1. Market Analysis for Effective Food Security Programming
IFADC
May 7, 2012
Prepared by USAID-BEST Project/Fintrac Inc.

2. 2012 IFADC: Market Analysis Overview
Theory: Key Elements & Approaches
Practice: Challenges & Insights
Q&A
Fintrac/USAID-BEST Ethiopia Study, 2010

3. Food Aid: Intervention Tools
To improve food security for vulnerable populations, donors can use a number of food aid tools:
Direct distribution
Monetization
Local or regional procurement (LRP)
Cash transfers
Vouchers
Fintrac/USAID-BEST Zimbabwe Study, 2012

4. Market Analysis to Maximize Impact & Efficiency, Minimize Risk
We want to maximize food security impact, and maximize efficient use of scarce resources
We don’t want to risk hurting the very people we are trying to help, by:
Encouraging dependency
Putting people out of business
Competing with farmers for labor
Supporting corruption
Supporting uncompetitive markets
Creating inflation
Fintrac/USAID-BEST Guatemala Study, 2011

5. How Does the Market View Food Aid?
Distributed food aid:
An increase in the local food supply
An (in-kind) income transfer to a household
Monetized food aid:
An (ad hoc) increase in the local food supply induced by a non-commercial market actor
Local procurement of food aid/cash/vouchers:
An (ad hoc) increase in demand for the local food supply
Fintrac/USAID-BEST Guatemala Study, 2011

6. What Happens When Supply Increases?
Price
Monetized/Distributed
P0P0 Pe
P0P1
Demand D0 Q0 Q0 Q1 Q1
Quantity supplied or demanded
Fintrac/USAID-BEST Zimbabwe Study, 2012
Fintrac/USAID-BEST Ethiopia Study, 2010

7. What Happens when Demand Increases?
Supply S0
Price
LRP/cash/
vouchers P1 Pe P0
Demand D1 D0 Q0 Q1
Quantity supplied or demanded
Fintrac/USAID-BEST Zimbabwe Study, 2012
Fintrac/USAID-BEST Ethiopia Study, 2010

8. Key Factors to Safeguard Markets
Distributed food aid:
Effective targeting (who, where, what, when, how much)
Monetized food aid:
Fair market price
Volumes small relative to local market’s supply
LRP/cash/vouchers:
Supply able to expand to increased demand
Fintrac/USAID-BEST Zimbabwe Study, 2012

9. Moving from Theory to Practice
Analytical frameworks
Data/information needs
Real-life challenges
Fintrac/USAID-BEST Guatemala Study, 2011

10. What Types of Analytical Frameworks Exist?
Market Information Food Insecurity Response Analysis (MIFIRA)
Emergency Market Mapping and Analysis (EMMA)
Structure Conduct Performance (SCP)
Fintrac/USAID-BEST Zimbabwe Study, 2012

11. Market Information Food Insecurity Response Analysis (MIFIRA)
Development/emergency
Designed for specialist?
Key feature: decision tree

12. Emergency Market Mapping and Analysis (EMMA)
Designed for layman
Key feature: market map

13. Structure Conduct Performance Framework
Basic conditions: Seasons and seasonality, infrastructure, consumer preferences, income distribution, stability, government policies
Conduct
behavior and strategies of market actors (price setting behavior, buying and selling practices, informal norms of trade, and information use)
Performance
outcomes of market interactions (e.g. prices)
Structure
relatively stable features of market environment (# and concentration of buyers and sellers, barriers to entry and exit, vertical and horizontal coordination, and licensing requirements)

14. Do I Really Need One of Those Analytical Frameworks?
Depends on objective…
Cherry pick from one framework based on your objective:
MIFIRA – which response is most appropriate
EMMA – inform emergency response
SCP – broad understanding of markets
Fintrac/USAID-BEST Guatemala Study, 2011

15. What Do We Need to Know, and Where Do We Find It?
Household needs (demand)
How local markets ‘work’ (supply, demand, price formation)
Primary sources
Secondary sources
Secondary
Vulnerability assessments, livelihood profiles, consumption and expenditure surveys
Crop assessments
Trade statistics
Price monitoring: gov’t, FEWS, WFP, FAO, etc.
Primary
Formal and informal surveys of market actors (producers, traders, wholesalers, retailers, consumers) – esp. producer and trader conduct

