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Food Security & Agriculture

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Agricultural Development: One Size Fits All?
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Agricultural policies prescribed by industrialised countries have led to a food system dominated by private interests. But in the context of achieving global food security, maximization of international trade and corporate profits should not be the dominating forces, writes Daryll E. Ray.

Prescriptive Agricultural Policy for Developing Countries: Back to Basics

Helping Developing Nations Improve Their Agricultures Requires Humility and Focus

Increased Agricultural Productivity Is One Piece of a Complex Puzzle

11th November 2009

Prescriptive Agricultural Policy for Developing Countries: Back to Basics

6th November 2009 - Daryll E. Ray, Agricultural Policy Analysis Center

Agricultural policy in developing countries has been an ongoing concern since the end of WWII and the dismantling of colonial European empires. Over that period of time, the models that were used to guide agricultural development have changed several times.

Early on, the policies included the use of international commodity agreements to manage overproduction and protect the prices received by farmers, the establishment of tariff barriers to protect local producers, the development of extension programs to aid farmers, the provision of subsidized inputs, and the establishment of marketing boards for major export crops. Government-sponsored, cooperative-like structures were put into place to house trained personnel who delivered production information and input-purchasing and product-marketing services.

By the 1970s the emphasis had turned toward the problem of chronic hunger and low yields in developing countries when compared to developed countries. Building on the work that began much earlier, the green revolution took off as farmers in developing countries were introduced to the fruits of agricultural research, the use of commercial inputs, and the first steps toward the mechanization of what had been animal-powered agricultural systems.

The Agency for International Development, Peace Corp volunteers, and others helped countries build infrastructure, from roads to agricultural research facilities, and provided one-on-one advice to farmers and rural community leaders.

The 1970s also saw the availability of petrodollars and other expanded sources of funds that were used by the leadership of many countries to purchase foodstuffs for their population and fund various development projects. Eventually the debt level rose to the point where the repayment of those loans became a burden for many developing countries.

When these countries were unable to promptly repay their debts, they were forced into Structural Adjustment Programs (SAPs) as a condition for obtaining lower interest rates and further support from the World Bank and the International Monetary Fund. The basic policies of the SAPs included privatization of state enterprises, deregulation, and the reduction of trade barriers.

The government-sponsored, cooperative-like, agricultural-services structures were on the top of the SAP list for elimination.

Gone also were fertilizer subsidies and the extension service. It was argued that private enterprise would quickly respond to these new farm markets by competing for farm accounts. As for extension services, it was believed that in developing countries, multinational agricultural input suppliers would duplicate the kinds of marketing and information programs that they provide to farmers in developed countries, where farmers often rely on the advice of sales personnel and private crop advisory services as frequently as they do extension personnel.

For the most part, the quantities involved in rural areas with poor transportation access were not sufficient to attract the kind of supply networks that farmers in places like the US rely upon.

The multinationals had little to no incentive to provide the kind of general production and marketing extension services most needed by smallholder agriculturalists. It would be too resource intensive. Besides that, it would primarily involve providing low-tech production and basic marketing information, while that would be very helpful for smallholder farmers it would result in limited or negative commercial opportunities for individual multinationals.

The result was that many developing countries traded an extremely helpful but admittedly less-than-efficiently-administered set of farmer-oriented organizations for the blue-sky promises of a private-sector-based utopia that never arrived.

The reduction of trade barriers left farmers at the mercy of the same low prices that plagued farmers in developed countries. But in contrast to developed countries like the US, Japan, and the members of the European Union that could afford various support programs for their farmers, developing countries lacked the financial resources to compensate their farmers.

Another of the SAP directives that clearly affected the ability of developing countries to feed themselves dealt with which commodities farmers were incentivized to produce. The intent was to focus less on producing commodities consumed domestically and more on expanding trade as the basic tool for generating farmer prosperity through market access programs and the development of an export-oriented agriculture.

The expectation was that by using their comparative advantage in the production of labor-intensive export crops like flowers, fruits, and vegetables, countries could use the revenue from these crops to import staples like corn, wheat, and rice.

In the utopian world of free trade theory, all would be better off. But the revenue generated from agricultural exports does not always flow back to those who used to grow their own food or had ready-access to locally grown staples.

