2013 Cebu - Ensuring Food Security
Note: This policy statement was issued on the 14th of March 2013 during the 27th CACCI Conference in Cebu, Philippines.
Feeding 9 billion people
The issue of how to ensure an adequate food supply to sustain the population has vexed academics and officials on a regular basis for centuries. Each time it appears as though the world will no longer be able to cope with the growing population of humans, human ingenuity overcomes the barrier and the food is produced.
Despite this, the current concerns of how to feed 9 billion people by 2050 remain and are no less challenging; with no guarantees the current system will be able to cope. There must be a finite limit to the carrying capacity of the earth in terms of humans, and of course it is other species that suffer as we ensure our own species survival.
Many local agencies, organisations and governing bodies take food security and its related issues seriously. The UN Food and Agriculture Organisation (FAO), a thought leader in this field, produced a report in 2009 entitled “How to feed the world in 2050”. This report provides an excellent synopsis of the issues and challenges facing governments on food security, production and supply. Most notably, it offers key recommendations, which if collectively implemented, could provide a solution to feeding our growing population. The report indicated that The world has the resources and technology to eradicate hunger and ensure long-term food security for all, in spite of many challenges and risks. It needs to mobilize political will and build the necessary institutions to ensure that key decisions on investment and policies to eradicate hunger are taken and implemented effectively. The time to act is now.
There are currently over 1 billion people who do not receive enough food to support their daily existence. While the world has enough food to feed everyone, it is not always produced and available in the places where it is most needed.
Poor people, in least developed and some developing countries are often caught in a vicious trap: they live in rural areas in a subsistence lifestyle where their time is consumed in a traditional process of procuring food and shelter. Often they may struggle to meet their daily needs, particularly in times of extreme weather such as floods and drought. Often they will produce little more than their own needs but if they have a surplus, may be able to take it to the local market to sell for money that can be used to advance themselves.
Without money, however, these farmers cannot afford modern crop and livestock husbandry systems such as those in developed countries. This means that production is low, but with further inputs could be improved.
Global aid programmes usually have some focus on improving capacity for food production and increasing the market access for farmers, along with direct food aid to those in most need.
II. Subsidies and trade restrictions
Notwithstanding the above, however, there are many countries that have and are developing policy positions supporting restricted trade and non-market based support mechanisms aimed at ensuring the local food supply for their individual country. These policies, such as export restrictions and production subsidies, can be disruptive to global food supply. They can create incentives or disincentives to the production and trade in food, and can lead to adverse impacts on commodity prices, and the environment. Examples of the 1980’s commodity “mountains” in Europe, which ultimately were destroyed rather than being provided to the poor, are extreme examples of what can happen when markets are corrupted and the wrong incentives implemented.
Subsidised production means that money is coming from other sectors in the economy (via taxes usually) to support the recipient industry. In turn this reduces the incentive to find more efficient production methods, including innovation, and can result in price gouging from input suppliers as they are aware of the income the farmers have available. It can also result in distortions in land values and investors seek the higher “rent” for land associated with a higher income potential created by the subsidy if they are poorly constructed.
Rice production throughout Asia is a highly protected industry. The protection however does not automatically result in greater food availability, nor a sufficient incentive to see young people choosing rice production as a career over for example, investment banking. Australia has a relatively small rice industry, but is one of the world’s largest rice exporters. Due to trade restrictions sales to Asia are relatively minor. This means the people of Asia have not received an expanded volume or variety of rice as a result of the restrictions imposed by a number of Asian nations.
New technology can also be subject to restrictions on trade. Products such as GM crops, while highly acceptable in some markets, are banned or heavily constrained in others. This technology is essential to advanced food production but consumer and environmental rights should also be respected. Organics on the other hand, was the standard production systems for centuries and still is in subsistence agriculture. It is a luxury product in developed markets, but is unlikely to be a robust enough system to feed, which could feed 9 billion people globally.
Novel approaches to food production such as “vertical farms” where office buildings and roof space in urban areas is used for food production should be considered as a means of providing additional food close to the consuming population in urban areas to supplement the supply.
Even when production is at a level sufficient to have an exportable surplus, there are many other threats to commodities along the supply chain before getting to market. For example, without cold chains, food will spoil and not be fit for consumption. Grains are rarely eaten as a raw product and need to be processed. Storage poses issues of stored grain pests destroying the grain before it can be consumed by people.
In countries like Australia where these risks have been eliminated to some extent, the result is that our production costs are also much higher leading to a higher price for our products. While there is some focus in Australia at least about our ability to be “the food bowl for Asia”, the reality is that Australia does not provide cheap food. Thus we are potentially the food bowl for only those who can afford it. The supply of food from exporting countries like Australia does though increase the overall availability of food and take pressure off local supplies in countries with a net import need.
There is a need, on farm and beyond the farm gate, to ensure that once food is produced, it has the greatest chance of reaching its destination. This requires significant investment in electricity, roads, cold chain and logistics systems. It means that infrastructure is as much a part of the solution as simple production.
The issue of food price is a recent catalyst for national interest in food sovereignty. Due to some dramatic spikes in commodity prices over recent years, some countries implemented restrictions on food trade such as export bans on wheat in India and Russia, the general Asian country bans on rice imports, and the Indonesian policy of food self-sufficiency which banned some imports in efforts to promote local production. Such efforts are trade distorting and lead to higher local prices and potentially supply deficits. Thus they exacerbate the food security problem rather than solve it.
