Changes in food prices – triggeredfrequently by natural disasters, macroeconomic shocks orregional market disruptions– can lead to large householdwelfare effects. At over 60 and 40 percent, food budgetshares remain high in rural and urban Mozambique,respectively. Furthermore, nearly 70 percent of thepopulation depends on agriculture for their livelihoods. Todetermine the net impact of food price changes onconsumption and poverty, we performed incidence analysiscombining household and farmer survey data withdisaggregated, market-level price data on major staples(maize, rice, and cassava). Overall, we find evidence for alarge net negative welfare effect of price rises in ruralareas, and a small, negative effect in the urban areas. Forinstance, A 10 percent increase in maize prices isassociated with an average reduction of 1.2 percent inconsumption per capita in rural areas and 0.2 percent inurban areas. Not all households are affected equally.Overall, the negative impacts are larger for the bottom halfof the distribution. As a result, the sharp food price spikeobserved in 2016–17 may have translated into a povertyincrease of 4-6 percentage points, with some of the poorestprovinces bearing much of the brunt. These findingsunderscore the importance of improving the functioning ofagricultural input and output markets, developing early foodsecurity warning systems, and increasing the availability ofrapidly scalable safety nets.
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