Reproducible Private Property Resources - Agriculture

Reproducible Private Property Resources - Agriculture The secret to solving the world food problem lies in transferring the modern technology from the developed countries to underdeveloped countries.

1974: World Food Conference – • Goal: eradication of hunger, food insecurity & malnutrition, Time: within a decade 1996: Rome: World Food Summit: Headquarters of FAO of United Nations • Participation: 10,000 from 185 countries + European Community • Target:⇩ no. of undernourished people by 2015 by half – Rome declaration • June 2002: World Food Summit • Delegates: from 176 countries+ European Commission • Target: repeated their pledge • Goal never met

High level meeting on food security for all, Madrid 26 -27 Jan2009 • 3rd world food summit – November 2009 in Rome, Italy - goals: solidify a strong and effective commitment from World leaders to eradicate hunger by 2025 & to address the root causes of the present situation through the full implementation of the Human Right to Food • 4th Food Technology & Innovation Forum and Food Safety Summit, May 11th-12th, 2010, Hyatt Regency O'Hare, Chicago brings together leading professionals to discuss, innovate, knowledge-share and shape the future of the food industry into the new decade

The Truth • According to UN Hunger Project, International Fund for Agriculture Development & FAO: • June 19, 2009 - 1.02 billion people, more than ever in human history are undernourished worldwide – 100 m more than last year – 1/6th of total humanity- >1 ∕4th of these are children • ⅓ of children in developing countries malnourished – more severely in South Asia & Sub-Saharan Africa • Approx. 24000 people die from hunger or from hunger related causes, each day – 10.8 m children die, per year, due to malnutrition • In US 1 in 10 households are at risk of hunger

If food availability is not a problem – why hunger? • Food – staple requirement – is renewable property resource – can be sustained as long as there is energy from the Sun • Are agriculture practises sustainable and efficient? • Land not free – farmers must invest for ⇧ in production & income • Why malnutrition? Must find: • Scarcity of food? Global? • Misdistribution - With in nations/ among nations? • Temporary shortage due to disasters?

Global Scarcity • Need to change the relationship between agriculture surplus nations & other nations • Situation desperate - Must be more stern: “life boat ethics” – Garrett Hardin • When famine is inevitable, sharing can become counterproductive • In absence of global scarcity then a worldwide famine can be avoided by sharing resources

Global Scarcity Hypothesis • Most agree that enough is being produced - world agriculture produces 17% more calories per person today than 30 yrs ago - although population ⇧ by 70% and less land is used for cultivation • Population growing, although slow, has not stopped  demand for food rising • We produce food - a renewable resource - with limited land • Owner has control over his resources but not over the market to get monopoly profit • How does market behave? Depends on nature of supply curve

Initial equilibrium at Qo – price Po Later demand keeps rising & reaches D5 – if supply is Sa the OQ5a produced and if supply is Sb then Q5b – but then price rises to P5b Even when supply curve is Sb – adverse supply circumstances – still DD=SS

This shows what is scarcity in world food market. It doesn’t mean a shortage. • Adverse supply – Sb - price rises  demand chocked off or additional suppliescalled forth – profit rises due to high price • Is demand for food price sensitive? • some feel it will be bought at any price as is necessity - demand inelastic • All food falls in this category? Some is far away from that.

Which is more representative – Sa or Sb? • As demand ⇧ supply can be ⇧ either by extensive or by intensive cultivation – in the past both are used • 1st more fertile land – then less fertile…. If price rise is enough to make farming profitable ∴ supply curve is upward sloping • India’s SEZs – farmers not giving up on land

DNA – Daily News & Analysis: Nov 16, 2007

2 forms of global security hypothesis to be tested against the available evidence: • Strong form: per capita food production is ⇩ - ∴ supply curve is steep indicating that it cannot keep pace with ⇧ population – if this is valid – PC food production falling  life-boat ethics • Weak form: per capita production is rising – supply curve steep indicating ⇧ in food prices > other prices ∴ per capita welfare ⇩, even if per capita production is ⇧. This problem is more of cost of food than its availability – as supply of food ⇧ - cost of food ⇧ relatively, to the cost of other goods

