the BBC World Debate in February 2008.
Children eat lunch at their
school in Ranaketugana
Rising food prices mean rising food insecurity at the household level. Increased food prices
Village
have a negative impact on the poorest Sri Lankan people. Impact assessments conducted
in IFAD-supported projects revealed that poor rural people have been adopting various
coping strategies to face food insecurity, such as:
• reducing the number of times they eat
• altering the amount and the type of food they eat
• adopting seasonal migration
• mortgaging and selling properties or other assets.
The first two coping strategies can lead to malnutrition. The fourth coping strategy can push poor people further into
poverty.
Farmers represent about 70 per cent of the rural Sri Lankan population. They are IFAD’s main target group. The rising
food prices affect farmers as they are also consumers. One effective way of reducing the impact of rising prices on
farmers is by improving their income, which has become depressed for a number of reasons. The harvesting of crops at
the same time causes low prices during the harvesting seasons. Lack of rural storage structures, high post-harvest
losses, and degrading lands due to soil erosion and improper land-use techniques also contribute to depressed prices for
agricultural products, as farmers are not able to secure optimal production. Insecure land tenure contributes to land
degradation.
IFAD-supported programmes in rural Sri Lanka address these difficulties. Some of the activities it supports in the dry zone
areas, Uva Province and poorer parts of the Central Province include:
• introducing technology through different extension strategies such as farmers’ field schools and targeted training
• providing facilities to produce seed materials and organic fertilizer to secure the supply of farm inputs
• investing in collective processing facilities and promoting out-grower systems to improve post-harvest products
• facilitating the collection of market information
• initiating the value chain to promote farmers’ entry into commercial agriculture.
To increase rural incomes and enable farmers to cope with the food crisis, IFAD also supports non-farm income
generation through rural financing and promoting business and micro-enterprises. Almost all IFAD-supported
programmes support these activities.
Such interventions could be more effective with increased political will, targeted policy debate on issues such as land
tenure and subsidies, commitment of project partners, close supervision and effective monitoring.
Anura Herath, IFAD Field Presence Facilitator, Sri Lanka
Useful links:
• IFAD in Sri Lanka: www.ifad.org/english/operations/pi/lka/index.htm
• Food – who pays the price? www.ifad.org/media/video/food/

9. Governments respond to increasing food prices –
examples from China, Pakistan and the Philippines
In response to increasing food prices, governments across Asia and the Pacific have
introduced a number of measures to reduce the amount of stress on poor farmers
and their families.
In China
The government has introduced measures to increase farm gate prices of grains (mainly
rice and wheat) by about 4 per cent, increase subsidies for grain and pork production,
reduce export subsidies for certain grains and their products (such as wheat, rice, soybean
and maize) and reduce import tax on some grains. For example, the import tax on soybean
was decreased from 3 to 1 per cent.
The government has also adopted mandatory approval for price increases of certain
A worker transports
products that are necessary for the day-to-day survival of citizens. These include grain
cabbage to the vegetable
products, edible oil, beef/lamb and their products, eggs, milk and liquid gas. Subsidies have
market in Mantalongon, on
been introduced to urban poor people in some provinces and cities. Cebu Island
To a large degree, however, farmers’ benefits from increased food prices and government
subsidies have not been significant. The additional amount paid by consumers to purchase more expensive food and
government subsidies largely cover farmers’ increased cost in production and distribution.
The State Council held a teleconference on 27 March 2008 chaired by Premier Wen Jiabo. The conference was a
response to increasing international and national prices of agricultural products, grain export limits of producing countries,
the rising inflation rate as well as the snow disaster in China early this year. During the conference, measures were
discussed to ensure an ample production and supply of agricultural products, mainly cereals, in 2008. These measures
include:
• significant increase in subsidies for means of production (including seeds)
• increase in minimum farm gate price of rice and wheat
• increase in the central fiscal budget for drought, flood control and infrastructure improvement
• increased subsidies for production loan interest and insurance premiums
• facilitation of agro-product distribution
• animal disease control
• enhancement of rural financial services
Various ministries have also adopted supportive measures in their areas. On 3 April 2008, the China Banking Regulatory
Commission issued instructions to banking institutions to enhance accessibility of financing services by rural entities and
individuals and expand agricultural insurance.
The Ministry of Agriculture has also adopted various programmes to support production, such as the programme on
prescribed fertilization based on soil testing. Soil is tested to understand its nutrient requirement, and a fertilization
formula is developed based on the test. The programme will cover two thirds of agricultural counties, anticipating yield
increases by 6-10 per cent in these counties. The Ministry’s programme on supporting pig raising has started to stabilize
pork prices and supply. Pork was one of the commodities that witnessed the sharpest price increase.
