Impacts of COVID‐19 induced income and rice price shocks on household welfare in Papua New Guinea: Household model estimates

Abstract

Concerns over the potential effects of the COVID‐19 pandemic have led to trade restrictions by major rice exporters, contributing to an average 25% increase in Thai and Vietnamese rice export prices between December 2019 and March–September 2020. This article assesses the consequences of these rice price increases in Papua New Guinea (PNG), where 99% of rice is imported. Utilizing data from a PNG 2018 rural household survey along with earlier national household survey data, we examine rice consumption patterns in PNG and estimate demand parameters for urban and rural households. Model simulations indicate that a 25% rise in the world price of rice would reduce total rice consumption in PNG by 14% and reduce rice consumption of the poor (bottom 40% of total household expenditure distribution) by 15%. Including the effects of a possible 12% decrease in household incomes because of the COVID‐19 related economic slowdown, rice consumption of the urban and rural poor fall by 20% and 17%, respectively. Maintaining functioning domestic supply chains of key staple goods is critical to mitigating the effects of global rice price increases, allowing urban households to increase their consumption of locally produced staples.

Impacts of the COVID-19 pandemic on food prices: Evidence from storable and perishable commodities in India

“…In sum, COVID-19 affected both supply and demand of food markets, resulting in higher food prices, leading to food insecurity and poverty in many developing and emerging countries. As mentioned above, various studies have investigated economy-wide impacts of COVID-19 induced turmoil [ 45 , 46 ], effects on labor markets [ 23 , 33 , 47 , 48 ], household income and food security [ 14 , 26 , 28 , 36 , 38 , 49 – 52 ], and trade flows [ 41 , 53 ]. However, the literature on price effects of the COVID-19 pandemic is minimal.…”

Consumer research in Papua New Guinea: Exploring preferences and purchasing behaviours for staple foods in an urban market

“…A devaluation of the Kina in 1994 and again in 1998 saw the cost of the predominately imported rice increase significantly, making local fresh produce relatively more affordable (Mellor, 2010;Sharp, 2021). Consequently, research from 2009/2010 found urban households were consuming 59.2 kg per person annually, down from its peak in 1996 (Schmidt et al, 2021). Covid-19 related shocks in 2020/2021 have seen the price of rice increased by 30%, and urban incomes reduced by 15%; thus household rice consumption has reduced by almost 20% (Schmidt et al, 2021).…”

“…Consequently, research from 2009/2010 found urban households were consuming 59.2 kg per person annually, down from its peak in 1996 (Schmidt et al, 2021). Covid-19 related shocks in 2020/2021 have seen the price of rice increased by 30%, and urban incomes reduced by 15%; thus household rice consumption has reduced by almost 20% (Schmidt et al, 2021). Prior to Covid-19 related shocks, authors had proposed that the growth in rice consumption in Port Moresby had plateaued (Bourke and Harwood, 2009;Gibson, 2019).…”

“…The availability of fresh produce has reduced in Port Moresby due to decreased shipments of fresh produce from the Highlands. The fresh produce that is available remains affordable because it is locally produced, yet estimates predict a decrease of up to 20% in total calorie consumption of urban consumers due to income losses which will decrease the quantity of fresh produce consumed (Diao et al, 2021;Schmidt et al, 2021) impacting those marketing fresh produce into Port Moresby.…”

Papua New Guinea agri-food trade and household consumption trends point towards dietary change and increased overweight and obesity prevalence

“…We disaggregate the BACI 6-digit trade database by food type to evaluate changes in agri-food trade, by average volumes and values over two five-year periods (2001–05 and 2014–18). 2 Overall, agri-food imports comprised 16% of total imports between 2014 and 2018 and remain crucial to supporting food security and dietary diversity within PNG [ 42 ]. Rice and wheat (flour) combined comprised 24% of total agri-food imports between 2014 and 2018, with rice imports making up the largest share (16%) of overall agri-food import values (Table 1 ).…”