Policies aimed at lowering the price of food by increasing the food supply Text extracted from The World Food Problem Leathers & Foster, 2004 http://www.lastfirst.net/images/product/R004548.jpg.
Download ReportTranscript Policies aimed at lowering the price of food by increasing the food supply Text extracted from The World Food Problem Leathers & Foster, 2004 http://www.lastfirst.net/images/product/R004548.jpg.
Policies aimed at lowering the price of food by increasing the food supply Text extracted from The World Food Problem Leathers & Foster, 2004 http://www.lastfirst.net/images/product/R004548.jpg How to increase food supply • An outward shift in the food supply curve – Reduces the equilibrium price • Farmers would need to – Produce more at the same price, or – Produce the same amount at a lower price • What would motivate farmers to increase food supply? – Reduction in cost of production How to reduce the cost of production • Reduce input prices • Encourage investment • New technologies – increase productivity Soy harvest, Brazil http://www.brazil.studyintl.com/programs/ag/images_ag/soy_harvest.jpg Subsidized inputs • Irrigation – Dam building • Abundant, inexpensive water • Benefits poor and wealthy farmers http://www.unesco.org/water/wwap/case_studies/ruhuna_basins/index.shtml Sri Lanka Irrigation Subsidized inputs • Fertilizer – Benefits of subsidies • Encourages learning by doing • Helps overcome – risk aversion – credit restraints • Helps poor farmers • Offsets tax and pricing policies http://www.thaitradesource.com/directories/fertilizer/fer2.jpg – that hurt farmers • Maintains soil fertility Fertilizer, Thailand Subsidized inputs • Fertilizer – Problems with subsidies • Knowledge of fertilizer use is widespread now • Subsidies help large farmers more • Best way to help small farmers is by eliminating urban bias • Reduces incentive to use natural organic fertilizers – That hold water better http://sweetchillisauce.com/Letters/Manurepic.html Subsidized inputs • Fertilizer in Africa – Subsidies removed • 1970s and 1980s – Fertilizer use dropped • Less profitable to use – Free Market has not responded to removal of subsidy http://www.new-agri.co.uk/image/046/dev01.jpg • • • • • Risk aversion by farmers Seasonal demand High transport costs Undeveloped financial services Farmers lack cash – Some role of government needed Subsidized inputs • Pesticide Subsidies – Encourage farmers to use more • Environmentally destructive – Undermine efforts to promote IPM • Integrated Pest Management – Biological control – Minimal chemical use http://www.ipminstitute.org/images/ipm_year.gif Mechanization • Farm machinery subsidies – – – – Tax breaks Tariff protection Subsidized credit Inflated official exchange rates • Can import machinery cheaply • Problems with subsidies – Benefits primarily to large farmers • Out-compete small farmers • Buy out small farms • Greater inequity http://www.technoserve.org/involve-donate.html Tractor, Kenya – Yields not necessarily increased – Employment reduction – If profitable, free market will works • Poor farmers can rent machinery Credit Subsidies • Is assumed that small farmers have trouble getting loans – No collateral – High risk • Government subsidies: – Direct Government loans • at low interest rate – Require banks to lend • at low interest rates http://www.hindu.com/thehindu/mp/2005/07/11/stories/2005071100210 500.htm State Bank of India Credit Subsidies • Problems – Benefits rural wealthy • Discriminates against poor – High cost leads to • Deficit financing • inflation – Discourages savings – Better uses of money? http://www.rdiland.org/OURWORK/OurWork_Accomplishments.html • Agricultural research • Better rural roads • Improved education Alternatives to subsidized credit • Increase local savings institutions – Must be convenient, secure – Good interest rate • Promotes saving • Availability of money lowers lending interest rates • Benefits poor • Microcredit – Small loans to poor families, women – Administered locally http://www.globalenvision.org/_image/microcreditmicro.jpg Microcredit recipients, India • Know reputation of borrower personally • Understand likelihood of business success • Status in community falls if loan not repaid Microcredit • Case study, Philippines – Farmer borrowed $52 • To buy two piglets – Planned to feed piglets table scraps • Low cost – Had