Conference Name: 7th ASAE Conference, Hanoi
Year: 2011
Paper title: Development of a Consistent Food Security Index
Author(s): Seung-Ryong Yang１andWonyong Kim２,*
１Professor, Department of Food and Resource Economics, Korea University, Seoul. Corresponding author ([email protected]) ２Research Assistant, Department of Food and Resource Economics, Korea University, Seoul.
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Development of a Consistent Food Security Index
Seung-Ryong Yang３andWonyong Kim４,*
Abstract
This study developed a food security index that is consistent with four principles: boundedness, reliability, duplicability, and applicability. The index is called KUFSI which is easy to interpret and comparable. The KUFSI is composed of three components: physical, economic, and market component. The KUFSI is calculated in quantity term as well as in calorie term.
The KUFSI measures a country‟s capability of accessing to food needed as a whole. The capability can be compared across time and with other countries. The index can also be used to build early warning systems for individual countries.
Keywords: food security index, early warning system, agflation.
３Professor, Department of Food and Resource Economics, Korea University, Seoul. Corresponding author ([email protected]) ４Research Assistant, Department of Food and Resource Economics, Korea University, Seoul.
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I. Introduction
The global price inflation caused by the soaring food prices (so called Agflation) starting in
2006 has continued distressing the food importing countries and the people living in the countries. More than a dozen countries have experienced riots caused by the skyrocketing prices of staple crops in 2008.
The agflation peaked in 2008was bent down during the following two years. However, it reemerged in 2010 with the poor harvest of major grains, especially wheat. FAO reported that the 2011 food prices set a record high since 1990 when they began to calculate the food price index. The recent anti-government demonstrations in Tunisia and Egypt that toppled the dictatorship regimes were sparked by the food shortage. The World Economic Forum held in
Davos in January 2011 seriously discussed about the food issues and the G20 summit meeting scheduled in November 2011 set the food security as the key agenda.
There are many reasons behind the agflation. Severe crop failures due to the adverse climate changes and the bio-fuel policy in the U.S. are the major causes. The population growth and increasing consumption of meat products in China and Asian developing countries are also important factors. These reasons are not at all temporary and the high food price seems to become a chronic phenomenon. The world real food price has started rising for the first time in more than fifty years. Obviously, the food security of the poor around the world is in great danger.
The solutions to the food insecurity problem require international cooperation as well as domestic efforts. For that, one needs to knowhow serious the food security is in the country
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concerned and can measure the situation quantitatively. The measurement should incorporate economic as well as physical capability of the country to secure the food needed. It should also reflect the world market circumstances which might inhibit procurement of food regardless of the country‟s ability to secure needed food in the world market. The index is supposed to be straightforward in interpretation and comparable among countries and over time.
The purpose of this study is to develop a consistent measurement of food security situation in a country, i.e., food security index (FSI).The index is consistent in the sense that it follows the principles that a desirable food security index should follow. We propose four general principles in the next chapter. The index developed in this study can be used to measure the current food situation and to predict the situation in the future. Early-warning systems against food crisis and proper counter-measures can be developed based on the consistent measure of food security situation. To distinguish from other FSIs existing we call the index developed in this study as „Korea University Food Security Index‟ or simply KUFSI.
This paper is composed of six parts. The second chapter describes the rules for FSI and reviews the previous studies by the rules. The third chapter explains the model for KUFSI, followed by the fourth chapter presenting estimated results for selected countries. The fifth chapter describes the data used to calculate KUFSI and last chapter concludes with some remarks.
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II. Review of the Previous Works
The food security has been defined differently by different institutions or researchers. At their home page WHO explains food security as follows:
The World Food Summit of 1996 defined food security as existing “when all people at all
times have access to sufficient, safe, nutritious food to maintain a healthy and active life”.
Commonly, the concept of food security is defined as including both physical and
economic access to food that meets people's dietary needs as well as their food preferences.
FAO gives a similar definition such that
Food security exists when all people, at all times, have physical, social and economic
access to sufficient, safe and nutritious food to meet their dietary needs and food
preferences for an active and healthy life.