Testing the Hypothesis • We would like to assess the degree to which historical record supports the existence of global scarcity • Rule out strong form – food production ⇧ at a speed > population – rule out strong form in the recent past • Weak form: more true all over the world • Supply curve for food products steeper than for other products. Prices of agri prod > than other products • Historical evidence: agri supplies have ⇧ at a faster rate than population, but at ⇧ cost

Future cost of food? What factors influence it? Past trends suggest: major role of developing countries to supply an increasing share of world’s food production to support their increasing population + ability of developed nations as exporters of food – developed nations should expand their ability to produce to face distribution problem Food production/productivity ⇧ due to better techniques, pesticides, HYV seeds, irrigation …. And irrespective of ⇩ land Us from 30 bushels per acre to 130 bushels during 1930-2000 – livestock: similar trend

Technological Progress: supports hope for ⇧ production – 3 techniques • Recombining DNA • Tissue culture • Cell Fusion • To do this generic engineering techniques include: • Make crops resistant to diseases / pests • Create new plants • Give ability to produce their own fertiliser • ⇧ crop yields - photosynthesis

There are problems: • Declining share of land for agriculture • ⇧ High cost of energy • ⇧ environmental cost • Rising cost of traditional farming • Price distortion in agriculture policy • Potential side effects of genetically modified (GM) crops Close examination of the above concerns reveal Current practises neither effective nor sustainable – the transition that is efficient & sustainable may ⇩ productivity levels

Allocation of agricultural land Land under agricultural sector is reducing – it will go to other uses when it is more profitable there – causes: • ⇧ Industrialisation & ⇧ urbanisation  ⇧ value of land • Less land required to produce more food due to ⇧ productivity ⇧ food prices & ⇧ demand for food should ⇧ value of agri. Land – slow conversion - reverse trend?

Energy costs: in developing countries agri production is very energy intensive - productivity gains from energy – mechanisation + ↑ use of pesticides & fertilisers – if substitutes to energy not developed  SS curve must shift to left indicating rising costs – energy & capital are complimentary – when energy price rises ↓ in capital + ↓ energy use  ↓ in yield per acre • Environmental costs: problems intensified • Use of chemicals & fertilisers • Grass-land & forests converted to farming • Soil erosion - techniques to control expensive loss by fertilisers – losses irreversible – fertilisers cheap • ⇧ in frequency & quantity of fertilisers • Pesticides – contaminate water supply used by humans & aquatic life

Sustainable agriculture • One with less fertilisers & pesticides – OECD countries are facilitating transition - incentives Scandinavia - New Zealand • Irrigation: yield ⇧ - by 2030 irrigated land will ⇧ by 27% in developing countries & 70% gain in cereal production will come from irrigated land • Organic food industry: fast growing in US - certified organic crop land – premium price • Mandatory labelling standards - OFPA 1990 • US & EU working together

Role of agriculture policies • Gains in agricultural productivity with externalities - others bear the cost - Govt. policies must bear responsibility - 3 policies • Subsidies for specific inputs • Support prices • Trade barriers for protection Anderson & Blackhurst: studied correlation between size of subsidies & use of fertilisers – ‘larger the subsidies larger the fertiliser use’ – subsidies lead to use of inefficient & unsustainable levels of fertilisers

Now many governments have started encouraging sustainable agriculture by • discouraging harmful effects of traditional methods • learning more sustainable practices are known • giving information to farmers derived from research • Providing financial assistance for the transition to sustainable agriculture • Conclusion:agriculture productivity is expected to rise at slow pace – in future changes will be in productivity + agricultural practices • GMO technology is still a debatable issue

Agricultural Knowledge Triangle Research Farmers Education Extension Source: FAO/World Bank 2000.

In the future scientists may develop GMOs, which lead to a dramatic reduction in the use of pesticides and artificial fertilisers. • Recently scientists developed a genetically modified strain of rice, golden rice, which contains vitamin A and extra iron, and a strain of vitamin A-rich sweet potato acceptable in sub-Saharan Africa. • Every year over a million children die of vitamin A-related diseases: golden rice could prevent such deaths. • Conway believes that the tools of biotechnology are essential if crop yields are to be raised.

