Investing in Food Production, Part I
Guest lecturer: Will Masters (william.masters@tufts.edu)
Nut 304: Food Security, Nutrition, and Development
November 16, 2010
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Investing in food production
This week in context -- the Nutr 304 story so far…
• Definitions and measurement (weeks 1-3)
• Household-level interventions
–
–
–
–
Capital formation: microcredit programs (wk. 4)
Income support: conditional transfers (wk. 5)
Nutrition enhancement: child feeding etc. (wk. 6)
Policy analysis exercise on food transfers (wk. 7)
• Market-level interventions
–
–
–
–
Price levels and stability (week 8)
Agricultural trade (week 9 from Lynn Salinger)
Investing in food production (weeks 10 & 11)
Economywide growth (wk 12 from Bea Rogers)
• Integrated policies (week 13)
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Investing in food production
Background readings for this week
• World Bank, World Development Review 2008: Agriculture for Development
– released October 2007, first WDR to address agriculture since 1986, whose theme was
Trade and Pricing Policies in World Agriculture; WDR 1982 was also on ag.
• W.A. Masters (2005), “Paying for Prosperity: How and Why to Invest in
Agricultural Research and Development in Africa”, J. of Int. Affairs, 58(2), 35–64.
– Review for a special issue on Finance Challenges of the Millennium Development Goals.
• Rockefeller Foundation (2006), “Africa’s Turn: A New Green Revolution for the
21st Century.”
– Launch document for AGRA, the Alliance for a Green Revolution in Africa
• Glenn D. Stone (2010), “The Anthropology of Genetically Modified Crops.”
Annual Review of Anthropology 39: 381-400.
– Nice impartial review from an outside discipline (not agricultural science or economics);
insiders are much more pro-GMO
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Investing in food production
Outline for today
• Why a special focus on agriculture?
• Why do some regions, like Africa, lag behind?
• How does farm size matter for productivity?
• How has foreign aid for food productivity changed?
• How has private agricultural R&D changed?
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Investing in food production
Why a special focus on agriculture?
•
In low-income places where food is scarce, agriculture is:
–
The largest sector
•
–
most people, most use of natural resources, most exports
The poorest sector
•
most poor people, most degradation of resources, most taxation of exports
5
Farming is what poor people do!
6
Source: World Bank (2007), WDR 2008: Agriculture for Development. Washington: The World Bank.
Farming is what poor people do:
Should donors join the exodus from agriculture?
•
In low-income places where food is scarce, agriculture is:
–
The largest sector
•
–
The poorest sector
•
•
most poor people, most degradation of resources, most taxation of exports
In general, agriculture offers:
–
–
–
•
low productivity relative to other sectors
variable productivity relatively to other sectors
limited prospects for growth or future stability
The overwhelming flow of investment is to off-farm activity
–
the route out of poverty is out of agriculture
•
•
•
•
most people, most use of natural resources, most exports
Within rural areas: richer farmers invest in nonfarm rural enterprises
Within poor countries: individuals and households migrate to urban areas
Across countries: migration, trade and investment favors non-farm work
Why not focus on urbanization, to buy the food people need?
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Investing in food production
Why a special focus on agriculture?
•
In any given year…
–
Food availability is limited, so someone must grow food
•
–
Nonfarm jobs are limited, so the poorest farmers have no choice
•
–
Objective #2 is productivity, to relieve poor farmers’ poverty, during the
transition before they move to faster-growing sectors
Among non-farmers, the poorest spend more on food
•
•
Objective #1 is productivity, so even more people and resources can move to
faster-growing sectors
Objective #3 is productivity, to reduce the cost of food and allow people to
spend more on other things
And eventually…
–
Farmland remains available, and food production remains important
for environmental, cultural and social reasons
•
Objective #4 is productivity, for “multifunctional” objectives
 Investment in agriculture is always about productivity,
to fuel other sectors; farm output rarely grows very fast
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Investing in food production
Why a special focus on agriculture?
