Does freer farm trade help poor people?
THE global food crisis has shone a harsh spotlight on the consequences of government meddling in agriculture. Poor people go hungry, in part, because Americans pay their farmers to divert crops from food to fuel. But in at least two areas, the crisis has emboldened those who are sceptical of free markets in food.
The first is “food security”. Politicians in rich and poor countries have seized on recent price spikes as proof that free farm trade is a risky business and self-sufficiency a worthy goal. The second area concerns the poor. For years reformers have advocated freer trade on the grounds that market distortions, particularly the rich world's subsidies, depress prices and hurt rural areas in poor countries, where three-quarters of the world's indigent live. The Doha round of trade talks is dubbed the “development round” in large part because of its focus on farms. But now high food prices are being blamed for hurting the poor (the topic of a big United Nations summit in Rome starting on June 3rd).
The argument for self-sufficiency is easiest to counter. Anyone who believes autarky is the route to food security should look at starving North Korea. In world markets trade barriers, not the lack of them, have exacerbated the mess. The commodities that have seen the biggest price spikes are those which tend to be traded least. Only 6% of global rice production, for instance, flows across borders. Unilateral export restrictions, such as those imposed by Vietnam and India, have made matters worse. Global supply is disrupted and domestic farmers discouraged from producing more. The route to deeper, less volatile markets lies through freer trade and fewer distortions. The notion that free trade precludes food security is plainly wrong-headed.
The links between trade, food prices and poverty reduction are more subtle. Different types of reform have diverse effects on prices. When countries cut their tariffs on farm goods, their consumers pay lower prices. In contrast, when farm subsidies are slashed, world food prices rise. The lavishness of farm subsidies means that the net effect of fully freeing trade would be to raise prices, by an average of 5.5% for primary farm products and 1.3% for processed goods, according to the World Bank.
These effects are still much smaller than recent food-price spikes, but would they, on balance, help or hurt the poor? In crude terms, food-exporting countries gain in the short term whereas net importers lose. Farmers are better off; those who buy their food fare worse. Although most of the world's poor live in rural areas, they are not, by and large, net food sellers. A forthcoming study* of nine poor countries by M. Ataman Aksoy and Aylin Isik-Dikmelik, two economists at the World Bank, shows that even in very rural countries, such as Bangladesh and Zambia, only one-fifth of households sell more food than they buy. That suggests the losers may outnumber winners.
But things are not so simple. The authors point out that net food buyers tend to be richer than net sellers, so high food prices, on average, transfer income from richer to poorer households. And prices are not the only route through which poverty is affected. Higher farm income boosts demand for rural labour, increasing wages for landless peasants and others who buy rather than grow their food. Several studies show this income effect can outweigh the initial price effect. Finally, the farm sector itself can grow. Decades of underinvestment in agriculture have left many poor countries reliant on imports: over time that can change.
The World Bank has often argued that the balance of all these factors is likely to be positive. Although freer farm trade—and higher prices—may raise poverty rates in some countries, it will reduce them in more. One much-cited piece of evidence is a study† by Thomas Hertel, Roman Keeney, Maros Ivanic and Alan Winters. This analysis simulated the effect of getting rid of all subsidies and barriers on global prices and trade volumes. It then mapped these results on to detailed household statistics in 15 countries, which between them covered 1 billion people. Fully free trade in farm goods would reduce poverty in 13 countries while raising it in two.
A question of numbers
But lately the bank seems to be taking a different line. Robert Zoellick, the bank's president, claims that the food-price crisis will throw 100m people below the poverty line, undoing seven years of progress. His figure comes from extrapolating the results of a different study** by Mr Ivanic and Will Martin, another World Bank economist. This study analyses the effects of more expensive staple foods on poverty by examining household surveys in nine countries. In seven cases, higher food prices meant more poverty. (Dani Rodrik, a blogging Harvard economist, was one of the first to highlight the tension between these studies.)
In fact, the bank's results are not as contradictory as they seem. The two studies are based on different sets of countries: only Peru, Zambia and Vietnam appear in both. And the gloomy analysis measures only the effect of pricier staple foods, whereas the other examines freer trade in all farm goods. Such trade brings broader benefits: even if higher prices for staples exacerbate poverty in some countries, at least in the short term, the effect may be outweighed by increased demand for other farm exports, such as processed goods, as rich countries cut tariffs.