16. How Do We Get the Information We Need?
Desk research
Existing market analyses including past Bellmon analyses, food security reports
Prices, production, trade, and food aid data from international and local data collection systems
In-field research
Interviews with private sector, various levels of government, communities, NGOs, and UN agencies
Market visits
Fintrac/USAID-BEST Zimbabwe Study, 2012

17. What we’ve covered:
Basic principles
Analytical framework
General data/information needs
So, now what?
Practical challenges translating theory into practice

18. Practical Challenge
Production, trade, and food aid data from desk research are often unreliable or incomplete

19. Production
Lack of resources to conduct frequent assessments
Sometimes politicized
Validation in field is critical, but also imperfect

20. Imports
Lack of resources to monitor and report
Importers’ incentive to evade customs duties

21. Food Aid
Not all donors report to online databases
Among donors who report, reporting is often inconsistent
FY vs CY vs MY
Does not specify whether monetized or distributed food aid

22. Commodity markets are complex.
Practical Challenges
Commodity markets are complex.
Fintrac/USAID-BEST Haiti Study, 2011

24. Questions So Far?
Market Analysis: Piece of Cake, or Piece of Work?

25. Practical Challenge
People sometimes tell you what they think you want to hear…or what they want you to believe.
Fintrac/USAID-BEST Haiti Study, 2012
Fintrac/USAID-BEST Guatemala Study, 2011

26. Lack of market information systems Asymmetries Fair market price
Definition
Types
Lack of market information systems
Asymmetries
Fair market price
Objective measure of fair market price: Import Parity Price (IPP)
Fintrac/USAID-BEST DR Congo Study, 2010

27. Import Parity Price (IPP)
Value of a unit of product brought from a foreign country and priced at a geographic location of interest in the importing country.
Fintrac/USAID-BEST Honduras Study, 2011

28. Calculating IPP:
Import data (assess likely country of origin)
Commodity cost (in likely country of origin)
Ocean transport (from likely country of origin)
Insurance fees, port charges at port of entry
Custom duties and taxes (if applicable)
Inland transport costs to eventual point of sale (if applicable)
Storage, operational fees, etc. (if applicable)

29. Determining Country of Origin
Ex: UN Comtrade – Wheat Imports

30. Example of IPP Calculation
Refined Soybean Oil
No.
Item
Source
US$/MT 1
Refined Soybean Oil Ex Rotterdam
USDA FAS Data.
748 2
Ocean Freight
Marill Freight 50 3
Insurance
1% of #1
7.5 4
CIF Djibouti
#1+#2+#3
805.5 5
Customs Duty
30% of #4
241.6 6
VAT
15% of (#4+#5)
157.1 7
Withholding Tax
3% of #4
24.2 8
Port Charges, handling etc.
Axis Transit Services
39.5 9
Inland Freight
41.1 10
Storage
ECEX 11
Packaging
Whey Consulting Ltd.
119.5 12
Administration
World Bank Salary Data
4.0 13
Total Import Parity Price
Sum(#4:#12)
1440.1

31. Practical Challenge
USG implementing partners have rich experience with demand-side constraints
Newer tools -- LRP/cash/vouchers -- require understanding supply-side constraints as well
Fintrac/USAID-BEST Haiti Study, 2011

32. Practical Challenge
Markets are dynamic.

33. Resources
USAID-BEST
Reading Lists
List of Data & Information Resources
Trade groups
Government ministries
Universities
TOPS, Learning Alliance, FEWS NET, FAO, etc.
External organizations
Your colleagues

34. Market Analysis for Effective Food Security Programming
Questions?
Comments?
Fintrac/USAID-BEST Peru Study, 2011
Fintrac/USAID-BEST Haiti Study, 2012

35. Prepared by USAID-BEST Project/Fintrac Inc.
Thank You!
IFADC
May 7, 2012
Prepared by USAID-BEST Project/Fintrac Inc.