Monday, 20 June 2011


by Erik Millstone, STEPS Centre Food and Agriculture co-convenor

There are massive inequalities between industrialised and developing countries, and they have widened over the past 15 years, but there are also considerable inequalities within developing countries. There are consequently divergent interests, at least over the short term, between different groups within developing countries, and between industrialised countries such as the UK on the one hand and developing countries on the other.

Moreover, given the structure and operations of the current global food system, some short-term measures that might be seen as benefiting one of those groups might be unwelcome by others. To tackle global inequalities and promote sustainable development, the structure and operations of the global food system will need to be substantially reformed. The UK government should be taking a lead in advocating and implementing policies that simultaneously tackle inequalities and promote sustainable development.

An example of divergent interests can be provided by considering the impact of ‘favourable’ weather during a growing season or a livestock production cycle. In a ‘good’ season the yields from both arable and livestock farming will be relatively plentiful. For subsistence farmers, this is substantially good news because they have more to eat and more to store, and maybe even a surplus to sell. If however they lack suitable mould- and pest-proof storage facilities then the benefits of that surplus will be short-lived. The benefit of having a marketable surplus may, however, be undermined as ‘good harvests’ often drive down market prices, as a significant ‘overhang’ of perishable foods typically results in a collapse of market prices, sometimes to well below the cost of production. Low food prices are welcomed by the urban poor, but are matters of relative indifference to the urban middle class and substantial indifference to the wealthy. ‘Unfavourable’ weather can drive supplies and prices in ways that may be welcome by commercial farmers who achieved marketable yields, but seriously compromise food security for subsistence farmers and the urban poor.

It is important to recognise that unregulated agricultural markets are notoriously unstable in respect of both supplies and prices; and not just because of the weather. Earlier this decade, before the food price shocks of 2008 and 2010/11, it became for fashionable for some to argue that technological innovations and globalized trade had delivered a stable, secure and sustainable agricultural regime. Recent events indicate that liberalised trade and historical patterns of technological change have not ensured stability, in the long-run they have contributed, and are contributing, to diminishing sustainability. The January 2011 UK Foresight report on the Global Future of Food & Farming recognised, as did UK ministers, that the current regime of policies and practices must change if food security is to be enhanced.

Weather remains, of course, a complicating factor for agricultural policy. Climate change should not be oversimplified as ‘global warming’. Even when long-term warming occurs, increased short-term meteorological volatility should also be anticipated. The probable consequence is increased perturbations of prices and supplies of food in ways that will, in numerous ways, compromise the sustainability of the livelihoods of both subsistence and commercial farmers and many urban consumers.

The various types of market liberalisation that have been implemented since the early 1980s have undermined food security for diverse communities in many different parts of the world, and they have done so through several mechanisms.

Firstly, subsistence farmers in developing countries suffered particularly as a consequence of the ‘Structural Adjustment’ policies of the 1980s and early 1990s, which amongst other things dismantled the agricultural research and extension services from which they had previously benefited. Aid and policy support for those services would be particularly beneficial for subsistence farmers, but the mechanisms through which those systems should operate should utilise extension services not just to disseminate knowledge and technologies but also to gather intelligence from farmers about their needs, priorities and expectations; only under those conditions can the R&D agendas of the scientists and technologists be effectively coupled to the needs, concerns and aspirations of poor farmers. Liberalisation was often justified as an effective means of transforming subsistence farmers into commercial farmers. In practice, that liberalisation frequently drove many of the rural poor out of farming, off the land and deeper into poverty, both rural and urban. While in the long run it may well be in the interests of many subsistence farmers to become increasingly commercial, the timing and rate at which those changes occur should be at their chosen pace, not driven by artificial timetables or unrealistic econometric models.

Agricultural research and development programmes that assume that the rural poor can be helped by technological innovations distributed through market mechanisms fail to reach their intended beneficiaries because they fail to appreciate the constraints imposed by poverty. Subsistence farmers are more commonly looking for ways to diminish risks, not opportunities for potentially profitable but risky investments. Distributing new ‘improved’ seeds through normal commercial channels may well not provide any benefit to poor farmers. Farmers who have not been able to afford any commercial seeds for many years cannot be reached through commercial channels; and many of the rural poor in eg sub-Saharan Africa fall into that category. If they are to benefit from improved seeds, they need to have subsidised access to those seeds, but they also need appropriate tools and knowledge, and the seeds need to have characteristics that the farmers most value. In sub-Saharan Africa, for example, farmers typically prioritise resilience to variable weather more than they value maximum yields in optimal conditions, while the research community too often concentrates on optimising and maximising.