These subtleties suggest two conclusions. First, the bank, and others, should beware sweeping generalisations about the impact of food prices on the poor. Second, the nature of trade reform matters. Removing rich-country subsidies on staple goods, the focus of much debate in the Doha round, may be less useful in the fight against poverty than cutting tariffs would be. The food-price crisis has not hurt the case for freer farm trade. But it has shown how important it is to get it right.
Rabu, 04 Juni 2008
Selasa, 03 Juni 2008
The New Face of Hunger
Global food shortages have taken everyone by surprise. What is to be done?
SAMAKE BAKARY sells rice from wooden basins at Abobote market in the northern suburbs of Abidjan in Côte d'Ivoire. He points to a bowl of broken Thai rice which, at 400 CFA francs (roughly $1) per kilogram, is the most popular variety. On a good day he used to sell 150 kilos. Now he is lucky to sell half that. “People ask the price and go away without buying anything,” he complains. In early April they went away and rioted: two days of violence persuaded the government to postpone planned elections.
“World agriculture has entered a new, unsustainable and politically risky period,” says Joachim von Braun, the head of the International Food Policy Research Institute (IFPRI) in Washington, DC. To prove it, food riots have erupted in countries all along the equator. In Haiti, protesters chanting “We're hungry” forced the prime minister to resign; 24 people were killed in riots in Cameroon; Egypt's president ordered the army to start baking bread; the Philippines made hoarding rice punishable by life imprisonment. “It's an explosive situation and threatens political stability,” worries Jean-Louis Billon, president of Côte d'Ivoire's chamber of commerce.
Last year wheat prices rose 77% and rice 16% (see chart 1). These were some of the sharpest rises in food prices ever. But this year the speed of change has accelerated. Since January, rice prices have soared 141%; the price of one variety of wheat shot up 25% in a day. Some 40km outside Abidjan, Mariam Kone, who grows sweet potatoes, okra and maize but feeds her family on imported rice, laments: “Rice is very expensive, but we don't know why.”
The prices mainly reflect changes in demand—not problems of supply, such as harvest failure. The changes include the gentle upward pressure from people in China and India eating more grain and meat as they grow rich and the sudden, voracious appetites of western biofuels programmes, which convert cereals into fuel. This year the share of the maize (corn) crop going into ethanol in America has risen and the European Union is implementing its own biofuels targets. To make matters worse, more febrile behaviour seems to be influencing markets: export quotas by large grain producers, rumours of panic-buying by grain importers, money from hedge funds looking for new markets.
Such shifts have not been matched by comparable changes on the farm. This is partly because they cannot be: farmers always take a while to respond. It is also because governments have softened the impact of price rises on domestic markets, muffling the signals that would otherwise have encouraged farmers to grow more food. Of 58 countries whose reactions are tracked by the World Bank, 48 have imposed price controls, consumer subsidies, export restrictions or lower tariffs.
But the food scare of 2008, severe as it is, is only a symptom of a broader problem. The surge in food prices has ended 30 years in which food was cheap, farming was subsidised in rich countries and international food markets were wildly distorted. Eventually, no doubt, farmers will respond to higher prices by growing more and a new equilibrium will be established. If all goes well, food will be affordable again without the subsidies, dumping and distortions of the earlier period. But at the moment, agriculture has been caught in limbo. The era of cheap food is over. The transition to a new equilibrium is proving costlier, more prolonged and much more painful than anyone had expected.
“We are the canary in the mine,” says Josette Sheeran, the head of the UN's World Food Programme, the largest distributor of food aid. Usually, a food crisis is clear and localised. The harvest fails, often because of war or strife, and the burden in the affected region falls heavily on the poorest. This crisis is different. It is occurring in many countries simultaneously, the first time that has happened since the early 1970s. And it is affecting people not usually hit by famines. “For the middle classes,” says Ms Sheeran, “it means cutting out medical care. For those on $2 a day, it means cutting out meat and taking the children out of school. For those on $1 a day, it means cutting out meat and vegetables and eating only cereals. And for those on 50 cents a day, it means total disaster.” The poorest are selling their animals, tools, the tin roof over their heads—making recovery, when it comes, much harder.