The classic formulation is:
1)
Increasing supply, so as to meet rising demand
demand growth = population growth + elasticity×income growth
2)
Increasing exports, so as to buy imports for other things
3)
Reducing labor use, so as to free workers for other things
4)
Generating capital, for investment in other things
5)
Increasing rural demand, for buying other things
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Investing in food production
What’s different now?
In starting AGRA, the Alliance for a Green Revolution in Africa, the
Rockefeller Foundation (2006) argued:
1) Africa missed out on farm productivity gains elsewhere,
2) R&D-driven productivity gain requires philanthropic action,
beyond what companies & governments can do.
Some reasons for the neglect of agricultural productivity are:
3) Gains are non-excludable (private firms can’t capture value)
4) Gains are international (national governments can’t either)
5) Gains are difficult to observe and predict (need impact data)
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Investing in food production
Why did Africa miss out on the green revolution?
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Source: World Bank (2007), WDR 2008: Agriculture for Development. Washington: The World Bank.
Why do some regions lag in food production?
Kenneth Boulding’s answer, written (hastily) in 1966:
“The Old Agricultural Lag,” in No Easy Harvest: The Dilemma of Agriculture in Underdeveloped Countries,
by Max Millikan and David Hapgood. Boston: Little, Brown and Co., 1967.
Why do some regions lag in food production?
Looking at the data….
How can we explain this classic observation?
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There is a close link between new seeds & fertilizer
Source: Y. Hayami and V. Ruttan (1985) Agricultural Development: An International
Perspective. Baltimore, The Johns Hopkins University Press.
Today, the main concern is Africa’s lag
Source: Reprinted from W.A. Masters, “Paying for Prosperity: How and Why to Invest in Agricultural
Research and Development in Africa” (2005), Journal of International Affairs, 58(2): 35-64.
Africa’s fertilizer use grew in the 1960s-70s,
but could not be sustained
Source: Reprinted from W.A. Masters, “Paying for Prosperity: How and Why to Invest in Agricultural
Research and Development in Africa” (2005), Journal of International Affairs, 58(2): 35-64.
Africa faces big geographic hurdles
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More recent data:
Is Africa’s green revolution finally arriving?
USDA estimates of average cereal grain yields (mt/ha), 1960-2010
4.5
4.0
Rest-of-World
World
3.5
Southeast Asia
3.0
South Asia
2.5
Sub-Saharan Africa
2.0
1.5
1.0
0.5
0.0
Source: Calculated from USDA , PS&D data (www.fas.usda.gov/psdonline), downloaded 7 Nov 2010. Results shown are
each region’s total production per harvested area in barley, corn, millet, mixed grains, oats, rice, rye, sorghum and wheat.
Africa faces a severe demographic headwind
Rural population pressure
varies widely by region and over time
Rural population estimates and projections, 1950-2030
Index
1950=100
400
350
300
Current rural
population
Rising rural population
implies decline in available
land per rural person
SS Africa
≈480 m.
S Asia
≈1.1 b.
250
200
≈310 m.
SE Asia
≈1.4 b.
Rest of
World
150
100
50
0
we are here:
Falling rural pop. allows
rising land per rural person
Source: Calculated from FAOStat (downloaded 17 March 2009). Rural population estimates and projections are based on
UN Population Projections (2006 revision) and UN Urbanization Prospects (2001 revision).
How many people work on each farm?
Farm family and hired workers per farm, latest census (1996-2003)
Workers8
per farm
Senegal
7
Family Members
6
Hired Workers
5
4
3
China
Chile
2
Uruguay
1
0.1
1.0
10.0
100.0
Source: Calculated from FAO (2010), World Census of Agriculture,
Main Results and Metadata by Country (1960-2005). Rome: FAO.
1,000.0
Hectares per farm
Note: Countries shown are, from left to right: China, Cape Verde, Japan, Yemen, Lao P.D.R., Philippines,
Pakistan, Senegal, Greece, Morocco, French Guiana, Algeria, Portugal, Netherlands, Belgium, Ireland,
Austria, Germany, France, Denmark, Luxembourg, Venezuela, Finland, Brazil, Chile, Sweden, Uruguay.