The price of commodities often fluctuates and in many instances is insufficient to ensure an appropriate return on capital and effort. This in turn sends a signal to farmers that their efforts are not valued, nor worthwhile. In most countries the age of farmers is rising as fewer people opt for farming as a career. Working in your own business or being gainfully employed in the city is often a much better means of advancement than farming. This is a perverse outcome from a society demanding “affordable food” and farmers expecting an appropriate return on their goods. Work needs to be done to raise the profile of food production as a noble and viable career choice. The challenge of feeding a population of 9 billion if there are no farmers is a major threat.
In advanced countries like Australia this is also true, and while farmers are becoming fewer and older, farms on the other hand are becoming larger and more productive. As Australia is an easy country in which to invest, the aggregation of farming land is occurring. Particular examples of international investment from China and Qatar have highlighted their vision of land investment to secure food supplies, rather than depending completely on domestic capacity. In Australia this has led to concerns that they are selling their future and that overseas investment in land should be restricted. Many other countries have strict land ownership regulations and these prevent skilled people such as Australians from investing and increasing the local capacity to produce food.
Engagement in global supply chains can dramatically assist with the economic growth and increase in national wealth, particularly for developing countries. For example, Asian based businesses supplying the higher priced markets of Europe can mean a strong flow of funds back to small business and farmers. This can assist with improving the quality of life in the supply country as well as increasing the diversity or supply, range of goods and the price in the target consuming country. 20. Conversely, international engagement in supply chains by SME’s in developing countries can also lead to food insecurity and associated social problems. Problems arise when the supplying country runs short on staples, having exported large volumes to third countries, thus making them unavailable or priced too highly for the local consumers. This remains a global problem.
There is also potential for the quest for lower cost food to have adverse social impacts, particularly in developing countries, such as servitude and the abuse of child labour, lack of respect for human rights, erosion of occupational conditions and safety, and environmental degradation.
Countries like Australia have a vast capacity to produce food but only a small local population to consume it. Free trade, particularly in food, is an important policy tenant in ensuring that the supplies of food can make their way around the world from the most efficient locations for production of each type of raw ingredient, to the places with the highest need.
Markets can also be fickle. They offer producers alternatives to simply feeding the people. Sometimes markets send signals to farmers that it is better not to grow food at all. At times the markets tell farmers it is better to sell their grain for fuel production for example. Consumers often lament the rising prices when farmers divert their production from food to fuel, yet consumers have a weak case in this argument when they are prepared to pay more for fuel than food and so create the incentive in the first place.
In a short paper it is hard to cover such as wide ranging topic, but suffice to say that the issue of ensuring food security for 9 billion as expected in 2050 is a massive challenge. A challenge that for humanity’s sake must be addressed. If the world is not able to provide the necessary food, then simply many people will starve. Those affected first will not be in developed countries and not the rich.
Governments across the world must allow and encourage human ingenuity to prosper and rise to this challenge of future food security. Governments must not prevent countries with supply from trading with countries with demand. Freely operating markets, underpinned by appropriate social policies and without trade distortion, will be the most efficient way to assure human survival.
A. Policy Principles
The economic principle of comparative advantage should be respected with regard to global food supply. This refers to the ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another. Even if one country is more efficient in the production of all goods (absolute advantage in all goods) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.
The WTO has established some well-regarded principles to assist with freer trade. These are: The trading system should be:
- Without discrimination — a country should not discriminate between its trading partners (giving them equally “most-favoured-nation” or MFN status); and it should not discriminate between its own and foreign products, services or nationals (giving them “national treatment”);
- Freer — barriers coming down through negotiation;
- Predictable — foreign companies, investors and governments should be confident that trade barriers (including tariffs and non-tariff barriers) should not be raised arbitrarily; tariff rates and market-opening commitments are “bound” in the WTO;
- More competitive — discouraging “unfair” practices such as export subsidies and dumping products at below cost to gain market share;
- More beneficial for less developed countries — giving them more time to adjust, greater flexibility, and special privileges.
B. Policy Objectives
- Clearly, policies related to food security should be based on a strong market based system which provides incentives to producers to increase production and be able to deliver that to a consumer.
- The trade in commodities must be free from Government interference and ensure that food can easily move between production and consumption centres.
- Trade distortions should be minimized.
- Food security must consider the entire supply chain and allow for improved investment in the infrastructure along the entire process of food production to consumption.
- Wastage must be minimised.
- Technology for increasing the supply of food should not be inhibited. Consumers should be informed about their food supply and able to choose food produced across a range of production systems.
- Food production should be a valued and desired career choice. Farmers are the most valuable people on earth. They must be able to generate appropriate returns.
- CACCI and its members should express their support and thanks to the people and organisations specializing in the maintenance of food production systems and supply chains around the world.
- CACCI members should encourage their respective Governments to urgently conclude the WTO Doha Development Round.
- CACCI members should support the International Chamber of Commerce in its efforts to assist the WTO to reach a conclusion.
- CACCI members should encourage their Governments to implement unilateral trade reforms, outside of the WTO and FTA’s, to encourage improved trade and investment which in turn creates greater opportunities for farmers and consumers.
- CACCI members, where possible, should assist their Governments and local industries to embrace modern and novel food production techniques and the sharing of knowledge across farmers throughout the CACCI area of influence.