Unit 10 Policy for Increasing Food Availability

Question 1

4 ways to increase total production

Answer 1

1 o Area:
Inequality in land holding slows production growth;
Technical improvements and intensification
Global expansion of farming land: clear forest land; side effects = climate change = threat to future production
Food price rise -> land pressure, e.g. large-scale acquisition in Africa by e.g. Saudi Arabia. LAND GRAB:
• Social and environmental concerns of Land grab (UN special rapporteur)
o Cultural meaning of land
o Social status
o Lifeline for poorest
o Weak governance
o Locals don’t benefit, lose access
• Arguments: More efficient production –> cheaper food and employment (benefits have not materialized!)
• Smallholder (“efficient” – Wiggins) vs. large scale (“necessary” – Collier) farming debate underlying land grab
optimal scenario: Small holders pull out of farming into urban areas due to OPPORTUNITIES, allowing land holding consolidation; long term process; land grab may increase AVAILABILITY but at EXPENSE of SHF

2 o Yield:
yield gap: ration of crop yield to economic potential yield (East Asia: 10%; South America: 50%; SSA: 75%)
Technical options to increase yield: HYV, soil/water mgmt, fertilizer, pesticides, mechanisation
investment obstacles: profitability, riskiness, affordability, system fit (farming, marketing)

3 o Reduce losses /wastage (estimates: 20-40%)
5 sources
• Agricultural production: mechanical damage, spillage, post-harvest sorting
• Post-harvest handling and storage, transport between farm and distribution
• Processing: industrial, domestic processing (accidental spillage, sorting out)
• Distribution: losses and waste in market system (wholesale, supermarkets, retailers…
• Consumption: at household level

% losses? •	Non-perishable (cereals): 20-35% losses (North America: at consumption; SSA: at agriculture, post harvest level) •	Perishable (fruit, vegetables): 35-55% losses (North America: at production and consumption; SSA: at processing level)

4 o	Reduce  risk
	3 sources: 
•	Production (rain, pests, diseases)
•	Price changes
•	Own health

Consequences: Risk –> low investment -> low profit

10.1

Question 2

“Market”
“Value chain” - national, international
“Arbitrage” - 3 obstacles?

Answer 2

“Market”: arrangement where ownership is transferred and forces of supply and demand set, confirm or modify a price
o Input market: seeds, fertilizer, fuel /Output market: farm products; traders, forward purchasing arrangements with large companies
o Importance of well functioning input and output markets for food availability and access (price fluctuation) (p.25)

“Value chain”: chain of activities which adds value to products, carried out by single or multiple firms; value chain break down if single broken link (e.g. due to poor roads)
o Local/national: Smallholder Farmer –> Micro bulkers – > middle men –> M/L processor (-> farmer retail/wholesale) or miller or micro-retailer (-> consumer) or S/M/L food processing (->retail)
o Interaction with international:
 Agri-business (Archer-Daniels Midland; Food manufacturers (Kraft, Nestle); Fast food Franchises (McDo); Retailers (supermarkets, Wal-mart); TNC franchises
 interact with SHF, local producers, local franchises, local retailers
 determine food consumption patterns
o Majority of added value by assemblers, manufacturers, wholesalers, retailers, eating places.
 Farm value = 20% vs. marketing bill (labour, packaging, transport etc.) = 80% (USA 2000)

Arbitrage: trade/storage essential for food availability from year to year and across year
o Spatial arbitrage: balances prices across locations (transport from surplus to deficit area, incentivizes production in deficit area) -TRADE
o Temporal arbitrage: surplus kept in storage by farmers til end of seasons (better prices) – STORAGE
o 3 obstacles to arbitrage
 High transport/ storage cost (and risk)
 Imperfect information, uncertainty (e.g. time lag, information asymmetry btw farmers and traders)
 Transaction cost (ex ante- make deals, sign, quality check; bribes; risk of deal failure)

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Question 3

Challenges in food marketing/trade/storage

Answer 3

o Access: Sen’s famine analysis: export from starving region because markets respond to demand (purchasing power) –> government intervention to increase purchasing power?

o Comparative advantage (INTERNATIONAL TRADE THEROY) but concerns about food import:
 Requires FX
 Internationally available commodity may not be preferred one
 Short notice of imported food price rises cause upheaval (e.g. 2007-08)
 Short notice on bans on export or conflict closes borders
Though self-sufficiency is not a reliable, viable objective (e.g. N. Mozambique imports across border due to easier access than from South)

o Storage smoothes prices and availability, but involves risks:
 Warm climates – mould, pests
 Holds up capital that could be invested
 Attacks on traders’ stocks leads to suboptimal storage suppyl

o International storage, mainly US and China
 Low international stock -> panic buys –> food price spike (e.g. 07/08)

o Globalisation of food system (…)

