Food security and agricultural development in times of high commodity prices

Thesis Abstract

              ABSTRACT

Efforts to promote food security must distinguish between short-term and medium-term measures, but also between countries with agricultural potential and without such potential, argues this paper. Furthermore, while high international food prices provide appropriate incentives for agricultural development, it would be misguided to expect that they will automatically result in an increase of agricultural output. Globally, food security is both a demand-side and the supply-side challenge. High food prices make it more difficult to address food security on the demand-side, as more and more low-income households become unable to afford sufficient food, but at the same time, higher food prices can provide impetus to address food security on the supply-side, as more and more farmers may find it lucrative to increase agricultural production. However, not all countries can address both challenges simultaneously. In principle, a higher rate of food self-sufficiency can help to increase the food security of the local population. But efforts to boost food production are viable only in countries that have agricultural potential; in others such efforts bear great opportunity cost. Viable approaches to promote food security must recognize, this paper argues, that food security is not per se dependent on a country’s food trade balance. At the country level, food security does not depend on whether countries are able to cover domestic food consumption through domestic food production, but whether they are able to generate sufficient financial resources to finance necessary food imports. The same holds true at the household level. Hunger must be addressed through social policies, including food aid, in the short run, but it can sustainably be addressed only through higher household incomes in the medium run. Countries that do not have potential in agriculture will need to address food insecurity through the development of non-agricultural sectors, which generate more, and more productive and remunerative jobs, particularly for low-income households. By contrast, countries that have potential in agriculture would most suitably address food insecurity through economic development that includes the agricultural sector. Although higher international food prices can provide appropriate incentives for agricultural development, it should not be expected, the paper argues, that higher international food prices will automatically result in an increase of agricultural output. While desirable, this reaction is crucially dependent on two factors, namely (i) the pass-through of international commodity price changes to the farm gate; and (ii) the farmers’ capacity to raise production in response. In many developing countries, especially low-income countries, the pass-through to farm gates and the productive capacities of farmers, is insufficient, and therefore requires appropriate policies Abstract
Efforts to promote food security must distinguish between short-term and medium-term measures, but also between countries with agricultural potential and without such potential, argues this paper. Furthermore, while high international food prices provide appropriate incentives for agricultural development, it would be misguided to expect that they will automatically result in an increase of agricultural output. Globally, food security is both a demand-side and the supply-side challenge. High food prices make it more difficult to address food security on the demand-side, as more and more low-income households become unable to afford sufficient food, but at the same time, higher food prices can provide impetus to address food security on the supply-side, as more and more farmers may find it lucrative to increase agricultural production. However, not all countries can address both challenges simultaneously. In principle, a higher rate of food self-sufficiency can help to increase the food security of the local population. But efforts to boost food production are viable only in countries that have agricultural potential; in others such efforts bear great opportunity cost. Viable approaches to promote food security must recognize, this paper argues, that food security is not per se dependent on a country’s food trade balance. At the country level, food security does not depend on whether countries are able to cover domestic food consumption through domestic food production, but whether they are able to generate sufficient financial resources to finance necessary food imports. The same holds true at the household level. Hunger must be addressed through social policies, including food aid, in the short run, but it can sustainably be addressed only through higher household incomes in the medium run. Countries that do not have potential in agriculture will need to address food insecurity through the development of non-agricultural sectors, which generate more, and more productive and remunerative jobs, particularly for low-income households. By contrast, countries that have potential in agriculture would most suitably address food insecurity through economic development that includes the agricultural sector. Although higher international food prices can provide appropriate incentives for agricultural development, it should not be expected, the paper argues, that higher international food prices will automatically result in an increase of agricultural output. While desirable, this reaction is crucially dependent on two factors, namely (i) the pass-through of international commodity price changes to the farm gate; and (ii) the farmers’ capacity to raise production in response. In many developing countries, especially low-income countries, the pass-through to farm gates and the productive capacities of farmers, is insufficient, and therefore requires appropriate policies