The end of "Cheap Food"

zash · #1 Saturday, February 26, 2011

Affordable and nutritious food, a basic human right, is a very reasonable and sagacious goal for any government but is far from being met in developing countries like Pakistan. Soaring food prices and falling purchasing power is mocking our social and political stability resulting in sparking riots and civil disturbance. It is the poorest of poor who have to spend more than 80% of their meager income on food. Leap in prices is affecting poor’s food in terms of quantity, quality and spending as well. They have reduced their food intakes by forgoing spending on health and education and selling their assets. Upper Middle class consumer is shifted to cereals based diet away from higher quality food groups, meat, dairy products and vegetables. This is much alarming situation as World Bank President Robert Zoellick warned G20 leaders in a recent summit at Paris that the world is reaching a danger point where soaring food prices threaten further political instability. This is a time to move from talk to action. This is a time to make right policy choice that may ensure food accessible to the most vulnerable and simultaneously helping producers to raise their output and increase their income.
Many factors contribute to the dramatic increase in food prices. At international level, it is because of expansion in bio fuel and record increase in oil prices. In Pakistan, it is due to distortionary policy responses leading to long decline in agricultural investment resulting in limited capacity to produce more that has put food and feed in menace. Primarily higher food prices should have been good news for the farmer as it increases the funds of producer for more investment, but it matters only when there are specialized skills, improved technology, easy and affordable access to quality inputs. Unfortunately all these things are missing in Pakistan. Our farmers are far distanced from modern technology; nothing is extended to the farmers regarding efficient and cheaper production technologies. Prices of key inputs like energy and fertilizer are increased many folds than price of produce.Necessary rural infrastructure, institutions, marketing linkages, income diversification interventions and storage facilities are lacking here. Lowest rural saving mobilization and limited access to credit coupled with unconstructive agriculture credit system is putting poor farmer under permanent debt. Policy measures need to be targeted that should be non distortionary and positive towards agricultural investment.
Policy Measures to encounter food prices may be categorized into two types. First there are Short-term measures commonly exercised in terms of import of food items from open world market that attempt to sluggish prices of food and increase food availability. But those are just emergency measures to control food prices for a limited time period. Second there are Mid-Term and long term policy measure that aims to boost agriculture produce by supporting producers both technically and financially. This is the only long run and widely used policy to address the strategic food security ensuring the provision of reasonably priced and healthful food supplies to the citizens. Regretfully, in Pakistan, only short term policy measures are taken to some extent but medium and long-term measures are totally neglected. There is a need for complementarity and consistency between both of the measures. This calls for a right policy choice to increase food supplies. The best policy should follow a twin-track approach by boosting agriculture production through support to investment in agriculture sector, ensuring safety net for poor consumer, managing markets and stocks, overcoming supply side constraints and institutional weaknesses. This will require educating farmers in modern production and marketing techniques, better crop management and farm practices, affordable access to key inputs, establishment of across border marketing chains, reducing produce taxes, providing subsidies on inputs so that farmer’s confidence may be revived to seize the opportunity to invest and raise their production.
Supply shocks also contribute to the rapid swing in food prices. Generally these shocks are resulted from drought, hoarding against expectations of further rise in prices, import/export restrictions, cropping patterns, emerging bio fuel factor, appreciation of US dollar. Import of food is most expensive and extravagant approach to ensure surplus supply that has never been a wise option for developing countries including Pakistan. High transport cost, poor infrastructure, transport, communication services and marketing margins stab economy of developing countries adversely to import commodities into domestic market and also affect the balance of payments. Long run expansion in supply is primarily driven by technological advancement, which reduces cost and minimizes risk ensuring food supply faster than population growth. We have failed to materialize supply responses and technology is limited to research papers only. This is the only reason for price hike in Pakistan and there is a need to promote supply response through crucial strategic and policy issues. We have to reduce excessive role of speculation and all the stake holders including farmer, processor, retailer and commercial trader must be brought on board through vivid regulations. Finally, we should import technical and policy assistant instead of food product itself.
Productivity-led approach to increase food supply will have a tri-fold effect on our economy. It will sluggish the food prices; it will increase farm income; it will also ensure a positive change in rural economy leading to poverty reduction. There is a strong need to develop a system that offers farmers a mean of earning a decant income that is comparable to their fellow citizens. This necessitates more funds for this sector. Expertise is required on commodity market and trade issues. The need to protect consumer from higher food prices must be balanced against maintaining incentives for productivity- raising investment and supply responses. The government will have to opt for out of box solutions and enthusiastic pursuit to develop agriculture sector as promotion of agriculture is the only and most effective tool for eradication of poverty and terrorism.

Muhammad Irfan Arshad
Credit & VO Help Officer
National Program for Food Security & Productivity Enhancement
(Crop Maximization project-II)
Ministry of Food and Agriculture, Government of Pakistan

asmat · #2 Wednesday, March 16, 2011

Brilliant analysis....... i read this article in "The Financial Daily". Realistic exposure of food price hike and accurate solution.

The Following 2 Users Say Thank You to zash For This Useful Post:
asmat (Thursday, March 17, 2011), Shooting Star (Wednesday, March 16, 2011)

The Following User Says Thank You to asmat For This Useful Post:
zash (Thursday, March 17, 2011)