In the end, farmers in developing countries are as insecure as ever, and rural poverty and chronic hunger are rampant. Farmers often leave their rural communities in hopes of finding a job in large cities only to join the mass of unemployed and underemployed people.

Back to basics. Developing the agriculture in a developing country—done in a way that does not severely disrupt the economic and social fabric of the country—is a long-term endeavor.

First and foremost, it involves making agriculture sufficiently productive so that farmers increasingly produce more than can be consumed by their households.

It involves implementing government policies similar to early US developmental policies but adapted to local country conditions. In our view, there are two basic policy categories.

The first policy set reduces the cost, increases the availability, or improves the quality of inputs used by agriculture. We did that in spades in the US. We made land available at nearly zero cost for homesteaders and for financing local (one-room) schools.

We subsidized the expansion of railroad networks in rural areas and built farm-to-market roads.

We invested in land grant universities, a vast network of publicly-sponsored agricultural research stations, an extension service that provides county-level information services nationwide, and a network of low-cost agricultural credit institutions.

All of this was designed to lower the cost, increase the supply, or improve the quality of important inputs used in production agriculture. Those inputs included seeds, machines, and other specific inputs (including, of course, land). Other important “inputs” like the availability of low-cost credit and free, locally-specific, production-practice information and marketing information services were also provided.

In the US much of this was done through the extension service. The strength of US agriculture is in no small part the result of the investment made in the Cooperative Extension Service. Agricultural agents made the results of public research available to local farmers while home economists taught basic skills in food safety, nutrition, and food preservation. 4-H agents led programs that taught farm youth essential leadership skills that they continued to use as adults, both on the farm and across the country.

The first set of policies provides farmers with a dependable and affordable way to secure inputs and information to support their operation.

The second set involves ensuring dependable and reasonably stable prices for their output. This helps stabilize income in the short-run, but just as importantly, it provides the security needed to invest (especially via loans) in technologies to increase long-term productivity. These policies could also involve the reinstatement of marketing boards.

While many in the US see single-desk marketing boards controlled by farmers as problematic, one needs to consider the nature of the markets into which farmers sell their products. A significant portion of exports and thus prices for domestic supplies are in the hands of fewer than five firms who have access to market information that is unavailable to farmers in the US, let alone farmers in developing countries. The presence of marketing boards could balance out the power of these large institutions to the benefit of farmers everywhere.

As we noted in last week’s column, it is critically important to consider policies that are sensitive to the cultures and needs of farmers. Some of the policies discussed above are likely not appropriate, and all of them would have to be shaped for local conditions. And, of course, many additional policies and concerns would need to be considered and addressed.

Too often in the recent past, we in developed nations have thought developing countries can skip some steps—for example going directly from an agricultural-based economy to an economy that is highly industrialized or importing staples and producing crops for export. The results have been mixed at best, especially in the lowest of low-income developing countries.

Well, we have tried that. Is it now time to go back to tried and true?

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Helping Developing Nations Improve Their Agricultures Requires Humility and Focus

30th October 2009 - Daryll E. Ray, Agricultural Policy Analysis Center

Much of the time this column focuses on current issues in US agricultural policy: food safety rules, farm program payments, crop insurance, ethanol, and CAFOs, among others. But one of the things that we try to keep at the forefront of our analysis is that policies that are good for US farmers must not come at the expense of farmers elsewhere in the world.

The reason for this is that that the dynamics that determine the nature of US agriculture and agricultural markets are the same dynamics faced by farmers in other countries as well. For starters, one could identify weather-determined variability in production, diseases like Asian Soybean Rust and bovine spongiform encephalopathy, long periods of low prices punctuated by a sudden peak and subsequent decline in prices, and international markets that are controlled by a relatively few firms on both the input and marketing sides.

We recently attended a meeting where the concerns of farmers in developing countries were the focus of the discussion. As we listened and talked, it became apparent to us that if we were asked to help a country become more food secure so that it could ensure that its citizens had access to a reliable supply of nutritious foods, our answer would be the same whether we were asked the question two centuries ago, two decades ago, or two weeks ago.

Task one is to become thoroughly knowledgeable about the country’s agriculture. That includes understanding what, how, and why farmers produce the food they do. It also includes being grounded in the heritage of its agricultural past.

