This document summarizes a presentation on the implications of the food and financial crises. It discusses how the financial crisis may negatively impact agriculture and the poor through reduced investment, employment, and policy attention. It presents scenarios showing rising food prices and malnutrition under recession conditions. It recommends priorities for action including increasing agricultural R&D, reducing food market volatility, and expanding social protection programs and nutrition action.

1. Food and Financial Crises:
Implications for Agriculture
and the Poor
Joachim von Braun
International Food Policy Research Institute
CGIAR Annual General Meeting, Maputo, December 1, 2008

2. Overview
1. Food and financial crises implications
2. What may happen? Recession scenarios
3. Addressing the turmoil comprehensively
Joachim von Braun, IFPRI, December 2008

3. Food- and financial crises linkages
Food crisis Financial
crisis
Strong and long-lasting negative impacts
Joachim von Braun, IFPRI, December 2008 Source: von Braun; Dec 2008

4. Food price crisis, 2007-08
800 125
Corn Price bubble
Wheat
100
600 Rice
US$/barrel
US$/ton
Oil (right scale)
75
400
50
200
25
0 0
Food prices falling because of the financial crisis,
not because the food crisis is over
Joachim von Braun, IFPRI, December 2008 Source: Data from FAO 2008 and IMF 2008.

5. Maize and sweet potato prices
Zambezia, Mozambique 2006-2008
12
10
8
6
mzpkg
wspkg
4
2
0
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
06 06 06 06 06 06 06 06 06 07 07 07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08 08 08
Joachim von Braun, IFPRI, December 2008 Source: R. Labardo (CIP), A. de Brauw (IFPRI) HarvestPlus, 2008

6. Number of food protests
by type and income group
20
Violent
15 Non-violent
11
7
10
5 2 9
8 8
4
0
Low income Low-middle Upper-middle High income
income income
Source: Protests – news reports;
Joachim von Braun, IFPRI, December 2008 Income group classification – World Bank 2007.

7. The poor cannot afford healthy diets
Corn-tortilla-based diets in Guatemala
Tortilla and veg. oil Tortilla, veg. oil, carrots, orange,
200 200
beef, spinach, black beans
Recommended nutrient density %
175 175
150 150
125 125
100 100
75 75
50 50
25 25
0 0
Vit A Vit C Folate Fe Zn Vit A Vit C Folate Fe Zn
$0.40 $0.72
person/day person/day
Joachim von Braun, IFPRI, December 2008 Source: Erick Boy, IFPRI, 2008.

8. Severe impacts on livelihoods of the poor
Purchasing power: 50-70% of income spent on food and
wages do not adjust accordingly
Assets and human capital: distressed sale of productive
assets, withdrawal of girls from school, etc.
Number of undernourished: 75 mil. more from 2003/05
to 2007 (FAO 2008)
Crisis not over for the poor;
Nutrition is undermined for the long run
Joachim von Braun, IFPRI, December 2008

9. Major pledges and investments
to address the food crisis (2008)
Donor organization/country Pledge (bil.$) Month
World Bank 1.2 May
EU (EC & national) 5+ May-July
USA 5 June
Increase in public budgets on agric. and social protection
bil. $US % change
China 23 +27%
India 6 +24%
Joachim von Braun, IFPRI, December 2008 Source: IFPRI, compiled from news sources and government budgets.

10. Output response forthcoming, but not from
low-income countries
Growth of cereal output in 2007-08:
11%: developed
0.9%: developing
1.6%: developing, excl. Brazil, China, India
Not enough to bring stocks back up
to sufficient levels
Joachim von Braun, IFPRI, December 2008
Source: FAO 2008.

11. Derived demand for land and water is
increasing
In the past 12 months land prices in:
• Brazil 16%; Poland 31%; USA 15%
Large growth in water demand for agriculture
expected in coming decades
Overseas investment in land (with water)
• China in Kenya, Nigeria, Philippines, Russia
• UAE in Sudan
• South Korea in Madagascar
• Many others
Joachim von Braun, IFPRI, December 2008
Source: IFPRI, News sources.

