Agricultural policies and food security Samuel K.Gayi and Milasoa Cherel- Robson Special Unit on Commodities, UNCTAD.

Agricultural policies and food security

Samuel K.Gayi and Milasoa Cherel-Robson

Special Unit on Commodities, UNCTAD

Course objectives

The linkages between agricultural policies and food security.

Emerging challenges, opportunities and risks linked to biofuels.

The linkages between agricultural trade and food security.

Prevalence of food insecurity

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Developedcountries

Near East andNorth Africa

Latin Americaand the

Caribbean

Sub-SaharanAfrica

Asia and thePacific

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1995-1997

2008

Definitions, analytical framework and policy actors at national level

“Food security exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.” (FAO, 2001)

Analytical framework: availability, access, use and stability.

Other conceptual issues include Sen’s entitlements framework and time dimensions and grades of severity of food insecurity

Food security policies need to be implemented through a cross-sectoral approach involving various government ministries, namely: Agriculture, Trade, Health and Education.

The focus of this presentation is on the linkages between food security and agricultural policies and trade.

Structure of the presentation

1. Issues in SSA’s agricultural sector and scope for optimism

2. Food security and biofuels: emerging challenges, opportunities, risks and policy responses

3. Food security initiatives at international level

4. South-South cooperation

5. Why trade is important for food security

6. Regional and subregional integration

7. Food security and WTO’s Agreement on Agriculture

Issues in SSA’s agricultural sector

Agriculture: Primary source of livehood for 64 % of the population in SSA.34 % of the continent’s GDP.40 % of the continent’s export earnings.

Agriculture under Structural Adjustment programmes: Trade liberalisation was thought to do the trick. Public spending on agriculture was reduced. Public marketing boards have not been replaced by private

institutions. No compensatory policies.

Neglect of agriculture

Figure 2: DAC ODA to Agriculture, fisheries and forest as proportion of total DAC ODA, 1967-2006

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2.00%

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6.00%

8.00%

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12.00%

14.00%

Issues in agriculture (cont’d)

The continent went from being a net food exporter to being a net food importer in 1988. By then, the continent had a net food trade deficit of $2.4 billion. This trend continued and culminated in African food imports reaching $119 billion in 2007.

The continent’s potential in commercial agriculture remains largely untapped with a fledging agribusiness sector in most countries.

Regarding productivity gains and technology-led diversification for a variety of crops including corn, soybeans, sugar and rice, Africa is lagging behind East and South Eastern Asia and Latin America.

Impact on food security

Africa is also losing its competitiveness in traditional crops such as cotton which is essential for the livelihood of millions of farmers and their families.

Structural constraints include: low investment in the agricultural sector, paucity of transport infrastructure, low access to finance, low adoption of technology, no “green revolution”.

By increasing vulnerability to poverty, these structural constraints limit conditions for food availability and food access on the continent.

And hence result in a situation of increased food insecurity.

Scope for optimism

NEPAD and CAADP framework: commitment of African countries to spend at least 10 percent of their budget on agriculture and achieve a 6 percent annual growth rate for the sector by 2008.

CAADP is under implementation in more than a dozen countries and 8 countries have already attained the goals : Burkina Faso, Ethiopia, Ghana, Guinea, Malawi, Mali, Niger and Senegal.

Food security and biofuels: emerging challenges

1.5% of the supply of global liquid fuels in 2006, but 50% of the increase in the consumption of major food crops in 2006-2007. This rising trend is set to continue despite a temporary setback in 2009.

Causes: demand for corn for ethanol production, and demand for other grains through cost-push and substitution effects.

Is renewable energy good for fighting climate change?

Biofuels- opportunities

Good reasons for producing crops for biofuels include:

1. Biofuels comprise ethanol and biodiesel. Ethanol is derived from corn, sorghum, barley and sugarcane while biodiesel is derived from vegetable and animal fat.

2. Producing biofuels for their own use would lessen developing countries’ dependence on fossil fuels: for ex, biofuels account for one-third of Brazil’s total transport fuel.

3. Exporting food crops for biofuel production would bring much needed foreign reserves. LDCs have preferential market access through the Everything But Arms (EBA) agreement. But the market is currently dominated by large countries.

