Syndicate content

Feeding the poor: shifting food within and across borders

Mohini Datt's picture

While the world’s population doubled in the last fifty years, global food production trebled – especially in the staple grains that form the mainstay of the poor man’s diet.  Yet, over a billion people in the world still go hungry - why?

As the World Bank’s Global Monitoring Report of 2012 shows, it is not that the world as a whole lacks rice, wheat or maize, but produce from food abundant areas does not always make it to food deficit ones – i.e. it is not so much the availability of food that matters as access to it.
Movement of food within a country or across its borders remains hampered by dismal infrastructure and inefficient regulations, and shackled to the dictates of political economy.   Yet, trading food can feed the poor at lower costs and help countries weather shocks to local production.

When food prices rise, consumers lose; some farmers may profit from selling grain at higher prices, but poorer farmers who are net buyers of food may lose.  The recent food price spikes saw governments make knee-jerk trade policy responses that lacked a long-term solution and harm both producers and consumers in the long run. When trade restrictions compound the rise in global food prices, everyone loses.  Countries tactically raise or lower tariffs temporarily, or impose export bans, policies that only serve to export price volatility to the rest of the world.  Global grain exporting countries are few – actions by one supplier can have huge global consequences.  Export restrictions on rice by India and Vietnam in 2007 / 2008 cascaded to a ban by Cambodia and panic buying by major importers like the Philippines and Nigeria, triggering a four-fold increase in the world price.  Soaring prices in one grain, can domino onto the price of a substitute grain: if you can’t eat rice, you eat bread - increased demand for wheat causes the global price to rise.
 
Export restrictions and government price controls lower the domestic price of food just when high world prices could most profit farmers.  The consequent disincentive to farmers deters a supply response and greater agricultural production in the medium/long term.  Government procurement is also often ham-handed: in Malawi price fixing of maize in a low-harvest year, backfired when the cost to import exceeded the fixed price and government imports arrived a year late, and in the middle of a bumper crop year, causing the local price to plummet.

Inefficient logistics services, excessive regulation and poor cross-border cooperation profits the farmer – who comes early in the supply chain – nothing, while trebling the final cost of food.  Trading food within the Maghreb costs twice more than transporting it across the Mediterranean to Europe. 

Instead, regional integration can provide food seamlessly, at lower cost: Northern Mozambique supplies maize to nearby Malawi, while distant Southern Mozambique sources low cost grain from South Africa.  High prices could actually spur agricultural productivity and consequent economic growth.  Targeted social safety nets, better storage of food stocks, and market-based hedging mechanisms that counter commodity price fluctuations, would allow countries to harness the terms of trade gains from profitable exports, while cushioning the poor consumer.

Comments

Submitted by Nachiket Mor on
Dear Dr. Datt, This is an excellent blog post. I find the arguments that you offer very appealing. Particularly regarding how higher agricultural prices could actually spur agricultural productivity and consequent economic growth and how targeted social safety nets, better storage of food stocks, and market-based hedging mechanisms that counter commodity price fluctuations, would allow farmers to harness the terms of trade gains from profitable exports, while cushioning the poor consumer. This issue is now the subject of much debate in India where we have followed a very different path -- that of a number of controls combined with a number of non-transparent subsidies -- including from the banking and insurance sectors. It is my view that these policies have had exactly the opposite effect of what was perhaps intended. As you point out, allowing market forces more play and using cash-transfers directly to vulnerable sections of the population as well as the other mechanisms that you suggest, may prove to be a much more beneficial path to follow for all concerned. Sincerely, Nachiket Mor