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Average farm size is
available land per farm household
Reprinted from Robert Eastwood, Michael Lipton and Andrew Newell (2010), “Farm Size”, chapter 65 in Prabhu
Pingali and Robert Evenson, eds., Handbook of Agricultural Economics, Volume 4, Pages 3323-3397. Elsevier.
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Demographic conditions are changing
A big window of opportunity:
Africa’s rural pop. growth rate is slowing fast
Rural population growth (decade averages), 1950-2030
2.5%
From above 2% per year, for
over 30 years
2.0%
1.5%
to about 1.3% per year and
falling
1.0%
0.5%
no
0.0%
change
-0.5%
-1.0%
-1.5%
SS Africa
S Asia
SE Asia
Rest of
World
Source: Calculated from FAOStat (downloaded 17 March 2009). Rural population estimates and projections
are based on UN Population Projections (2006 revision) and UN Urbanization Prospects (2001 revision).
How does farm size relate to technology adoption?
Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian
Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.
Slide 23
How does farm size relate to labor use?
Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian
Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.
Slide 24
How does farm size relate to access to credit?
Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian
Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.
Slide 25
Taking account of all inputs:
Farm size and total factor productivity
Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian
Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.
Slide 26
So, how does farm size distribution matter?
Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian
Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.
Slide 27
Investing in food production
Today’s story so far…
• Food productivity growth helps to accelerate transition to
non-farm activity, and to alleviate poverty during the transition
• Africa has faced particular geographic hurdles in food
productivity, and demographic pressure driving farm size down
– Smaller farms are not necessarily less productive; they
• adopt innovations faster for seeds, fertilizer & other divisible, labor-using inputs
• and adopt more slowly for machinery and other lumpy, labor-saving inputs;
• they achieve highest total productivity when land is distributed equitably,
– But in any case reduced land per farmer reduces farm income, unless offset
by productivity growth
28
The need for more food does
gradually slow down…
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But is the agricultural engine
slowing down too soon?
30
One reason for slower growth is
declining Green Revolution aid
31
What happened to the level and mix of foreign aid?
Since the mid 1980s we have contributed
very little to Africa’s farm productivity gains
ODA commitments to Africa in selected sectors and total, 1973 -2006
(real US dollars per capita)
20
40
Health
Food Aid
Total ODA (right axis)
Agriculture
Debt Relief
15
30
10
20
5
10
-
1975
1980
1985
1990
1995
2000
2005
Source: Author's calculations, from OECD Development Assistance Committee (2008), Bilateral ODA
commitments by Purpose (www.oecd.org/dac), deflated by OECD deflator (2005=100) and divided by
midyear population estimates for Sub -Saharan Africa from the U.S. Census Bureau, International Database.
Reproduced from W.A. Masters (2008), “Beyond the Food Crisis: Trade, Aid and Innovation in
African Agriculture.” African Technology Development Forum 5(1): 3-15.
Foreign aid to African
agriculture fell to
about US$1 per capita
(vs. $4/pers. in health
and $38 in total ODA).
Worldwide trends in agricultural R&D
Reprinted from Philip G. Pardey, Nienke Beintema, Steven Dehmer, and Stanley Wood (2006), “Agricultural
Research: A Growing Global Divide?” Food Policy Report No. 17. Washington, DC: IFPRI.
33
A global food productivity slowdown?
Julian M. Alston, Jason M. Beddow, and Philip G. Pardey (2009), “Agricultural Research,
Productivity, and Food Prices in the Long Run.” Science, 325(5945): 1209-1210.
34
The slowdown has been in the quantity of inputs used,
not overall efficiency or ‘total factor productivity’
Source: Reprinted from K.O. Fuglie (2010), “Total Factor Productivity in the Global Agricultural Economy: Evidence
from FAO Data,” in Julian M. Alston, Bruce A. Babcock, and Philip G. Pardey, eds. “The Shifting Patterns of
35
Agricultural Production and Productivity Worldwide.” Ames, Iowa: Iowa State University, pages 63-95.
For example, how has input use changed in the US?