Because the problem is not yet reflected in national statistics, its scale is hard to judge. The effect on the poor will depend on whether they are net buyers of food or net sellers for some net buyers, the price rises may be enough to turn them into sellers. But by almost any measure, the human suffering is likely to be vast. In El Salvador the poor are eating only half as much food as they were a year ago. Afghans are now spending half their income on food, up from a tenth in 2006.
On a conservative estimate, food-price rises may reduce the spending power of the urban poor and country people who buy their own food by 20% (in some regions, prices are rising by far more). Just over 1 billion people live on $1 a day, the benchmark of absolute poverty; 1.5 billion live on $1 to $2 a day. Bob Zoellick, the president of the World Bank, reckons that food inflation could push at least 100m people into poverty, wiping out all the gains the poorest billion have made during almost a decade of economic growth.
Small is fairly beautiful
In the short run, humanitarian aid, social-protection programmes and trade policies will determine how well the world copes with these problems. But in the medium term the question is different: where does the world get more food from? If the extra supplies come mainly from large farmers in America, Europe and other big producers, then the new equilibrium may end up looking much like the old one, with world food depending on a small number of suppliers and—possibly—trade distortions and food dumping. So far, farmers in rich countries have indeed responded. America's winter wheat plantings are up 4% and the spring-sown area is likely to rise more. The Food and Agriculture Organisation forecasts that the wheat harvest in the European Union will rise 13%.
Ideally, a big part of the supply response would come from the world's 450m smallholders in developing countries, people who farm just a few acres. There are three reasons why this would be desirable. First, it would reduce poverty: three-quarters of those making do on $1 a day live in the countryside and depend on the health of smallholder farming. Next, it might help the environment: those smallholders manage a disproportionate share of the world's water and vegetation cover, so raising their productivity on existing land would be environmentally friendlier than cutting down the rainforest. And it should be efficient: in terms of returns on investment, it would be easier to boost grain yields in Africa from two tonnes per hectare to four than it would be to raise yields in Europe from eight tonnes to ten. The opportunities are greater and the law of diminishing returns has not set in.
Unfortunately, no smallholder bonanza is yet happening. In parts of east Africa, farmers are cutting back on the area planted, mostly because they cannot afford fertilisers (driven by oil, fertiliser prices have soared, too). This reaction is not universal. India is forecasting a record cereal harvest; South African planting is up 8% this year. Still, some anecdotal evidence, plus the general increase in food prices, suggests that smallholders are not responding enough. “In a perfect world,” says a recent IFPRI report, “the response to higher prices is higher output. In the real world, however, this isn't always the case.” Farming in emerging markets is riddled with market failures and does not react to price signals as other businesses do.
This is true to a certain extent of farming in general. If you own a toy factory, or an oilfield, and the price of toys or oil rises, you run the factory night and day, or turn the taps full on. But it always takes a season to grow more food, which is why farm prices everywhere tend to be “sticky”: a 10% increase in prices leads to a 1% increase in output. But the food crisis of 2008 suggests farm prices in developing countries may be stickier than that.
The quickest way to increase your crop is to plant more. But in the short run there is only a limited amount of fallow land easily available. (The substantial unused acreage in Brazil and Russia will take a decade or so to get ready.) For some crops—notably rice in East Asia—the amount of good, productive land is actually falling, buried under the concrete of expanding cities. In other words, food increases now need to come mainly from higher yields.
Yields cannot be switched on and off like a tap. Spreading extra fertiliser or buying new machinery helps. But higher yields also need better irrigation and fancier seeds. The time lag between dreaming up a new seed and growing it commercially in the field is ten to 15 years, says Bob Zeigler of the International Rice Research Institute (IRRI) in the Philippines. Even if a farmer wanted to plant something more productive this year, and could afford to, he could not—unless research work had been going on for years.