Pinstrup-Andersen (2009) discussed several definitions of food security in the literature and asserts that all in all food security is referred to as whether a country has access to the enough food to meet dietary energy requirement. This assertion seems a reasonable basis for food security index.
Despite its importance, the concept of FSI has received limited attention from even academic circles. It is mainly because food security has never been in this danger during the long period of time. The green revolution in 1960‟s made the second half of the 20th century as the
“age of affluent food”. For the first time in the human history, the world has enjoyed abundant food except only a few sporadic years. In addition, most developed countries are food exporting countries in which food security is not an important issue. They may even
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benefit from the world food crisis. Food crisis only hurts the lower income people in the less developed countries in Asia and Africa most. Food crisis also troubles wealthier countries like
China, Japan, and Korea who are net food importers.
A few studies have suggested quantifiable food security indexes. UN‟s International Fund for
Agricultural Development (IFAD) has first developed an FSI and Korea Rural Economic
Institute (KREI) has applied the IFAD‟s index to Korea (Sung et al. 2000). The index, however, has several flaws. IFAD‟s index is constructed as a weighted average of food consumption divided by variability of consumption and food production divided by production variability as in equation (1). It considers physical demand and supply situations.
However, its economic interpretation is not clear. The concept of food security has something to do with capability of supply of needed food. The index can hardly serve as such indicator.
Lee (2009) with Nonghyup Economic Research Institute (NHERI) in Korea extends the
IFAD‟s index such as to reflect the international market structure of the major crops. For that, however, one should estimate the oligopolistic power in the market, which can be estimated differently according to different models, estimation methods, and/or data used. Their index provides numbers from a black box.
Park et al. (2011) with Samsung Economic Research Institute (SERI)developed an index that
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is devoted to the full definition of food security. SERI‟s food security and safety index includes factors indicating two pillars: food security that consists of food availability and food accessibility, and food safety that consists of production sustainability and nutrition and environmental integrity. Twenty variables are needed to construct the index. Some of the variables ought to be estimated. Some are never clearly defined. Those variables such as agricultural R&D budget, labor productivity, and shares of GM crops imported do not have clear implication on food security. Furthermore, no one seems to be able to duplicate their index and inter-country comparisons are hardly possible.
III. The Principles and the KUFSI
The food security index should be easy to understand and straightforward in interpretation. It should also be duplicable so that anyone can get the same results. It should be comparable among countries and over time so that it can clearly indicate how serious the current situation is. Most of all, the index should be predictable so that it can serve as an alarm bell for coming food crises. For that, we suggest four principles for a reasonable FSI to follow. First, the index should give numbers that are bounded on[0,1] so that it can be easily interpreted
(boundedness). Second, it should be calculated with data from internationally accredited institutions so that the results are reliable (reliability). Third, the formula should be clear and duplicable (duplicability). Forth, it should be easily applicable to any country of interest
(applicability). This study develops a food security index that is consistent with the four principles above.
As Pinstrup-Andersen (2009) asserts there are so many definitions of food security and each has the different meaning. Thus we need a concrete definition of food security to develop a
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quantifiable index. We claim that a country is food-secure if the country as a whole can meet physical demand for food from domestic production or can afford food needed irrespective other outside market conditions. We do not give full consideration to the nutritional adequacy of the food since it is too complicated to set relevant and objective levels of nutrition for all people. However, we calculate the calorie based FSI as well as the quantity based FSI to incorporate the nutritional dimension of food security.
As shown in figure 1, the quantity based FSI is constructed for the main staple crops. Since it is based on the quantity term, it is straightforward to interpret and easy to compute. On the other hand, the calorie based FSI incorporates meat consumption as well as other food stuffs.
It thus is comprehensive and more relevant since it deals with the final food consumption.
The KUFSI is composed of three components: physical component, economics component, and market component (figure 2). For simplicity, all three components are treated equally important. But, this seems reasonable since we have no a prior information about relative
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importance of the three.
The physical component indicates the ability of the domestic production meeting the domestic consumption of food . The self-sufficiency ratio in quantity term (for the quantity based FSI) and in calorie term (for the calorie based FSI) are used to represent the physical capability. Most countries have the self-sufficiency ratios that are bounded on [0, 1].