Source: Reprinted from Julian M. Alston, Matthew A. Andersen, Jennifer S. James, and Philip G. Pardey (2010), “Shifting Patterns 36
of Agricultural Production and Productivity in the United States,” in J.M. Alston, B.A. Babcock, and P.G. Pardey, eds. “The
Shifting Patterns of Agricultural Production and Productivity Worldwide.” Ames, Iowa: Iowa State University, pages 193-227.
Productivity of input use is driven by R&D,
which has had huge payoffs around the world…
Source: J.M. Alston, M.C. Marra, P.G. Pardey & T.J. Wyatt (2000). Research returns redux: A meta-analysis of
the returns to agricultural R&D. Australian Journal of Agricultural and Resource Economics, 44(2), 185-215.
Slide
37
Almost all ag. R&D in poor countries is gvt. funded;
private agric. R&D is limited even in rich countries
Share of agricultural R&D funded by the private sector, 2000
Source: Reprinted from P. Pardey (2010), “Reassessing Public–Private Roles in Agricultural R&D for Economic
Development,” in A.G. Brown, ed., World food security: can private sector R&D feed the poor?
Deakin, Australia: Crawford Fund, pages13-23.
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For example, how has US agricultural R&D changed?
Trends in U.S. Public and Private Agricultural R&D, 1950‐2007
Reprinted from P.G. Pardey (2009), “Reassessing Public ‐Private Roles in Agricultural R&D
for Economic Development.” Slides presented at the Crawford Fund Annual International
Conference, 27 October 2009, Parliament House, Canberra.
39
The most visible private ag R&D is in biotech
GMO seeds have been developed and adopted quickly…
Global Area of Biotech Crops, 1996 to 2009:
Industrial and Developing Countries (millions of ha)
Approx. share of
global farm area
in 2008
Worldwide:
2.5% of
4.96 b. ha
Indust. Co.:
5.4% of
1.29 b. ha
Dev’ing. Co.:
1.5% of
3.67 b. ha
Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: 2009. ISAAA
Brief No. 41. ISAAA: Ithaca, NY (www.isaaa.org).
The impact of GMOs has been surprisingly narrow
GMOs have been effective in only four major crops
Global Area of Biotech Crops, 1996 to 2009,
By Crop (millions of hectares)
Share of global
area for that crop
in 2008
Soybeans:
70% of
95 m. ha
Maize:
24% of
157 m. ha
Cotton:
46% of 34
m. ha
Canola:
20% of 30
m. ha
Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: 2009. ISAAA
Brief No. 41. ISAAA: Ithaca, NY (www.isaaa.org).
The impact of GMOs has been surprisingly narrow
GMOs have been effective for only two kinds of traits
Global Area of Biotech Crops, 1996 to 2008,
By Trait (millions of hectares)
Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: 2009. ISAAA
Brief No. 41. ISAAA: Ithaca, NY (www.isaaa.org).
The impact of GMOs has been surprisingly narrow
New biotechnologies have not (yet?) helped raise food
productivity in the world’s poorest areas
Global Status of Biotech/GM Crops (hectares in 2009)
Canada
8.2 m.
Portugal
<0.05 m.
Spain Czech R.
0.1 m. <0.05 m.
Poland
<0.05 m.
Slovakia
<0.05 m.
Romania Egypt
<0.05 m. <0.05 m.
USA
64 m.
China
3.7 m.
India
8.4 m.
mainly
cotton
only
cotton
Mexico
0.1 m.
Philippines
0.5 m.
Honduras
<0.05 m.
Egypt
<0.05 m.
Costa Rica
<0.05 m.
Colombia
<0.05 m.
Bolivia
0.8 m.
Australia
0.2 m.
Chile
<0.05 m.
Argentina
21 m.
Uruguay
0.8 m.
Paraguay
2.2 m.
Brazil
21.4 m.
S.Africa
2.1 m.
Burkina Faso
0.1 m.
Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: 2009. ISAAA Brief No. 41. ISAAA: Ithaca, NY (www.isaaa.org).
To conclude…
Back to today’s outline:
• Why a special focus on agriculture?
• Why do some regions, like Africa, lag behind?
• How does farm size matter for productivity?
• How has foreign aid for food productivity changed?
• How has private agricultural R&D changed?
44