12. Food dominated inflation 2005-08: this
contributed to the recession
Ethiopia India
20 3
Overall
15 2
Food
Overall
10 1
Food
5 0
0 -1
-5 -2
Jan-05 Jan-06 Jan-07 Jan-08 Jan-05 Jan-06 Jan-07 Jan-08
4
Overall Mexico
Food
2
0
-2
Jan-05 Jan-06 Jan-07 Jan-08
Joachim von Braun, IFPRI, December 2008 Source: von Braun, Data from government statistics.

13. The financial market collapse 2007-08
Dow Jones World Financials Index, US$
400
300
200
100
0
Joachim von Braun, IFPRI, December 2008 Source: Google Finance 2008.

14. Financial crisis and recession complicate
food situation: the risks
• Less capital for agriculture now and in the
future
• Higher debt burden for small farmers who
already invested in agriculture expansion
• Policy attention diverted away from agriculture
leading to lower public investment
• Reduced employment and wages of unskilled
workers
Joachim von Braun, IFPRI, December 2008

15. Overview
1. Food and financial crises implications
2. What may happen? Recession scenarios
3. Addressing the turmoil comprehensively
Joachim von Braun, IFPRI, December 2008

16. Recession scenarios 2005-2020
Scenarios
baseline: econ. growth as in past years
1: Recession: econ. growth falls by 2-3%,
agric. investment maintained
2: Recession: econ. growth falls by 2-3%,
agric. investment reduced
Joachim von Braun, IFPRI, December 2008

17. Prices under recession and alternative
agricultural investment scenarios
Non-recession Maize
200 Same-investment Rice
300
Low-investment
150
250
100
2005 2010 2015 2020 200
2005 2010 2015 2020
Wheat
200
150
100
2005 2010 2015 2020
Joachim von Braun, IFPRI, December 2008 Source: Rosegrant, von Braun; IFPRI IMPACT, Dec. 2008.

18. Number of malnourished children rises by
16 million with recession and low investment
210
World (excluding SSA)
SSA
180
150
Millions
120
90
60
30
0
2005 2020
Joachim von Braun, IFPRI, December 2008 Source: Rosegrant, von Braun; IFPRI IMPACT, Dec. 2008.

19. Overview
1. Food and financial crises implications
2. What may happen? Recession scenarios
3. Addressing the turmoil comprehensively
Joachim von Braun, IFPRI, December 2008

20. Three priorities for action needed
1. Promote pro-poor agriculture growth
2. Reduce market volatility
3. Expand social protection and child nutrition
action
Joachim von Braun, IFPRI, December 2008

21. 1. Double agric. R&D to impact poverty
R&D allocation  in # of + Agr. output
(mil. 2005 $) poor (mil.) growth (% pts.)
2008 2013 2008-2020 2008-2020
SSA 608 2,913 -143.8 2.8
S Asia 908 3,111 -124.6 2.4
Devel.ing
World 4,975 9,951 -282.1 1.1
CGIAR investment must rise from US$0.5 to US$1.0
billion as part of this exoansion
Joachim von Braun, IFPRI, December 2008 Source: von Braun, Shenggen Fan, et al. 2008.

22. 2. Reduce food market volatility
1. An internationally held emergency
reserve
2. A virtual global reserve against price
“bubbles”
- An institutional arrangement at international
level
- Implemented by G8+5 and other large grain
exporting countries
Joachim von Braun, IFPRI, December 2008
Source: von Braun and Torero 2008.

23. 3. Social protection and nutrition action
Protective:
- Cash transfers (conditional)
- Employment programs
Preventive:
- School feeding
- Early childhood nutrition programs
Joachim von Braun, IFPRI, December 2008

24. 1872-2008 prices and population
Are we living in unusual times?
1000 Wheat price 8
2000 US$/ton, 3yr averages
Population (right)
800
6
Billions
600
4
400
2
200
0 0
1872
1876
1880
1884
1888
1892
1896
1900
1904
1908
1912
1916
1920
1924
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
Sources: J. von Braun, based on data from NBER Macrohistory database,
BLS CPI database, Godo 2001, OECD 2005, and FAO 2008;
Joachim von Braun, IFPRI, December 2008 Population data from U.S. Census Bureau Int’l database and UN1999.