However, some food exporting countries may have the ratio higher than 1.
The economic component is composed of three factors. The first factor is the economic affordability that shows whether the income is large enough to afford the food needed.
We use one minus Engel coefficient which is the household expenditure on food divided by
GDP. The higher the Engel coefficient is, the weaker the food security is. If a country spends all of its income on food, she gets 0. On the contrary, if a country has extremely high income compared to the food expenditure, she gets a figure close to 1.
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The second factor is the income inequality . Even if the country as a whole has large enough income for food, there may be poor people who cannot afford food needed. The GINI index is usually used to represent such income inequality. We use one minus GINI index so that a lower GINI indicates higher food security. If the income is perfectly equally distributed in a country, the GINI would be 0 and the country gets 1 for the factor. If the opposite is the case, the GINI would be 1 and the country gets 0.
The third factor is the economic stability of the nation as a whole. We use the Moody‟s sovereign credit ratings. We choose Moody‟s because its governance is known as well- diversified compared to other credit rating agencies. The ratings are divided into 20 levels and the highest level (Aaa) is given 1 descending by 0.05 to the next ratings until the lowest level (Ca and C together indicates the condition in or near default) gets 0.
The market component reflects the international market conditions . Even if a country can afford the food they need, a tight world market may hinder the country from purchasing the food. In 2009 when the severe food shortage prevailed, many countries embargoed food exports for their own domestic consumption. In some cases they embargoed against certain countries for political reasons. For the market condition, we use the current stock to
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consumption ratio divided by the appropriate level suggested by FAO. If the current stock is equal to the consumption for two months as FAO suggests, it would be 1. If lower, it would be less than 1. The number can be higher than 1, which indicates the market has no trouble to supply food demanded with money.
To compute the commodity KUFSI we multiply the five factors above, one for the physical, three for the economic, and one for the market component as in equation (5). The physical and market components are crop-specific so that they are subscripted by i indicating a specific crop. On the other hand, the economic component is the same across commodity.
The aggregate KUFSI for the country of interest results from the weighted average of commodity KUFSI as in equation (6). The weight is the value of supplied divided by the total value supplied.
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The calorie based KUFSI is naturally an aggregate measure for all food items. Thus, it is calculated as in equation (7):
Where PC is the country‟s self-sufficiency ratio in calorie term and M is the ratio of the food stock to the world consumption for two months. We average the stock to consumption ratio for all commodities listed in the FAS, USDA database and divide it by 16.6% which is the recommended level of stock by FAO.
The KUFSI developed above is straightforward and easy to understand. The food security of a country is regarded as sound if the KUFSI approaches 1 and in great danger if the KUFSI is close to zero. The KUFSI is transparent, duplicable, and thus reliable. It is standardized so that the food security situation can be compared across countries and over time. Most of all, it is predictable so that early warning systems can be developed based on.
IV. Data
The self-sufficiency ratio uses data for domestic production and domestic consumption from the USDA's "Grain World Markets and Trade" and "World Agricultural Supply and Demand
Estimates (WASDE)". The data for the Engel co-efficient are obtained from the national accounts on the National Bureau of Statistics of each country. The GINI coefficients for the income inequality are from International Statistical Yearbook of National Bureau of Statistics
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in Korea.
The Moody‟s scores for economic stability are from the Research & Rating reported by
Moody's. The data for stock and consumption are from the Economic Research Service (ERS)
Yearbook (2001 ~ 2011).The grain prices are from International Commodity Prices of FAO.
The data for calorie term self-sufficiency ratio are from FAO‟s Custom Query.
V. Estimated Results
The KUFSI for each major commodity and the aggregate measure of Korea are shown figure
3 and appendix table 1. The numbers for the year 2011 are from prediction.
The index for rice was 0.74 in 2001, but fell down to 0.38 in 2006 when the world stock hit the record low in the last forty years. As figure 4 shows the world market situation (Mi) dominates the Korea‟s food security as other components are relatively stable. This is not good for Korea whose self-sufficiency ratio is less than 27%.
