Risks and Opportunities
As Baher Magulu sells maize flour to his customers at the Cashworth Mini Mart in Entebbe, Uganda, he doesn’t conceal his own surprise at the high price. In late May, one kilo of flour sold for 1700 Ugandan Shillings—200 more than it cost just one week earlier.
Unlike many African countries, local grain prices in Uganda were largely unaffected by soaring prices in 2008. Uganda is relatively isolated from global markets due in part to the high cost of shipping to this landlocked country. In addition, Uganda is self-sufficient in terms of national food production.
In early 2009, however, the story began to change. Between December 2008 and April 2009, local maize prices in Uganda increased by 4.6 percent. Increased exports to neighboring countries, including Kenya and the DRC, have been driving maize prices up, explains Mr. Magulu.
While producers may reap some benefits from the price increase, consumers are more likely to suffer from it. Understanding the nature and size of price effects has important policy implications. Within a given country, for example, the effects of a price increase can vary greatly across regions or districts. The impact on welfare can also differ at the household level, where women and girls often have less access to food and other resources.
According to a new IFPRI study, How Does Food Price Increase Affect Ugandan Households? An Augmented Multimarket Approach, policy responses need to take these conflicting effects and other factors into account if they intend to successfully assist both poor consumers and producers.