Annex 1


* Markets do not function in the ideal manner as assumed in our model. There exist, in
 reality, substantial market fragmentation and market rigidities which prevent the
 market from passing on price and market signals and from co-ordinating effectively
 supply and demand. Market rigidities are often reinforced by official market and price
 regulations which lead to the emergence of parallel markets. Although parallel markets
 function, in principle, according to the 'laws' of a liberal market system, they are strongly
 influenced by the regulations of the official marketing system. The interaction between
 both marketing systems and the combined effects on the food situation deserve special
 attention, if a specific country case is studied.

* Long-run versus short-run effects: While, for example, an increase in food prices leads
 to an immediate increase in the nominal income of producers (and/or traders) and a
 decrease in the real income of consumers (with corresponding effects on food demand),
 the incentive effect on production may take some time to materialise. Negative short-run
 effects may be outweighed by positive effects in the long-run, but still be a matter of
 concern, if they worsen the position of already food insecure households. People may be
 dead before the trees bear fruit. This problem is a main subject of the discussions on the
 'social dimensions of adjustment' and has been expressed in the question: 'present pain,
 future hope?' (Woodward 1992).

 Positive effects of certain economic parameter changes on the food situation may not come
 through or may be blurred or outweighed by negative effects on another side. There are
 always gainers and losers. Even the same household may gain in one and lose in another
 respect. What counts is the net real impact on food supply and demand on those who are
 exposed to chronic, transitory, and latent food insecurity. In order to arrive at relevant
 conclusions, the macro-approach analysing the effects of economic parameter changes on
 aggregate food supply and demand needs to be broken down and complemented by micro-
 analyses of the effects on food security of specific population groups and at the individual
 household level.

 There is no easy and no general answer to the issues raised above. How food supply, demand
 and overall food security are affected by certain policy measures and economic parameter
 changes depends on the particular situation of a country, the socio-economic structure, the
 characteristics of prevailing food deficits, and on the specific types, dimensions, and policy
 package pursued and parameter changes induced. Therefore, an assessment of the effects of
 policy measures on the food situation can only be done on a case to case and country specific
 basis.

 The concepts presented above assist in such efforts, by providing the framework for an
 assessment of the structure and the determinants of the food situation of a country. It has
 become clear which factors need to be considered in analysing the food economy, and in
 which way changes in economic parameters affect the levels of food supply, demand, the
 structure of food deficits and the state of food security.


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