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Market and Price Impact Assessment

Market and Price Impact Assessment

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Market and Price Impact Assessment

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  1. Market and Price Impact Assessment

  2. OBJECTIVES • To quantify the magnitude of the recent increase in food prices • To assess the future outlook in different parts of the country • To understand the likely impact on household food security • To make recommendations for government and humanitarian relief

  3. BACKGROUND • Food prices in Nepal have not increased to the same extent as on international markets • Very good recent paddy harvest • Good wheat harvest overall (except in the Far and Mid-Western hills and mountains)

  4. BACKGROUND • Fuel shortages • Transportation companies only able to use 20-30% of their capacity • Proposed fuel price increase of up to 25% • Inflation scaled up to 8.9% for the first three-quarters of the fiscal year 2007/2008 (Nepal Rastra Bank) • Rising food prices are the major factor that increased the CPI • Rise of 12.6% in food and beverages prices (53% of the CPI)

  5. METHODOLOGY • Primary data • FSMAS field monitors and NDRI enumerators • Market survey (5 traders per market) • 357 retailers • 153 wholesalers • Household survey (5 households per market) • 551 households • Rapid urban survey (per urban area: 10 slum households, 2 better off households, 5 traders) • 216 households • 90 urban traders • Secondary data • Department of Agriculture, FNCCI, Nepal Rastra Bank and Ministry of Finance

  6. METHODOLOGY • Geographical coverage • 40 districts • 6 urban cities (Biratnagar, Birgunj, Nepalgunj, Dhangadhi, Kathmandu and Pokhara) • 6 month recall • Prior to October 2007, food price increases were marginal • Pre-harvest period for paddy (highest prices of key commodities) • India introduced the export ban

  7. PRICE CHANGES • Highest increases in nominal prices • cooking oil (30%) • coarse rice (23%) • kerosene (17%) • Less dramatic • wheat grain and flour • Price of coarse rice • highest percent change in the terai and and the hills • highest absolute change in mountains • Farm gate prices of paddy and wheat • highest increase for paddy in the mountains (24%) • highest increase for wheat in the hills (drought-affected) (13%)

  8. Cost of transportation increased by 27% on average and further increases are imminent FACTORS DETERMINING THE PRICE OF COMMODITIES • Transport -related (for hills and mountains) • Imports from India (for the terai)

  9. TRADERS’ PRICE EXPECTATIONS • 11% increase for coarse rice • 17% for traders in the Terai and hills • 8% increase for kerosene • Stabilization for cooking oil (at a much higher price) • Wheat prices • Decrease in the terai • Increase in the hills and mountains (esp. Mid and Far West)

  10. TRADE STOCKS AND SALES • Supply and sales volumes have dropped for more than 60% of traders • 40% less kerosene • 30% less coarse rice • 20% less beans, cooking oil and fine rice • Consistent with the price increase Problems affecting business • 77% reported a decrease in the volume of sales

  11. TRADERS’ RESPONSES In case we need a box

  12. Most households depend on the market for coarse rice, cooking oil and kerosene 59% of HH expenses spent on food (73% for the poorest) IMPACT ON HOUSEHOLDS VULNERABILITY WAGES • Increased by 5-15% • Highest percent in the Terai • Highest absolute value in the mountains IMPACT PURCHASING POWER • Main hazards: food (unavailability/prices), drought, insufficient rain • Food prices affected 57% of HH • People are buying less/cheaper food • Substantial increase of sales on credit • May result in higher malnutrition rates • The purchasing power of households decreased because of the rise in commodity prices

  13. WEALTH RANKING

  14. FOOD PRICE VULNERABILITY INDEX • Land access index • Food expenditure index • Income source index For Rural Nepal: Significant losers 42.2 % 9.7 million Marginal losers 41.2 % 9.5 million Marginal winners 3.3 % 14.3 million Significant winners 0.5 % 2.3 million

  15. 13 % 35 %

  16. 11 % or 2.5 million people 17 % or 3.9 million people

  17. Recommendations • Develop a joint market watch monitoring system. • Provide targeted food assistance to the identified 2.5 million most vulnerable. • Closely monitor the additional 3.9 million who are at high risk of food insecurity. • Support agricultural initiatives to increase food production (irrigation, seeds, credit etc.) • Expand the role of NFC in remote areas and improve the beneficiary targeting. • Expand and strengthen nutrition-based programmes such as MCHC and SF.