Being the stereotypical “ugly American” who purveys a large dose of one-size-fits-all practices regardless of local relevance gets relationships off on the wrong foot at best and at worst breeds resentment and may even violate the “do no harm” principle.

Culture and context are important. One does not have travel out of the country to see the importance of this.

Farmers in one corner of a county may be wedded to the use of liquid UAN (a liquid mixture of urea, ammonium nitrate, and water), while farmers 30 miles away might not even consider using it.

Each of us in farm country knows of agricultural practices that are well entrenched in one area that are considered unacceptable in another. We also know that it is not within the psyche of farmers to kindly accept suggestions to change specific agricultural practices just because those practices are used by farmers elsewhere.

Considering culture and context are especially important when working with farmers in developing countries. Attempts to get farmers in developing countries to switch over to US agricultural practices are often met with varying degrees of resistance. We have read of well-meaning projects in developing countries designed to modernize agricultural practices that were quickly abandoned when the outside experts and their money moved on to another area.

Outside of a few developing countries, a large portion of the world’s population consists of small-holder agriculturalists and pastoralists. In developing international agricultural and trade policy, we must remember that it took this nation four centuries to move from one dominated by small farms to one where less than 2 percent of the population feed the other 98 percent and have a surplus left over to export around the world.

Given that history, it makes little sense to think that this shift can take place in developing countries in a generation or two because the change is not simply technological, it is cultural as well. Farming involves a close tie between the farm family and their community and the land. Those ties only change slowly.

That suggests to us that if one wants to help a country improve its level of food security, one needs to start by taking the local farmers and their farming practices seriously. In many cases, the ancestors of the present-day farmers survived on that land for centuries and passed their knowledge down from one generation to the next. Agricultural practices that do not make sense to an outside expert may take into account conditions, both social and agricultural, that are not found in the expert’s home country.

Early extension agents in this country often faced a similar situation. They needed to become familiar with local agricultural practices in order to be trusted by the local farmers. As they built trust among the farmers in their county, they could then identify those who were looked up to by their neighbors. With patience, the agents identified those who would set up a demonstration plot to see if a change in practice would be beneficial—a picture is worth a thousand words.

The work is often slow and tedious, but taking local farmers and their practices seriously is the key to long-term agricultural productivity and social stability. Small-holder producers are not easily transformed into international agricultural moguls, but they can be given the support they need to improve their productivity and thus the food security of their family, community, and country.

Okay. In our view, being respectful of the developing nation’s culture and agricultural heritage so as to become a trusted helpmate rather than an irrelevant know-it-all is critical. But then what? Well, that will be the fodder for future columns.

In general terms, it will take a unique combination of policies and investments coupled with enlightened international organizations that have become newly obsessed with taking countries from where they are to being food secure.

Decisions of all involved should be laser-focused on needs of the country, independent of other considerations. For example, if multinationally supplied products and services and/or imports from other countries fit the short-run and long-term development plans for a country, great.

But doing what needs to be done to stabilize food security in a developing country may conflict with certain mindsets—mindsets such as maximization of international trade and what-is-good-for-multinationals-is-good-for-all. If that turns out to be true, the collective answer should be “so be it.”

Maximization of international trade and multinationals’ profits are perfectly acceptable goals in certain contexts, but in the context of helping developing countries achieve food security, they clearly should not be dominating forces.

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Increased Agricultural Productivity Is One Piece of a Complex Puzzle

23rd November 2009 - Daryll E. Ray, Agricultural Policy Analysis Center

The jump in prices of agricultural commodities in 2008 was devastating not only for US dairy and livestock producers—its repercussions could be felt around the world with food riots in many countries and trade restrictions in a number of others. For many, that this crisis could occur at all was a wake up call.

Given recent discussion by the Food and Agriculture Organization (FAO) officials and presenters at the World Food Prize presentation in St. Louis, the crisis and increase in the number of hungry in the world provides an opportunity to promote accelerated growth in agricultural productivity. Many at the meeting either called for or announced future productivity gains.

Ellen Kullman, CEO of DuPont, agrees with FAO that food production needs to double by 2050 to meet the needs of a growing world population. In addition she announced that DuPont expects that corn and soybean yields will increase by 40 percent over the next nine years.