It has not. Most agricultural research in developing countries is financed by governments. In the 1980s, governments started to reduce green-revolutionary spending, either out of complacency (believing the problem of food had been licked), or because they preferred to involve the private sector. But many of the private firms brought in to replace state researchers turned out to be rent-seeking monopolists. And in the 1980s and 1990s huge farm surpluses from the rich world were being dumped on markets, depressing prices and returns on investment. Spending on farming as a share of total public spending in developing countries fell by half between 1980 and 2004.
This decline has had a slow, inevitable impact. Creating a new seed is a bit like designing a flu vaccine: you need to keep updating it, or pests and disease will negate its effectiveness. When the rice variety IR8 was introduced in 1966, it produced almost ten tonnes per hectare; now it yields barely seven. In developing countries between the 1960s and 1980s, yields of the main cereal crops increased by 3-6% a year. Now annual growth is down to 1-2%, below the increase in demand (see chart 2). “We're paying the price for 15 years of neglect,” says Mr Zeigler.
Alterations in the structure of farming have exacerbated the effects of underinvestment. Farming is just one part of a food chain that stretches from fertiliser and seed companies at one end to supermarkets at the other. In the past, the end of the chain nearest consumers was less important. Food policy meant improving links between farmers and suppliers. The Green Revolution of the 1960s, for example, provided new seeds and subsidised fertilisers. Malawi is doing something similar now. But over the past decade, the other end of the chain has come to matter more. The main reason why Kenyan and Ethiopian farmers planted less this year was not just that fertilisers were expensive, but that farmers could not get credit to finance purchases. Supermarkets are also more important to farmers than they used to be, accounting for half or more of food sales, even in many developing countries.
Success in patches
In theory, the growing importance of traders and supermarkets ought to make farmers more responsive to changes in prices and consumer tastes. In some places, that is the case. But supermarkets need uniform quality, minimum large quantities and high standards of hygiene, which the average smallholder in a poor country is ill equipped to provide. So traders and supermarkets may benefit commercial farmers more than smallholders.
To make matters worse, smallholdings are fragmenting in many countries. Because of population growth and the loss of farmland, the average farm size in China and Bangladesh has fallen from about 1.5 hectares in the 1970s to barely 0.5 hectares now; in Ethiopia and Malawi, it fell from 1.2 hectares to 0.8 in the 1990s. By and large, the smaller the farm, the greater the burden of the cost of doing business with big retailers. Smaller smallholders are also at a disadvantage in getting loans, new seeds and other innovations on which higher yields depend.
ReutersA burden to afford
Such bottlenecks and market failures make it harder for smallholders to respond to higher prices, even without the multiple distortions that governments also introduce into world food markets. They mean the transition to a new equilibrium will be prolonged and painful. But they do not mean it will not happen. Lennart Båge, the head of the International Fund for Agricultural Development, a UN agency in Rome, argues that if farmers can keep the higher prices, they will overcome the problems that beset them. As he points out, India feeds 17% of the world's people on less than 5% of the world's water and 3% of its farmland—and, along with China, is seeing its cereal crop rise this year. Similar success stories are cropping up, in patches.
Despite East Africa's problems, Ethiopia this week opened its own commodity exchange, a rare thing on the continent, in an attempt to improve the markets that connect farmers and traders. The spread of mobile phones also relays market information more widely. In landlocked Malawi, it costs almost as much to ship maize to and from world markets as it does to grow it locally, so Malawian farmers have found it hard to export their surplus even with prices high. But partly because of the political disaster of Zimbabwe, regional markets are now springing up out of nowhere in southern Africa—and Malawi's farmers are selling there.
Moreover, technological improvements are still pushing through the neglected soil. Mr Zeigler reckons IRRI has enough tinkerings in the pipeline to increase yields by one or two tonnes a hectare. And if European countries relax their hostility to genetically modified organisms, crop scientists could do things—such as redesigning photosynthesis in plants—which could boost yields 50% or more.
