CONSEQUENCES OF THE CRISIS 63


data have not been updated to a large set of countries and mostly pertain to 2007. Hence we do not report it here (see Headey and Fan 2008). Nevertheless, to demonstrate the importance of the distinction between nominal and real prices, and between food CPI trends and individual com- modity trends, we look at the very instructive case of Nigeria. In that country the nominal food CPI increased by 50 percent from January 2005 to the end of 2008. However, inflation in the rest of the economy (the nonfood CPI) was sufficiently high to minimize real price changes. Indeed, the real food- price index was lower in 2008 than it was in mid-2005. When we compare this index to the average of four staples, also in real prices, we see only a broadly similar story with one critical difference. The broad similarity is that real prices for the four-staple average in 2008 were indeed lower than they were in 2005. The critical difference is that staple prices doubled between September 2007 and late 2008, which the food CPI barely registered. The Nigerian example is pertinent because it shows that price changes may be rapid, but not large relative to historical norms or to inflation in the broader economy.


Figure 3.3 demonstrates three things: (1) it is vital to look at real prices; (2) it may be important to focus on the key staples that make up a large por- tion of a poor person’s consumption rather considering the broader CPI; and (3) it may be important to look at food price changes in 2008 because of the speed of price changes. An assessment of individual commodity trends across countries was initially quite difficult in the current crisis because of the pau- city of data on both wholesale and retail prices in developing countries (Headey and Fan 2008). However, the crisis prompted a significant scaling up of local food-price collection and dissemination by such bodies as USAID/Famine Early Warning Systems Network (FEWSNET), the WFP, and the GIEWS, among others. For the commodity-level analysis below we use the new GIEWS (2009) dataset, which reports real food price trends for more than 50 countries and a wide range of commodities. Although impressive in scope, the GIEWS dataset is unbalanced in that different commodities are reported across countries, some- times in wholesale prices and sometimes retail, and variously as processed (for example, bread) or semi-processed (for example, flour). So Table 3.3 reports some broad price trends by commodity, whereas Table 3.4 explores the heterogeneity in price movements by making use of cross-country and cross-commodity regressions. The descriptive statistics in Table 3.3 relate to the average real price change for each commodity between a given month in 2008 and the corresponding month in 2007, thereby taking account of seasonality. The statistics show that the real monthly prices of commodities were significantly higher in 2008 than they were in the corresponding months of 2007. Prices were highest for potatoes (only five


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