Given the October 9th USDA projection of a 164 bu/ac corn yield, we might see a national yield of 230 bu/ac in 9 years. If 80 million acres were to be planted to corn in 2018, we could see US corn production increase from the present 13 billion bushels to nearly 19 million bushels.

While increasing yields is an excellent long-term strategy, it is hard to make the case that the lack of productivity was the cause of the recent crisis. The problem was not that we did not have enough production but that we were afraid that we weren’t going to have enough. Even though wheat production was down, there was enough rice to meet the world’s needs.

As a result of the fear, speculators helped prices hit dramatic highs that resulted in the crisis that drove an additional 250 million people into the situation where they were chronically hungry. They joined the 800 million who were already in that situation.

Despite the crop research announcements, it is not production capacity that is the immediate problem. It is the variability of production and demand that we need to be prepared for in the near future.

Shortfalls in production and demand shocks occur periodically and are going to occur in the future. Given the projections for climate change, significant crop production shocks are likely to occur more frequently in the future.

Rather than a spurt in demand from increased ethanol production, next time it may be a sharp drop in supply due to weather or other natural phenomena. It is not a matter of if, but when.

Had the present excitement in increasing productive capacity occurred two years ago, it would not have had an impact on 2008 crisis. Similarly, this current discussion will not have an impact if we have production or demand shock in the next three to five years.

What would have made a difference? Putting some of the less than $2 per bushel corn into a reserve during 1998 thru 2001 would have been a game changer. Just the presence of such a reserve would have had a calming effect.

We are supportive of research that increases our capacity to produce various crops at higher yield levels. We want to have the capacity to produce more than we need in any given year. Hopefully, research will result in productivity increases that will exceed increasing demand.

However, to keep prices from crashing and to address increased volatility, we need to manage the growing productive capacity of agriculture just as in other industries. On a recent trip, we flew on four flights, and each plane was full as stand-bys filled any available seats. That is quite a contrast to a couple of years ago when we would be on aircraft that were 40 to 60 percent full.

Earlier this year we took a trip that landed at a Western airport, where we saw a number of aircraft parked in a little used section of the airport. We asked our hosts what was going on and were told that the airline was taking a number of craft out of service to reduce capacity and increase their profitability.

Given the price we had to pay for our tickets and the lack of empty seats in the aircraft, it appears that the airline strategy of reducing capacity has worked.

Given the level of agricultural research that we hear about, the problem facing crop agriculture may be that we are going to have more capacity than the demand requires. At the same time, this increased capability does not address the variability and volatility that is inherent in food production.

We shouldn’t expect crop research to solve the problem of variability. That will require reserves and the ability to manage the productivity increases that are coming down the pike.

We should also remember that, while much of the focus has been on the problem of 1 billion people suffering from chronic hunger, increasing productive capacity will not solve the hunger problem for those who have too little money to buy sufficient food. Production does not equate to feeding the hungry.

As we academics might say, increasing productivity is a necessary but not sufficient condition. Certainly, we can’t feed the hungry if there is no production. Likewise, we can’t feed them if they don’t have the money to purchase what is produced.

With regard to developing countries, there is a divergence between the kinds of technologies that improve the productivity of US farmers and the kinds of technologies that are appropriate and will best help poor peasants who make up the bulk of the farmers in the world.

Here again the pronouncements about future productivity gains are not all that reassuring. It is likely to be the agricultures in the developed countries, like the US, that will most benefit from the new technologies envisioned for the future. But to better feed the 60 percent of the hungry that depend on agriculture, a different set of research investments may also be necessary.

Clearly, in recent decades the world community has been under-investing in appropriate technology that meets the needs of small holders. Increased productivity and profitability would boost rural family well-being while allowing them to stay on the farm until jobs in town are available. That in turn—in the decades ahead—could allow for increases in the average size of farms that perhaps could benefit from some of the same research that benefits producers in the US.

The current frenzy to increase investments in agricultural productivity helps ensure needed future growth in agricultural productive capacity.

The recent food crisis fanned that frenzy, but it is important to keep in mind that increased productive capacity does little to address the “food-crisis-type” volatilities like the one we just experienced, and by itself increased production will not defeat world hunger.

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). Daryll Ray’s column is written with the research and assistance of Harwood D. Schaffer, Research Associate with APAC.

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