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Question 4

Globalisation of the food system: threats and opportunities

Answer 4

Increasing world food trade; TNCs: ABCD companies (Archer Daniels Midland, Bunge, Cargill, Louis Dreyfus) dominate world grain trade; climate change will exacerbates importance of international trade

Threats
o Cheap imports outcompete locally produced; exacerbated by OECD subsidies and middle class preference of imported food (e.g. wheat imports in SSA (…))
o High fx cost of imports, opportunity cost of national production
o Supermarkets crowd out traditional markets and small traders
o Displacement of smallholders: lower quality standards, longer time lines, remoteness, small-scale production
o Traditional societies undermined
o Encourages junk food vs healthy local food
o Destroys the environment
o Take-over by few TNCs

Opportunities: Supermarkets develop value chains for regular and diverse supply to feed growing middle class; traditional food system unable to feed growing population and demands change, scaling up

10.1.

Question 5

Policy interventions to increase availability

Answer 5

Intervention (see Social Protection Programmes spreadsheet)
o	Increase production
o	Increase marketing/storage
o	Wider policies
o	Other countries

Question 6

6 Policy challenges and controversies concerning availability

Answer 6

• (1) How much gvt intervention to support producers and stabilize prices?
o Food sector specific: dependence on external factors and poorly integrated markets cause price swings
o Policy dilemma of high vs. low food prices (hurts consumers vs. farmers)
o Price stabilization: success at early stages, but risk of inefficiencies and corruption; dismantling has to be done with care (e.g. 80s SAP, free markets, though no true state withdrawal happened, and private sector ignores small farmers, threatening survival)

• (2) What types of farming support to prioritise?
o Public good investment (infrastructure – future benefits) vs. transfer subsidies (inputs – immediate benefits)
o 3 phase approach: Basics (infrastructure, extension, land reform), Kick-start markets (seasonal finance, input subsidies, reliable output markets), Withdrawal (private sector take-over); poor sequencing explains failure of approaches
o Poor implementation - policy failure, clear communication of policy intention, not to delay agreed policy; … …

• (3) Does SP help increase production?
o Evidence of positive effects, active area of research
o 1- safety nets create assets, 2- protect assets, 3- help risk coping and effective use of resources, 4- inequality reduced, raises growth rates, 5- supports local consumers, helps support local markets

• (4) Large vs small farms to be supported?
o Large farms: e.g. Africa is land abundant, low growth history in small farm sector
o Small farms: equity and access considerations, economies of scale may not work in practice

• (5) Focus on high-potential zones?
o High-potential: total food production increases – though it’s country/situation specific
o Low-potential: equity and access concerns

• (6) Agricultural chemicals essential?
o Yes: only way to increase world food production sufficiently; sustainable initiatives are only tiny, expensive projects, not scalable
o No: unnecessary overuse and careless use harms environment

10.2

Question 7

Factors with highest impact on productivity in SSA

Which interventions have had the most impact on food production?
- India

Answer 7

•	Developing countries vs. SSA most impact 60s-00s
o	TFP (Total factor productivity: most important in developing countries, second most important in SSA)
o	New land (most important in SSA)
o	Inputs/hectare (fertilise, pesticides) (second most important in developing countries on average, but use decreasing sharply)
o	Irrigation (n/a in SSA); 

India 60s -90s most impact?
• Impact of public investment and subsidies on agricultural performance in India: highest returns in
o 60s, 70s: Roads, credit subsidies, education, power subsidies
o 80s: Roads, R&D, Education, Irrigation
o 90s: R&D, Roads, Education, Irrigation
• R&D : highest public investment returns across time and space
o Example: Boro rice, Bangladesh: 60% increase…
o Research challenges: less scope to increase yield to full potential and exceed it, new technologies needed
o Concerns: genetic modification affects health, environment; technology is not neutral: SHF, women, and farmers in low potential areas benefit less, e.g. green revolution benefitted farmers in optimal production environment –> long-term consequences on structure and location of food availability

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Question 8

Alternative visions, conclusions concerning food availability policy?

Answer 8

o Question faced by policy-makers: what production /marketing system? (shf, large, both?); values espoused? (equality, biodiversity, tradition/culture/localism, animal rights?)
o Complexity of issues – difficulties
o UN: considering charter of peasant rights (2012)
o Food sovereignty movement (local control)
o Difficult to agree on common definition and objectives,
o Added difficulty: population and consumption growth

10.2