Between November 2007 and February 2008, rice exports from Thailand (the world's biggest exporter) were running at 1m tonnes a month—an unprecedented bonanza. But for even for producers and traders, the blessing was mixed. Some farmers sold their crop before prices soared. Millers tried to keep supplies back, waiting for higher prices. The government capped exports below last year's levels. The secretary-general of the Thai rice exporters' association told IRRI that “We don't know where the 2007 harvest is.” Vichai Sriprasert, a big exporter, describes the Thai rice market using language that, elsewhere, is literally true. “This is a crucial time,” he says. “It will tell the story of who will survive and who will not survive.”
SAMAKE BAKARY sells rice from wooden basins at Abobote market in the northern suburbs of Abidjan in Côte d'Ivoire. He points to a bowl of broken Thai rice which, at 400 CFA francs (roughly $1) per kilogram, is the most popular variety. On a good day he used to sell 150 kilos. Now he is lucky to sell half that. “People ask the price and go away without buying anything,” he complains. In early April they went away and rioted: two days of violence persuaded the government to postpone planned elections.
“World agriculture has entered a new, unsustainable and politically risky period,” says Joachim von Braun, the head of the International Food Policy Research Institute (IFPRI) in Washington, DC. To prove it, food riots have erupted in countries all along the equator. In Haiti, protesters chanting “We're hungry” forced the prime minister to resign; 24 people were killed in riots in Cameroon; Egypt's president ordered the army to start baking bread; the Philippines made hoarding rice punishable by life imprisonment. “It's an explosive situation and threatens political stability,” worries Jean-Louis Billon, president of Côte d'Ivoire's chamber of commerce.
Last year wheat prices rose 77% and rice 16% (see chart 1). These were some of the sharpest rises in food prices ever. But this year the speed of change has accelerated. Since January, rice prices have soared 141%; the price of one variety of wheat shot up 25% in a day. Some 40km outside Abidjan, Mariam Kone, who grows sweet potatoes, okra and maize but feeds her family on imported rice, laments: “Rice is very expensive, but we don't know why.”
The prices mainly reflect changes in demand—not problems of supply, such as harvest failure. The changes include the gentle upward pressure from people in China and India eating more grain and meat as they grow rich and the sudden, voracious appetites of western biofuels programmes, which convert cereals into fuel. This year the share of the maize (corn) crop going into ethanol in America has risen and the European Union is implementing its own biofuels targets. To make matters worse, more febrile behaviour seems to be influencing markets: export quotas by large grain producers, rumours of panic-buying by grain importers, money from hedge funds looking for new markets.
Such shifts have not been matched by comparable changes on the farm. This is partly because they cannot be: farmers always take a while to respond. It is also because governments have softened the impact of price rises on domestic markets, muffling the signals that would otherwise have encouraged farmers to grow more food. Of 58 countries whose reactions are tracked by the World Bank, 48 have imposed price controls, consumer subsidies, export restrictions or lower tariffs.
But the food scare of 2008, severe as it is, is only a symptom of a broader problem. The surge in food prices has ended 30 years in which food was cheap, farming was subsidised in rich countries and international food markets were wildly distorted. Eventually, no doubt, farmers will respond to higher prices by growing more and a new equilibrium will be established. If all goes well, food will be affordable again without the subsidies, dumping and distortions of the earlier period. But at the moment, agriculture has been caught in limbo. The era of cheap food is over. The transition to a new equilibrium is proving costlier, more prolonged and much more painful than anyone had expected.
“We are the canary in the mine,” says Josette Sheeran, the head of the UN's World Food Programme, the largest distributor of food aid. Usually, a food crisis is clear and localised. The harvest fails, often because of war or strife, and the burden in the affected region falls heavily on the poorest. This crisis is different. It is occurring in many countries simultaneously, the first time that has happened since the early 1970s. And it is affecting people not usually hit by famines. “For the middle classes,” says Ms Sheeran, “it means cutting out medical care. For those on $2 a day, it means cutting out meat and taking the children out of school. For those on $1 a day, it means cutting out meat and vegetables and eating only cereals. And for those on 50 cents a day, it means total disaster.” The poorest are selling their animals, tools, the tin roof over their heads—making recovery, when it comes, much harder.
