A Global Perspective on Crisis Response of Food Systems and Agribusiness

1. A Global Perspective on Crisis Response of Food Systems and Agribusiness Prof. Jock R. Anderson Consultant, IFPRI & World Bank, Washington, DC CFO, Jilba Dressage Inc Catharpin Virginia

2. World Bank (2006) at last gets with it • the new approach highlights “managing risks and the underlying conditions that lead to disasters and requires, among others, risk assessment, vulnerability reduction and capacity enhancement besides emergency preparedness and sustainable recovery”

3. MacCrimmon and Wehrung (1986, p. 3): • “Consider getting food from the supermarket. • We jump in the car and run a risk of being hit by a careless or drunk driver, even if we are cautious ourselves. • Once inside the store we are faced with goods that may have been tampered with or tomorrow be declared carcinogenic or environmentally harmful. • On a more minor level, we may discover that the meat we bought was on sale at a competing supermarket.” • These authors wrote before the BSE crises and the dread of some hazards (particularly those with hidden and irreversible damage, perhaps magnified in the public perception by controversy among authorities)

4. Crises at Various Levels • Climatic variability at national and lower levels.. • But climate change may be a more interesting source of future crisis for food systems in some parts of the world, although almost surely not globally per se

5. Europe or Bust, until today • Jock’s limited engagement but … • Reading Ruud’s ruminations on various animal disease epidemics more recently and earlier… • A few days after 26 April, 1986, the cloud from Chernobyl & Jock arrive in Sweden, so get to pondering nuclear risks

6. Deaths per 100,000 persons per year • nuclear power stations 0.01 • run over by a road vehicle 5 • influenza 20 • smoking a pack a day 500 • a bottle of wine a day 75

7. Storm surge control structures Risk of failure? • 1 in 10,000 for the Netherlands system? • 1 in 100 for the levees of S-E Louisiana? • Adjusted for climate change/global warming?

8. Incomplete data? • How could they ever be complete? Imperfect information is the norm • Usual for uncertain phenomena about which public and private decisions must be made • As research provides new information it should logically be combined into updated assessments, … assessment cycles

9. Data Limitations, and Crises (intrinsically rare) • Hence, subjective appraisal by “experts” using methods that are both defensible and transparent • Public-good provision? Relevant public agencies? • ‘Objectivity’ in science is a myth, in life an impossibility, and in decision making an irrelevance (Anderson, Dillon and Hardaker 1977)

10. Sound advice by Morgan and Henrion (1990, p. 37) 10 “commandments” • 1. Do your homework with literature, experts and users • 2. Let the problem drive the analysis • 3. Make the analysis as simple as possible, but no simpler • 4. Identify all significant assumptions • 5. Be explicit about decision criteria and policy strategies • 6. Be explicit about uncertainties • 7. Perform systematic sensitivity? and uncertainty analysis • 8. Iteratively refine problem statement and analysis • 9. Document clearly and completely • 10. Expose the work to peer review

11. Brian Hardaker might have said… • Preparation for crises is basic • Risk avoidance—reducing the chance of a crisis— is eminently sensible • Risk reduction in emerging crises is imperative • Harm minimization is desirable • Recovery in learning mode is smart

12. Contemporary Reality: Agribusiness and Beyond • WHO (2005) on avian influenza (a severe disease almost exclusively affecting poultry) and pandemic influenza (yet to come), there are some important steps to be taken in this potential crisis situation …

13. WHO et al. Bird Flu Steps • 1. ways need to be found to prevent and contain the spread of the highly pathogenic H5N1 virus among birds and from birds to humans • 2. countries need to be better equipped to detect cases in both humans and birds, confirm the diagnosis, and report the findings; prompt and transparent sharing of information important, & compensation to farmers for lost birds • 3. research and development urgently needed to address the problem of inadequate supplies of vaccines and antiviral drugs • 4. need was for an operational plan for the rapid deployment of antiviral drugs following the first signs of improved transmissibility among humans • 5. importance of risk communication to all societies and preparedness plans

14. Where does agribusiness fit? • 1. Present incidence mostly in the informal sector of East Asia, and in wild bird flocks. Corporate avian enterprises taking prudent precautions against infections as a core part of their business risk management? • 2. The roles of detection and intervention fall largely on government but public capacity weak • 3. There is an increasing formal linkage between the pharmaceutical and agricultural science corporations, so “agribusiness” will get some of the action in vaccine and drug development and production • 4. The communications issues raised pertain to government non-government and private-sector agencies, and are in line with the “commandments” • B/Line: agribusiness needs to be diligent in its risk management

15. Take the Parmalat fiasco of 2003 and the lost $10 billion of assets? • reform of accounting standards? & remember Buconero LLC! • survey of 20 countries by GlobeScan.com • “While there is overwhelming support for free markets, there is also near-unanimous rejection of unbridled capitalism, with people around the world overwhelmingly favoring greater government regulation of large companies and more protection of workers and consumers.”

16. Natural Disasters as a Source of Crisis • New Orleans, most of my off-spring & Katrina: tricky stuff • Prevalent lack of disaster preparedness and insufficient recognition of the importance of early warning systems • Some slides after the next two?

17. Agribusinesses have many things to worry about in their risk management plans… • ordinary business risks of dealing with suppliers and customers • extraordinary risks, e.g., food safety & contingency plans for downsides • other idiosyncratic risks that can affect their operations from nature (droughts, wildfires, floods etc.), from factor markets (e.g., energy costs) and the macro-economy (e.g., changed exchange rate and taxation regimes) • risks from changed government policy (e.g., evolving regulations, on biosafety, food safety, etc.) AND…

18. Agribusinesses risk management continued • If they cannot resist the temptation to indulge in cartel-like non-competitive behavior, need to make special provision to finance the fines • Dealing with all these takes specialized human resources that continue to be scarce • Perhaps such capacity building priorities may be one of the recommendations to emerge from our discussion today?