KEY MESSAGES
è Factors driving the cost of nutritious foods are found throughout food systems, in the realms of food production, food supply chains, food environments, as well as consumer demand and the political economy of food.
è Food production: Low levels of productivity, high production risks and insufficient diversification towards the production of more nutritious foods are key drivers of the cost of healthy diets, especially in low-income countries.
è Food supply chains: Inadequate food storage, poor road infrastructure and limited food preservation capacity, especially for highly perishable foods, lead to food losses and inefficiencies along the food supply chain that drive up the cost of nutritious foods.
è Food environments: In both urban and rural areas, the lack of physical access to food markets, especially to fresh fruit and vegetable markets, represents a formidable barrier to accessing a healthy diet, especially for the poor.
è Consumer demand: Rapid rates of urbanization have resulted in more work-away and
eat-away-from-home habits, with a direct impact on the demand for easy-to-prepare, highly processed foods or convenience foods that are often energy dense and high in fats, sugars and/or salt and do not necessarily contribute to healthy diets.
è Political economy: Trade policies, mainly protectionary trade measures and input subsidy programmes, tend to protect and incentivize the domestic production of staple foods, such as rice and maize, often at the detriment of nutritious foods, like fruits and vegetables. Non-tariff trade measures can help improve food safety, quality standards and the nutritional value of food, but they can also drive up the costs of trade and hence food prices, negatively affecting affordability of healthy diets.
è Addressing some of these drivers to reduce the cost of nutritious foods implies the need to also tackle environmental externalities associated with current food systems and the hidden cost they create, particularly at the food production level, but also at the consumption level.
As shown in the cost and affordability analysis, even the most conservative cost estimate of a healthy diet is unaffordable for more than 3 billion people in the world. To understand what is driving the high cost of healthy diets relative to people’s incomes, we need to look at their most costly food groups. As was shown previously, the highest-cost food groups in a healthy diet are those that are more nutritious: dairy, fruits, vegetables, protein-rich foods (plant-based and animal source), with some variations by region (Figure 27). Therefore, to increase the affordability of healthy diets, the cost of these nutritious foods must come down.
Global food price developments represent an important indicator of changes in the cost of food at country levels.am Following a long period of decline during the twentieth century, food prices of major commodities, including meat, dairy, cereals, vegetable oils and sugar, rose sharply during the first decade of the twenty-first century. By 2011, price indices for these commodity groups more than doubled (even tripled for some). Since reaching a peak in 2011–2013, global prices of these major commodities have dropped by about 29 percent, although meat and dairy prices declined less by about 15–19 percent from their highest levels.134 Recently food markets have been confronted with significant uncertainties that affect the price of foods, ranging from a fast-changing trade environment to the rapid spread of African Swine Fever over several continents, Desert Locust outbreaks in Eastern Africa and Southern Asia, and the devastating impacts of the COVID-19 pandemic on economies and markets of so many countries around the world (Box 16). These major events place upward pressure on food prices, thus
am Price trends reported here stem from the FAO Food Price Index, which is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices, weighted with the average export shares of each of the groups for 2002–2004.134
affecting the cost and affordability of healthy diets. The full impact of COVID-19 on food prices remains to be seen.
Affordability of diets is determined by the cost of food relative to people’s incomes. The 2019 edition of this report addressed the relationship between food security, nutrition and poverty.
It showed that poverty and inequality reduction is critical to improving people’s capacity to access sufficient and nutritious food, pointing to concrete policy recommendations, some of which are revisited in the last section of this part of the report. While the broader issue of how to increase people’s incomes is at the core of economic development,144 this topic is beyond the scope of this year’s report. On the other hand, increasing affordability through food price reductions is not as widely studied, hence the drivers of the cost of foods, rather than the drivers of people’s incomes, are the focus of this section.
Many factors determine the consumer price of nutritious foods, from the point of production throughout the food supply chain and also within the food environment, where consumers engage with the food system to make decisions about acquiring, preparing and consuming foods.
As food systems have become more globalized, industrialized and dominated by large actors capable of economies of scale and of maintaining long supply chains,145 this has had different effects on food prices and the affordability of various diets across countries. Other drivers, including rising incomes, increasing urbanization and changing consumer demands, have
led to food markets becoming outlets for mass-produced and highly processed foods, often energy-dense foods of minimal nutritional value that are high in fats, sugars and/or salt.145 This has resulted in vegetables, fruits and
animal source foods often being too expensive or inaccessible to many households, leading to low nutritional quality diets.
Within the broad context of these global trends, the unique structure and performance of a multitude of food systems (and their supply chains) at national, subnational and municipal (or community) levels imply different cost structures for nutritious foods in different
locations. Some of the cost drivers, such as »
wreaking havoc on the world economy* with multiple effects on people’s reduced capacity to access healthy diets. Record levels of unemployment, lost livelihoods**
and rising poverty levels*** will cause healthy diets to become even more unaffordable for the more than 3 billion people estimated in this report. This number is likely to rise during the course of 2020.
There is sufficient food, but millions risk not having access to diverse and nutritious foods. Globally, enough food is being produced or in stock to meet dietary energy needs. But border closures, quarantines, market, supply chain and trade disruptions are restricting people’s physical access to sufficient, diverse and nutritious sources of food, especially in countries hit hard by the pandemic or already affected by high levels of food insecurity.135 High value perishable commodities are going to waste, as essential workers in food and agriculture are barred from crossing borders and food supply chains are being disrupted.136Closure of informal markets may exacerbate unaffordability healthy diets. Estimates based on scenarios modelling the potential impacts of the COVID-19 pandemic on the number of undernourished people in the world are presented in Part 1 (see Box 3), while the possible impacts on malnutrition are presented in Box 4.