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2,50
2,00
1,50 Mi
1,00 Pi ES EA EI 0,50
KUSFI(Rice)
0,00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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As shown in figure 3, the aggregate KUSFSI of Korea shows a downward trend since 2001.
The average KUFSI is 0.37 which should have been much lower without rice. The average
KUFSI for rice is about 0.5 while those for the other crops are nearly zero. The food security in Korea is very fragile and unbalanced. Without rice Korea should face an immediate food crisis.
The KUFSI of four Asian countries is compared with that of the largest food exporting country, the United States in figure 5. The most food-secured country in Asia is Japan whose average KUFSI is 0.49 during 2001-2011. However, it is about a half of that of the U.S. The average for the U.S. is 0.95 with the standard deviation 0.08. As expected the country is very secure in food.
1,20
1,00 USA
0,80
0,60 JAPAN
0,40 KOREA CHINA 0,20 VIETNAM
0,00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
China, the most populous country in the world, seems fragile in food security, which can be a critical global problem. Vietnam whose economy as well as population grows fast looks most
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vulnerable in food security among the countries compared.
One of the top three credit rating agencies, Moody‟s has recently downgraded the Japanese sovereign credit rating from Aa2 to Aa3. This changed the KUFSI for Japan from 0.43 to 0.41 in 2011, a 5% reduction.
Figure 6 shows the calorie based KUFSI of Japan and Korea for which the self-sufficiency ratio in calorie term is available. Despite higher self-sufficiency ratios , the calorie based indices are much lower than the quantity based ones due mainly to the lo wer world market stock ratio . Since the calorie based KUFSI represents the country‟s overall and ultimate food security, the countries need immediate actions to strengthen the food security.
0,30
0,25
0,20
0,15 Japan
0,10 Korea
0,05
0,00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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VI. Concluding Remarks
This study developed a food security index that is consistent with four principles: boundedness, reliability, duplicability, and applicability. The index is called KUFSI which is easy to interpret and reliable. The KUFSI is composed of three components: physical, economic, and market component. The KUFSI is calculated in quantity term as well as calorie term.
The KUFSI measures a country‟s capability of accessing to food needed as a whole. The capability can be compared across time and with other countries. The index can also be used to build early warning systems for individual countries.
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References
Custom Query- the Foreign Agricultural Service, USDA.
Economic Research Service, Yearbook (2001 ~ 2011), USDA
Foreign Agricultural Service, “Grain World Markets and Trade” USDA, various issues.
International Commodity Prices, FAO.
Lee, Wonjin, “Development of New Food Security Index for Stable Supply-Demand
Management of Food,” NHERI Report 55(June 2009) (in Korean)
Park, H., et al., “New Strategies for Food Security in the Era of Global Food Crisis,” SERI
Report (Feb. 2011) (in Korean)
Pinstrup-Andersen, P., “Food Security: definition and measurement,” Food Science Vol.1
(2009):5-7
Moody‟s, Research & Rating (www.moodys.com).
National Bureau of Statistics, International Statistical Yearbook, Korea.
Sung, M., et al., “Strategies for Food Security in the 21th Century” KREI Report R416 (Dec.
2000) (in Korean)
World Agricultural Supply and Demand Estimates (WASDE), USDA.
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KOREA JAPAN CHINA VIETNAM USA 2001 0.60 0.77 0.43 0.26 1.12 2002 0.56 0.62 0.37 0.25 0.98 2003 0.41 0.46 0.28 0.19 0.93 2004 0.34 0.42 0.23 0.16 0.93 2005 0.31 0.40 0.24 0.14 0.82 2006 0.30 0.38 0.26 0.15 0.90 2007 0.28 0.43 0.25 0.14 0.91 2008 0.30 0.47 0.28 0.17 0.97 2009 0.34 0.50 0.32 0.20 1.03 2010 0.32 0.50 0.32 0.20 1.00 2011 0.30 0.41 0.28 0.15 0.85 mean 0.37 0.49 0.30 0.18 0.95 sd 0.11 0.11 0.06 0.04 0.08
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