Because the problem is not yet reflected in national statistics, its scale is hard to judge. The effect on the poor will depend on whether they are net buyers of food or net sellers for some net buyers, the price rises may be enough to turn them into sellers. But by almost any measure, the human suffering is likely to be vast. In El Salvador the poor are eating only half as much food as they were a year ago. Afghans are now spending half their income on food, up from a tenth in 2006.
On a conservative estimate, food-price rises may reduce the spending power of the urban poor and country people who buy their own food by 20% (in some regions, prices are rising by far more). Just over 1 billion people live on $1 a day, the benchmark of absolute poverty; 1.5 billion live on $1 to $2 a day. Bob Zoellick, the president of the World Bank, reckons that food inflation could push at least 100m people into poverty, wiping out all the gains the poorest billion have made during almost a decade of economic growth.
Small is fairly beautiful
In the short run, humanitarian aid, social-protection programmes and trade policies will determine how well the world copes with these problems. But in the medium term the question is different: where does the world get more food from? If the extra supplies come mainly from large farmers in America, Europe and other big producers, then the new equilibrium may end up looking much like the old one, with world food depending on a small number of suppliers and—possibly—trade distortions and food dumping. So far, farmers in rich countries have indeed responded. America's winter wheat plantings are up 4% and the spring-sown area is likely to rise more. The Food and Agriculture Organisation forecasts that the wheat harvest in the European Union will rise 13%.
Ideally, a big part of the supply response would come from the world's 450m smallholders in developing countries, people who farm just a few acres. There are three reasons why this would be desirable. First, it would reduce poverty: three-quarters of those making do on $1 a day live in the countryside and depend on the health of smallholder farming. Next, it might help the environment: those smallholders manage a disproportionate share of the world's water and vegetation cover, so raising their productivity on existing land would be environmentally friendlier than cutting down the rainforest. And it should be efficient: in terms of returns on investment, it would be easier to boost grain yields in Africa from two tonnes per hectare to four than it would be to raise yields in Europe from eight tonnes to ten. The opportunities are greater and the law of diminishing returns has not set in.
Unfortunately, no smallholder bonanza is yet happening. In parts of east Africa, farmers are cutting back on the area planted, mostly because they cannot afford fertilisers (driven by oil, fertiliser prices have soared, too). This reaction is not universal. India is forecasting a record cereal harvest; South African planting is up 8% this year. Still, some anecdotal evidence, plus the general increase in food prices, suggests that smallholders are not responding enough. “In a perfect world,” says a recent IFPRI report, “the response to higher prices is higher output. In the real world, however, this isn't always the case.” Farming in emerging markets is riddled with market failures and does not react to price signals as other businesses do.
This is true to a certain extent of farming in general. If you own a toy factory, or an oilfield, and the price of toys or oil rises, you run the factory night and day, or turn the taps full on. But it always takes a season to grow more food, which is why farm prices everywhere tend to be “sticky”: a 10% increase in prices leads to a 1% increase in output. But the food crisis of 2008 suggests farm prices in developing countries may be stickier than that.
The quickest way to increase your crop is to plant more. But in the short run there is only a limited amount of fallow land easily available. (The substantial unused acreage in Brazil and Russia will take a decade or so to get ready.) For some crops—notably rice in East Asia—the amount of good, productive land is actually falling, buried under the concrete of expanding cities. In other words, food increases now need to come mainly from higher yields.
Yields cannot be switched on and off like a tap. Spreading extra fertiliser or buying new machinery helps. But higher yields also need better irrigation and fancier seeds. The time lag between dreaming up a new seed and growing it commercially in the field is ten to 15 years, says Bob Zeigler of the International Rice Research Institute (IRRI) in the Philippines. Even if a farmer wanted to plant something more productive this year, and could afford to, he could not—unless research work had been going on for years.
It has not. Most agricultural research in developing countries is financed by governments. In the 1980s, governments started to reduce green-revolutionary spending, either out of complacency (believing the problem of food had been licked), or because they preferred to involve the private sector. But many of the private firms brought in to replace state researchers turned out to be rent-seeking monopolists. And in the 1980s and 1990s huge farm surpluses from the rich world were being dumped on markets, depressing prices and returns on investment. Spending on farming as a share of total public spending in developing countries fell by half between 1980 and 2004.