In Pakistan
In 2007 the government introduced the Ration Card Scheme, in which cardholders are able to buy wheat, edible oil and
pulses from utility stores owned by the government at subsidized prices. This measure has mostly benefited urban
consumers. A large number of poor urban and rural people have not been able to take advantage of this subsidy due to
limited outreach of utility stores. In addition, since the subsidies through the utility stores were not specifically targeted at
poor and vulnerable people, everyone irrespective of their economic situation, had access to them. This led to leakages
irregularities in the scheme.
To protect poor urban and rural families from increasing food prices, it will be necessary to introduce different targeted
safety net approaches such as:
• Ban on exports of wheat
• Reduction in duty of food imports
• Efforts to check smuggling of food items to other countries.

10. Recently the new government increased the procurement price of wheat by about 23 per cent. The aim is to meet the
procurement target for operational (4 million tonnes) and strategic stocks (1 million tonnes) for planned distribution and
stock build-up. Food subsidies and rations are also under discussion by the new government, but to date no concrete
policy has been announced.
In the Philippines
The government has introduced the following measures to ensure sufficient supply of rice, the country’s staple food:
• crackdown on hoarders and retailers who mislabel rice subsidized by the government as commercial rice
• huge imports of rice from neighboring countries such as Viet Nam and Thailand
• cancellation of permits to rice dealers reselling rice subsidized by the state to avoid artificial price hikes
• allocation of PhP 5 billion (US$ 120 million) as a subsidy to rice farmers
• increased National Food Authority’s buying price for palay by 42 per cent to motivate farmers to plant more.
The President of the Philippines, Gloria Macapagal-Arroyo, has declared that her Administration would make all efforts to
mitigate the adverse effects of the continued increases in the prices of food, particularly among the impoverished
population. She has committed to ensure that there would be food on the table for all Filipino households.
Sun Yinhong, IFAD Sub-Regional Officer, China, Qaim Shah, Proxy Field Presence, Pakistan, and Yolando Arban,
Country Programme Management Facilitator and Knowledge Management Officer, the Philippines
Occasional papers
Issue 5: Agricultural technology choices for poor farmers in less-favoured Areas
of South and East Asia
Between 1965 and 1990, improved bioagricultural technology and water control lifted hundreds of millions of people out of
poverty in several countries of the Asia and the Pacific region, mainly by increasing employment and the production of
food staples and making products more affordable.
However, this Green Revolution technology bypassed millions of rural people in less-favoured environments (uplands and
mountains, marginal coastal areas and drylands). Rainfed agriculture dominates in these areas, which are also subject to
critical socio-economic constraints such as poor access to markets, infrastructure and services. The incidence of poverty
is high. Agricultural productivity growth is slow and declining due to natural resource degradation, particularly soil erosion
and reduced fertility, caused by the overgrazing of livestock and the limited use of soil and water conservation measures.
Agricultural productivity has also slowed in many irrigated and favourable rainfed areas in countries of the region. This is
due to diminishing returns on conventional technologies and natural resource degradation, including through salinization,
water logging, soil nutrient deficiencies and groundwater depletion.
Because of these problems, alternative agricultural technological approaches are being promoted by development
partners among poor smallholders in less-favoured areas. These technological approaches include low external input and
sustainable agriculture, organic agriculture and biotechnology.
This paper reviews the available evidence on the adoption and impacts of these technological approaches, the
constraints faced by farms and communities and related policy and institutional issues. Based on this review, the paper
assesses the potential of these technological approaches to improve productivity and natural resource management and
reduce poverty in the less-favoured areas of South and South East Asia. It then provides recommendations concerning
technology strategies to reduce poverty among poor farmers in these areas.
This study was undertaken by the International Food Policy Research Institute, in collaboration with the Asia and the
Pacific Division of IFAD. The findings and recommendations of the study should be of interest to policymakers,
development practitioners, donors, academics and civil society.
The paper was written by John Pender, Environment and Production Technology Division, International Food
Policy Research Institute, Washington, DC. Read full paper: www.ifad.org/operations/projects/regions/pi/paper/5.pdf
Occasional papers are a series of studies on emerging thematic issues in the Asia and the Pacific Region published by
IFAD. The papers contribute to IFAD’s efforts to share the knowledge and experience emerging from its activities and
those of its partners in the region.
For more information, please contact Valentina Camaleonte, Asia and the Pacific Division, IFAD