World market share in biofuels production

Ethanol Biodiesel Total biofuels

Share (%) Share (%) Share (%)

United States 50.1 Germany 19.1 United States 43.8

Brazil 37.5 United States 17.5 Brazil 31.6

China 2.7 France 12.3 Germany 4.3

France 1.2 Brazil 7.0 France 3.3

Germany 0.8 Italy 4.5 China 2.5

Sum of top 5 92.3 Sum of top 5 60.4 Sum of top 5 85.5

Others 7.7 Others 39.6 Others 14.5

Total World 100.0 Total World 100.0 Total World 100.0

Biofuels - Risks

The risks that biofuels pose to food security include:

Competition over scarce water resources.

Commercial production could be to the detriment of small land owners. For ex: the “land grab” issues in 2007-2009.

Energy needs would compete with food needs: 1 SUV would require 660 pounds of corn or other food to fill its tank. This is equivalent to the annual food needs of two people from the developing world.

Higher food prices would act as a taxation on the poor.

Detrimental impact on the environment due to the intensive land use.

Food security and biofuels: policy responses

There is no “one size fits all”: each country has to develop its own biofuels strategy. Ex: Mozambique’s National Policy and Strategy for Biofuels that was approved in 2009 after two years of preparation.

National agendas must also be integrated into a regional agenda. Ex: SADC’s mechanism for coordinating biofuels policy towards the development of a regional biofuel strategy.

Food security initiatives at international level

They include:

The United Nations’ High Level Task Force on food security and Common Framework for Action.

UNCTAD’s Biofuels Initiative set in 2005 to assist developing countries in capturing the multiple potential advantages of greater production, use and trade in biofuels resources and technology.

South-South cooperation

List of developing countries that provide technical and financial support to other developing countries include: Brazil, China, Egypt, India, Malaysia, Turkey and South Africa.

Ex: Agriculture is a priority for the China-Africa cooperation: The Beijing Action Plan of the 2006 Forum China-Africa Cooperation states plans to send 100 senior experts on agricultural technologies to Africa and set up 10 demonstration centers of agricultural technology with special features.

Why trade is important for food security

The tradeoff between self-sufficiency versus self-reliance.

Entitlements: food can be available at one location and missing at a neighbouring location.

Extreme case: a famine is a failure of entitlements.

Dynamic regional trade in food in SSA: staple food dominates intra-regional trade.

Agricultural trade

Share of Africa in global agricultural trade : now at around 3%.

Reforms have rendered African economies more open and hence more vulnerable to the vagaries of the global economy: by 2008, some of them had used up to 50% of their foreign reserves to deal with the surge in energy and food prices.

But African countries can also seize export opportunities by increasing productivity, i.e. improving access by smallholders to improved seeds and fertilizers in order to stimulate supply response.

Price volatility on international markets and impact of the crisis create risks of policy reversal in many countries.

Risks of protectionism

Source: Compilation based on World Bank online information, extracted 17 March 2009. http://siteresources.worldbank.org/NEWS/Resources/risingfoodprices_chart_apr08.pdf

Note: (a) Not all countries that are considered food insecurity by the FAO and/ or the WFP have taken measures. (b) There are 91 countries that are reported to have taken measures. These include 37 in Africa, 11 in east Asia and the Pacific, 17 in Eastern Europe and Central Asia, 9 in the Middle east and North Africa, 8 in South Asia, and 9 in Latin America and the Caribbean.

Chart 8: Recent national responses to food price hikes and food insecurity.

(Number of countries that have...)

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Food security and regional and subregional integration

Ex of potential of regional trade: exports among 26 countries in ESA increased from $7 billion in 2000 to $27 billion in 2008. Imports also increased from $9 billion in 2000 to $32 billion in 2008.

South-South trade in Africa driven mostly by agricultural products, meat, fisheries and dairy products.

This trade has been enhanced by regional integration agreements: removal or reduction of tariffs and non-tarrif barriers.

More regional harmonisation of standards and regulations as well as accessible market information are needed.

But no comprehensive treatment of agricultural commodities in RTAs so far.

Food security and WTO’s Agreement on Agriculture (AoA)

The agreement might have had little impact on food security because the extent of agricultural trade liberalisation under it appeared to be far less than expected.

In the current context of existing trade distorting practices by Developed Countries, more trade openness expose poorer countries to terms of trade losses and hence reduced purchasing power and ultimately more food insecurity.

More subsised exports of food from developed countries could undermine developing countries’ export competitiveness in food production and deplete their agricultural production.

DC’s responses to WTO’s AoA on concerns for food security

In the on-going Doha Round negotiations, developing countries have obtained:

1. Special tariff treatment for designated “Special products” (SPs).

2. A Special Safeguard Mechanism (SSM) that allows them sufficient policy flexibility to raise tariffs in case of import surges.