Currently, in low- and middle-income countries, the lives and livelihoods of an estimated 265 million people are under severe threat unless swift action is taken to address the impact of COVID-19.137
Food losses are increasing as food supply chains are under strain. In spite of major efforts to keep open food production, processing, trade and transportation networks, and access to food markets and retail outlets, there are reports of significant food losses, especially of fruits and vegetables, fish, meat and dairy products.138 Furthermore, travel restrictions are causing severe labour shortages in food and agriculture production and processing industries, leading to production and supply disruptions. Middle- and high-income countries have been most affected by increased levels of food losses as producers cannot market their produce putting upward pressures on food prices, especially of perishable commodities.136
prices varies tremendously across and within countries, between urban and rural areas and across different food groups. The depth and length of the economic crisis, and to what extent corrective policy measures are taken and implemented in a coordinated manner will determine if rises in food prices can be avoided. Most importantly, trade channels must stay open to prevent food price rises. Both exporters and importers of foods should agree not to impose trade barriers in response to the pandemic. Countries should eliminate existing export restrictions, including export taxes and export bans, while also reducing tariffs to facilitate imports.139
Evidence of impact on food prices. At the time of writing, few countries had reported significant rises in food prices, except for a number of local markets because of temporary food shortages. In Western Africa, countries like the Central African Republic, Gambia, Liberia, Mauritania, Niger, Senegal and Sierra Leone, where the market situation was already fragile, may face further deterioration. In several of these countries non-seasonal price increases of 10–20 percent have already been recorded in monthly variations for food products. In countries hardest hit by the pandemic, there has been a reduction in the demand for fruits, horticultural and other perishable products, such as aquatic products, leading to a decline in food prices.
The poultry and egg food production chains have also faced strong downward price pressures.138
Impact on some of the most vulnerable populations.
Migrant workers have been affected by lockdowns, trade disruptions, layoffs and illness, while their capacity to send remittances to their home countries has dropped significantly. This will affect families especially in Bangladesh, Ethiopia, Indonesia, Kenya, Nepal, Nigeria, Somalia, Tajikistan and many others, where remittances make up a large proportion of the income of poor households.
Policies to counter the negative effects of the COVID-19 pandemic on food systems worldwide should prevent significant increases in the cost of nutritious food and support affordability of healthy diets. Recommendations are presented in Box 21.
* The IMF expects the world economy to contract by 3 percent in 2020, much worse than during the 2008–2009 financial crisis.140
** ILO estimates that 1.6 billion workers in the informal economy (nearly half the global workforce) risk losing their livelihoods and the equivalent of 305 million full-time jobs will be lost during the second quarter of 2020 (10.5 percent lower than end 2019).141
*** The World Bank estimates 40–60 million people will fall into extreme poverty (< USD 1.90/day, half of which in SSA) and 90–100 million will fall below the USD 3.20/day poverty line (half of which in Southern Asia). Other estimates from UNU-WIDER place the figures much higher and suggest that about half a billion people worldwide could be pushed into poverty due to COVID-19.142,143
food losses and waste, cut across food systems, whereas others vary by food group or are specific to the country context, such as domestic policies aimed at increasing the availability of staple foods. International trade and related government policies and the aspects of the political economy of food also represent major drivers of the cost of nutritious foods. Finally, climatic shocks (as highlighted in the 2018 edition of this report) and other unexpected shocks, including those caused by infestations and diseases at the regional level (e.g. African Swine Fever or Desert Locust outbreaks) or at the global level (COVID-19) are becoming more frequent and severe, often disrupting the world’s food supply chains.
Hence, food systems today are facing huge challenges in adapting to a multitude of
developments. They simultaneously face demands to ensure that healthy diets are affordable not only to a growing urbanized world population but especially also to the majority of the poorest living in rural areas. While production and processing advances have made food more convenient, widely available and affordable for large portions of the world,146 these same food systems are a dominant driver of the increased availability of energy-dense foods of minimal nutritional value that are high in fats, sugars and/
or salt. They are also a driver of health threats like NCDs and many environmental threats, including climate change, biodiversity loss, and degradation of land, soil and freshwater.
This section focuses on four main sets of drivers determining the cost of food. The following drivers are specifically covered:
1. Cost drivers that relate to the production of diverse nutritious foods that contribute to healthy diets (insufficient diversification and low productivity; low levels of technology;
pre-harvest and post-harvest losses;
seasonality and other climate risk factors;
insufficient investment in R&D, limited access to knowledge and information).
2. Cost drivers that relate to the food supply chain beyond food production (inadequate food storage, handling and preservation, especially of perishable foods; food losses beyond
pre-harvest and post-harvest losses; poor road networks and limited transport capacity).
3. Cost drivers that relate to the food
environment as well as consumer demand and behaviour (population growth, urbanization, access to markets; food preferences and culture; consumer knowledge and behaviour).
4. Cost drivers that relate to the political economy of food (including the unique impact of food and agricultural policies on the cost of nutritious foods; trade measures and government policies that favour energy-dense foods of minimal nutritional value over nutritious foods; public expenditure;
unfavourable trade mechanisms and the impact of food and agriculture industry lobbying on the cost of nutritious foods).