Generic policies to accelerate the pace of technological change in eg agriculture often do not benefit those what are in greatest need. Different types of technologies have differential effects on contrasting social groups. For example commercial farmers may be attracted by labour-saving innovations, but landless labourers benefit more from employment-generating technological changes.

A second consequence of the liberalization of agricultural markets has been a reduction in the number and size of public sector buffer stocks. That occurred over the past 10 years in the UK and the EU, as well as the USA, but under pressure from the World Bank and the IMF public sector buffer stock holdings in developing countries have also been markedly reduced in frequency and scale. Urban consumers, especially poor ones, share common interests with rural communities in seeing diminished volatility in food supplies and prices. Food security requires at minimum a sufficient and sustainable supply of food that can be equitably accessed. Sufficiency, equity and sustainability have often only been achieved with public policy measures to create and manage public stocks to buffer supply volatilities. Those stocks should, of course, be managed in careful and accountable ways.

Leaving stocks of foodstuffs to decay or distributing them in corrupt or unaccountable ways brought stockholding into disrepute. The UK policy and research community could make a substantial contribution by helping developing countries to establish and operate legitimate resilient and robust buffer-stock regimes. Several EU Member States have responded to the price volatilities of recent years by re-establishing some of their stocking policies, but not the UK. The current UK government and the European Commission have taken the view that as long as private sector commercial stocks are deemed sufficient by the food industry then food supplies will be secure, but not everyone is convinced that that is anything more than wishful thinking.

A third feature of liberalisation over the past 15 years has been the abolition of rules that prevented ‘naked short-selling’ of food commodities, and the rules that restricted owning and trading in food commodity futures. The ranges of different kinds of ‘investors’ who are now lawfully permitted to gamble on future food price movements has been substantially widened; they are no longer restricted to companies that own or need physical stocks and supplies. Speculative investments by those with no interest in ever holding physical commodities has substantially amplified price fluctuations beyond what could have been anticipated by reference to physical conditions of supply and social conditions of demand.

In the light of those considerations, 10 recommendations emerge:

1. The UK government’s investments (eg by DFID, the BBSRC and the NERC) in R&D for developing country agriculture should be closely and explicitly coupled to the needs and agendas of the intended beneficiaries. As the Gates Foundation’s Agricultural Research Guidelines stipulate, researchers should indicate: “Who are the target beneficiaries of your work and how does your approach specifically serve their documented needs?”

2. The UK government should endeavour to shift the corresponding agendas of the EU, the Consultative Group on International Agricultural Research (CGIAR), the UN Food and Agriculture Organisation, the World Bank and the IMF to couple them more closely to the needs, concerns and aspirations of their intended beneficiaries.

3. Investments should be made by the UK and the wider donor community to re-establish and support improved agricultural extension services so that they provide effective reciprocal communications between the research community on the one hand and farmers and landless farm-workers on the other.

4. Investments should be made to help poor rural farmers and landless farm workers gain affordable access to improved means for storing and preserving foods when they are plentiful and cheap.

5. The development and adoption of employment-generating technological changes for developing countries should be no less a priority than labour-saving innovations.

6. Effective steps should be taken within the UK and the EU to re-establish public sector food stocks that can serve to buffer supply and price volatilities.

7. Help and encouragement should be given to developing countries to establish (or re-establish) public sector food stocks that can serve to buffer supply and price volatilities, so as to protect the vulnerable rather than enrich the powerful.

8. To diminish inequalities, chronically poor farmers need subsidised affordable access to diverse ranges of improved technologies appropriate to their needs, concerns and aspirations.

9. A fresh approach to trade policy will be needed. Instead of simply adopting a rhetoric of levelling the playing fields while making sure they remain skewed against poor farmers and poor countries, both the rhetorics and the practices must change, to shift support from eg the CAP that gives most help to those who need it least and least to those that need it most, by inverting that relationship.

10. Rules governing the buying and selling of food stocks and food futures need to be more not less restrictive. Naked short-selling of food stocks or futures should be unlawful. Buying and selling of wholesale food stocks should be restricted to companies that own or use physical stocks. Gambling on the future price of food should be prohibited, except for limited seasonal hedging by companies in the food industry.


>> STEPS research on food & agriculture

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