Opponents of GMOs, on the other hand, believe that the risks are too great. They fear that gene transfer to wild relatives of genetically modified crops may give rise to super weeds, and they are also concerned about the impact of GMOs on human health. • They see the introduction of GMOs, which are largely developed and sold by a handful of multinational corporations, as further evidence of the industrialisation of agriculture, and a further nail in the coffin of small farmers.

While FAO admits that the number of hungry will remain "stubbornly high", it believes that growth in food production, although slower than in the past, will still outstrip population growth. • There is little doubt that sustainable agriculture can bring considerable benefits to many parts of the world, but sustainable agriculture alone will not be enough to ensure the food security of the growing numbers of rural poor. A good pricing policy, credit systems, gender discrimination and policies, which neglect the poor; all need to be tackled if the poor are to get a better deal.

Distribution of food resources • Problem is not of global security but of distribution – malnourishment in poorest sections – mainly in poor countries • Issue is how to get food for them? • Alleviation of poverty & ⇧ ability to pay for food could solve the problem • sufficient calorie intake even in developing countries – shows no global scarcity – the least developed countries have failed to keep pace with population & their dependency on food imports has ⇧ - poverty, popu growth & insufficient food • Their poverty ⇧ - population is ⇧ at ⇧ rate & the degree income inequality has ⇧ too.

Foreign exchange used for food imports - ∴ less for capital goods – affects productivity • ∴ both is necessary – population control strategies & ⇧ food availability to poor • All countries cannot be self-sufficient - and poor countries must try ⇧ domestic production - use comparative cost advantage – Ricardo – even developed countries gain by trading with poor countries – specialisation - world production ⇧ • Limits to ⇧ agricultural production are economic & political – agriculture production undervalued in low-income countries - • Marketing Boards & Export taxes

Feeding the poor • Undervaluation was due to misguided attempt to use price controls – provide poor with food at regulated price – backfire if availability of food ↓ - Support prices – way to ↓ nutritional gap among poor with maintenance of adequate supply of food? Green Revolution: • Bright side: better diet for poor & ⇧ in employment – 1950s in US – productivity doubled / tripled over 30 years period – 2 crops a year – transformation • Dark side: Irish potato famine of mid 1980s – more species  ⇧ risk of pests & diseases – smaller farmers – not the beneficiaries of new hybrids

In the short run foreign food aid will • help when traditional sources are inadequate due to natural disaster • when it doesn’t interfere with the incomes of domestic producers • In the long runforeign food aid means • Technical help – leading to co-operatives • Large scale operation – risk sharing • ⇧ in general standard of living and effective population control • Help to small farmers • Solution to distribution problem

Feast & famine cycles • Fluctuation in food availability due to • Vagaries of weather & • planting decisions Benefit to the society by smoothening the fluctuations • Larger the fluctuations  larger the swings in prices + farmers production decisions worsen the situation – the tendency can be represented by cob-web model over production or underproduction

Initially SS is Q0 price is P0 - ∴ next season plan to produce ⇧=OQ1 – price ⇩ OP1 ∴ next season SS OQ3 – price ⇧ OP3 ⇧ production OQ4 - price OP4 .…… S Price P0 Cob – web model P3 P4 P1 D O Q0 Q 3 Q 4 Q 1 Quantity

In developing world demand for food is price-inelastic ∴⇧ the price – to adjust short supply due to weather problems – gamble in monsoon • Initially DD D1 & SS S0 - equi at A - price is OP0 – If short SS  S0 then price rises to OP1 or OP2 depending on the elasticity of demand • When demand is inelastic farmers gain more due to higher price Price P2 B C P1 A P0 D1 D D2 O S1 S0 Quantity

Producers want to guard against excess supply and consumers want to guard against short supply • Stabilization is good for all Views: • Stock-piles – buffer stocks – stability – Internal– expected to be internationally co-ordinated - but implementation difficult as interests of the producer nations & of consumer nations are different – International To alleviate hunger caused by disasters - “World emergency stock-pile” – internationally co-ordinated Both should work together

Conclusion: • Serious malnutrition in many parts of the world • Root cause is poverty – intensified by fluctuations in the availability of food • Developing countries could ↑ their production by about 4% per year – if developed countries share technology • Not enough just to produce ↑ - poor should afford it – reduce poverty + increase employment • Stock piles – key element

Reproducible Private Property Resources - Agriculture