reputation for honesty, hard work – Repaid $2.30/week • 26 weeks • Total of $60 – Sold fattened pigs for $200 http://community.webshots.com/photo/3884771/10038848300107682 71iWotCapauD Improving Roads • Raises prices farmers receive – Reduces cost of • Cost of transport • Cost of inputs • Price fluctuations – Increases • • • • • http://he.wikipedia.org/wiki/%D7%99%D7%A8%D7%A7%D7%95%D7%AA Production Exports, imports Wages Farm labor employment Agricultural specialization – Fruits and vegetables can be marketed further away Improving Roads • Case study: Bangladesh – Villages with good infrastructure • Hard-surface Roads – Used 92% more fertilizer – Used 4% more labor/hectare – Paid Ag workers 12% more per day http://www.dfid.gov.uk/images/countries/asia/bangladesh_bicycle.jpg Bangladesh Road – Compared to villages with poor infrastructure Improving Rural Infrastructure • Rural electrification – Electrical farm machines – Irrigation pumps – Telephones • Marketing systems – Transmits supply, demand needs – Improves choice through competition • Radio, newspapers – Market price news Central Market, Mexico City • Terminal markets – Buyers, sellers in one place – Improves production, nutrition Price Stabilization • When prices are unstable – Farmers less likely to invest in production • Risk averse • Governments stabilize prices – Buy commodity at set price • Encourages Black Markets – Buffer Supplies • Buy when prices cheap • Store for sale when supplies drop – Buffer Funds • Raise commodity taxes when prices high – Encourage Futures Markets • Farmers pick price at beginning of season http://www.tradingsimulation.com/resources/articles/mot.jpg Subsidizing Agricultural Research • Important areas for Ag technology research: – Yield response to fertilizers and pesticides – Drought tolerance – Disease and pest resistance – Food quality – Food handling and storage – Labor for production and food processing – Compatibility with social, cultural and economic norms http://maizeandgenetics.tamu.edu/drought.htm Return on Research • Case study: hybrid corn – For every $1 invested in hybrid corn in the U.S. • Until 1955 – Was $0.35 return per year • Since 1955 • Due to reduced price • Case study: Cassava mealybug – Research cost $27 million – Benefits exceeded $4 billion http://www.fofweb.com/Subscription/Science/Environ _Issues/EN0728.jpg Why don’t farmers invest in research? • Operation too small – To sponsor research – To benefit from research • Majority of ag tech benefit goes to consumers – Farmers lose revenue when new tech is introduced – Farm prices fall faster than production can increase http://www.donau-uni.ac.at/imperia/md/images/donau_uni_allgemein/presse/bilder2005/labor_w_236x157.jpg Why doesn’t industry invest more in Ag research? • Require patents to make research profitable – Machinery can be patented – Most biological innovations cannot be patented • • • • • • • http://www.plantbreeding.iastate.edu/news.html Walt Fehr, ISU Soy breeder Animal breeding Animal nutrition Plant breeding Plant pathology Entomology Agronomy Soil science – This research must be Government sponsored CGIAR • Consultative Group on International Agriculture – International Rice Research Institute (IRRI) – International Maize and Wheat Improvement Center (CIMMYT) – 13 other International research centers • Helps fill research gap in small countries Challenge of ag research in Africa • 90 percent of ag is mixed cropping – More than one crop in a field • Intercropping – 2 crops at same time • Relay Cropping – Not all crops planted at same time • Sequential cropping – Second crop planted after first harvested • Challenge: http://www.afrol.com/images/agriculture/kenya_trees.gif Agroforestry, Kenya – improve productivity – While maintaining sustainability • Agroforestry – Alternate trees and crops • Conserves water, soil, organic matter Extension • Government subsidizes – Education and advice to farmers • Case Study: Iowa – weed killer 2,4-D – Took only 11 years http://www.extension.iastate.edu/Connection/2002AR/farmbill.html ISU extension • From time first farmers heard about it • To when most were using it (1955) Sustainable Farming • Role for government to promote – environmentally appropriate practices – Extension to teach farmers http://www.sendacow.org.uk/printed.asp?active_page_id=113 • Will prevent future declines in productivity