Are Low Food Prices Pro-Poor? Net Food Buyers and Sellers in Low-Income Countries

There is a general consensus that most
of the poor in developing countries are net food buyers and
food price increases are bad for the poor. This could be
expected of urban poor, but it is also often attributed to
the rural poor. Recent food price increases have increased
the importance of this issue, and the possible policy
responses to these price increases. This paper examines the
characteristics of net food sellers and buyers in nine
low-income countries. Although the largest share of poor
households are found to be net food buyers, almost 50
percent of net food buyers are marginal net food buyers who
would not be significantly affected by food price increases.
Only three of the nine countries examined exhibited a
substantial proportion of vulnerable households. The average
incomes (as measured by expenditure) of net food buyers were
found to be higher than net food sellers in eight of the
nine countries examined. Thus, food price increases, ceteris
paribus, would transfer income from generally higher income
net food buyers to poorer net food sellers. The analysis
also finds that the occupations and income sources of net
sellers and buyers in rural areas are significantly
different. In rural areas where food production is the main
activity and where there are limited non-food activities,
the incomes of net buyers might depend on the incomes and
farming activities of net food sellers. These results
suggest the need for reevaluation of the consensus on the
impact of food prices on food needs. Further work on the
regional differences, and more important, on the second
order effects, are necessary to answer these questions more
precisely. Only on the basis of further analysis can we
start generating better policy responses.