This decline has had a slow, inevitable impact. Creating a new seed is a bit like designing a flu vaccine: you need to keep updating it, or pests and disease will negate its effectiveness. When the rice variety IR8 was introduced in 1966, it produced almost ten tonnes per hectare; now it yields barely seven. In developing countries between the 1960s and 1980s, yields of the main cereal crops increased by 3-6% a year. Now annual growth is down to 1-2%, below the increase in demand (see chart 2). “We're paying the price for 15 years of neglect,” says Mr Zeigler.
Alterations in the structure of farming have exacerbated the effects of underinvestment. Farming is just one part of a food chain that stretches from fertiliser and seed companies at one end to supermarkets at the other. In the past, the end of the chain nearest consumers was less important. Food policy meant improving links between farmers and suppliers. The Green Revolution of the 1960s, for example, provided new seeds and subsidised fertilisers. Malawi is doing something similar now. But over the past decade, the other end of the chain has come to matter more. The main reason why Kenyan and Ethiopian farmers planted less this year was not just that fertilisers were expensive, but that farmers could not get credit to finance purchases. Supermarkets are also more important to farmers than they used to be, accounting for half or more of food sales, even in many developing countries.
Success in patches
In theory, the growing importance of traders and supermarkets ought to make farmers more responsive to changes in prices and consumer tastes. In some places, that is the case. But supermarkets need uniform quality, minimum large quantities and high standards of hygiene, which the average smallholder in a poor country is ill equipped to provide. So traders and supermarkets may benefit commercial farmers more than smallholders.
To make matters worse, smallholdings are fragmenting in many countries. Because of population growth and the loss of farmland, the average farm size in China and Bangladesh has fallen from about 1.5 hectares in the 1970s to barely 0.5 hectares now; in Ethiopia and Malawi, it fell from 1.2 hectares to 0.8 in the 1990s. By and large, the smaller the farm, the greater the burden of the cost of doing business with big retailers. Smaller smallholders are also at a disadvantage in getting loans, new seeds and other innovations on which higher yields depend.
ReutersA burden to afford
Such bottlenecks and market failures make it harder for smallholders to respond to higher prices, even without the multiple distortions that governments also introduce into world food markets. They mean the transition to a new equilibrium will be prolonged and painful. But they do not mean it will not happen. Lennart Båge, the head of the International Fund for Agricultural Development, a UN agency in Rome, argues that if farmers can keep the higher prices, they will overcome the problems that beset them. As he points out, India feeds 17% of the world's people on less than 5% of the world's water and 3% of its farmland—and, along with China, is seeing its cereal crop rise this year. Similar success stories are cropping up, in patches.
Despite East Africa's problems, Ethiopia this week opened its own commodity exchange, a rare thing on the continent, in an attempt to improve the markets that connect farmers and traders. The spread of mobile phones also relays market information more widely. In landlocked Malawi, it costs almost as much to ship maize to and from world markets as it does to grow it locally, so Malawian farmers have found it hard to export their surplus even with prices high. But partly because of the political disaster of Zimbabwe, regional markets are now springing up out of nowhere in southern Africa—and Malawi's farmers are selling there.
Moreover, technological improvements are still pushing through the neglected soil. Mr Zeigler reckons IRRI has enough tinkerings in the pipeline to increase yields by one or two tonnes a hectare. And if European countries relax their hostility to genetically modified organisms, crop scientists could do things—such as redesigning photosynthesis in plants—which could boost yields 50% or more.
Between November 2007 and February 2008, rice exports from Thailand (the world's biggest exporter) were running at 1m tonnes a month—an unprecedented bonanza. But for even for producers and traders, the blessing was mixed. Some farmers sold their crop before prices soared. Millers tried to keep supplies back, waiting for higher prices. The government capped exports below last year's levels. The secretary-general of the Thai rice exporters' association told IRRI that “We don't know where the 2007 harvest is.” Vichai Sriprasert, a big exporter, describes the Thai rice market using language that, elsewhere, is literally true. “This is a crucial time,” he says. “It will tell the story of who will survive and who will not survive.”
Langganan:
Postingan (Atom)
