The Economic Impact of Global Food Price Increase on Africa Least Developed Countries: An Application of the Common Agricultural Policy Regionalized Impact (CAPRI) Model

W. J.-B. Zongo, H.-L. Lee, Shih-Hsun Hsu and C.-C. Chang

No 332545, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: International prices of most staple food commodities in 2008 reached a remarkable level that had not been seen since late 1970’s. Food commodity prices are projected to remain on higher levels over the next decade, supported by firm demand, unfavorable weather conditions, slowing growth in global production, and expected high price of crude oil. This perspective poses not only challenges to global food insecurity but also offers opportunities for food and agricultural producers arising from the higher average prices projected for the coming decade. This paper attempted to investigate the impact of future global food price increase on 28 Africa least developed countries (LDCs) and to propose some policy instruments for tackling the impact of high food prices. Our simulation results indicate that African LDCs are adversely affected in terms of overall welfare when prices of maize, rice and wheat increase. The reduction in consumer surplus, agricultural income and tariff revenues are the key factors for the reduced overall welfare. The sectoral impact analysis reveals that total demand for wheat and rice, including both human consumption and imports, would drop as a result of substitution effect, yet maize demand could increases. In addition, African LDCs are projected to be more negatively affected than the other trade blocks such as Africa-Rest, Nigeria, South-Africa and Ethiopia. Important policy implications follow our findings. African LDCs governments could invest to develop the wheat, rice and maize sectors in order to reduce the countries’ vulnerability to international shocks. Bilateral cooperation between African and Western countries should be more oriented toward transfer of technology, knowledge and managerial skills. Poor transportation could magnify import prices, and also impede the distribution of products between production zones and consumption areas within and out of the country. Improving transportation logistics and infrastructure would be helpful in reducing costs of food transportation to African LDC consumers. In addition, policies that promote for more diversified agricultural income sources, such as earnings from livestock and fishing, can help farmers withstand the unfavorable impact of agricultural price fluctuations on African LDCs.

Keywords: Research Methods/Statistical Methods; Agricultural and Food Policy (search for similar items in EconPapers)
Pages: 22
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332545

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