ArchiveBusinessIndustryOODA Original

International Agriculture in Transition

World food prices, food import/export levels, and food security are becoming more predictable and organized thanks to worldwide improvements in reporting, increasing regional agricultural development, and heightened governmental attention. The stage is set for major improvements in the development of international agriculture. In 2011, world food policy and food security issues drew the attention of governments and supra-governmental organizations around the world. Natural and man-made factors highlighted the need for this attention and action. Regionally, India, China, and SouthEast Asia have dedicated themselves to increasing national food security while the super-exporters of grain continue to warp international food prices through high subsidy levels. These high subsidy levels, however, are not sustainable. Africa continues to make great strides towards agricultural self-sustenance after decades of internal strife, natural disasters, and well intentioned but detrimental foreign aid programs. The steady growth of the African agricultural economy may prove to be a game changer for movements and market shifts within the world food market.

Historical Background: The Why

For the past few decades, comprehensive global food policies were, to a great extent, neglected. Disasters were met as they came, with the US, Europe, Australia, and South America shipping their surpluses around the world as markets dictated. Prices were liable to rise and fall accordingly. Famines, droughts, and other disasters sent governments and humanitarian organizations scrambling for cheap grains.

These factors combined to create a strong push for farm subsidies among farmers in the US and especially in Europe. Over time, the farm lobbies won over the necessary politicians and agricultural subsidies skyrocketed in a textbook example of interest group economics. Within the EU, agriculture currently accounts for 5% of the workforce and a mere 1.6% of GDP. The EU’s Common Agricultural Program (CAP) subsidies comprise over 45% of the entire annual EU budget. The 350 billion USD that the EU spends on agricultural subsidies per year is over 14 times greater than the total amount of international aid the entire continent of Africa receives over the same time period. Despite Europe’s financial difficulties of the Eurozone crisis, farm subsidy reductions have not yet been included in austerity measures. These massive subsidies are sustained and supported by governments across Europe, who all seek a greater portion of the money every year.

US agricultural policy has followed a similar pattern. The US hit its highest subsidy level in 2000 when subsidies made up 47% of total farm income. In 2005, the World Trade Organization (WTO) demanded that the US cease paying these subsidies as they harmed global food prices and production. The US ignored these concerns with the passage of the 2008 Farm Bill which distributes 288 billion USD in subsidies over 5 years. Both the UN and the WTO criticized the bill for hampering fair competition among developing nations. The policy will be up for debate again within the next two years. An end to these subsidies would mean ruin for a large minority of American farmers but would be good news to growers in Africa and South America who are forced to compete against highly subsidized American agricultural produce. Farm subsidies in the US will not, however, be discontinued in the next few years. The coalition of politicians from farming states is too strong and extends across party lines. The issue is not yet seriously debated in Washington, D.C..

These high subsidy levels in the US and the EU result in overproduction. Both the EU and the US have adopted aggressive trading techniques to reduce the inevitable surpluses. Outside of country to country food exports, the two largest methods of surplus consumption is to ship it overseas in the form of humanitarian food aid and to subsidize it further for biofuel production. Biofuels, then, have become another factor in the measurement and prediction of future world food prices.

These surpluses depress world prices and create disincentives for developing countries to focus on agriculture, a necessary component of development. According to the International Food Policy Research Institute (IFPRI), growth in agriculture is on average three times more effective in poverty reduction than growth in other economic sectors like mining and manufacturing. Nearly two-thirds of sub-Saharan Africans work in some form of agriculture. With the widespread failure of comprehensive political and economic development attempts in Africa, agricultural development has become the new method for economic development in the past two years.

A Subtle, Recent, and Tremendously Important Shift

Since 2011, food policy and security has become a key agenda topic for governments and other international organizations. What used to be the field of NGOs and other non-profits is falling under the purview of government and supra-governmental attention. With their interest comes money. For the first time in many years, agriculture and global food security were highlighted in the political and development agendas within Rio+20, the UN conference on sustainable development. In the past two years, 29 African countries have signed onto the African Union’s framework for agricultural development known as the Comprehensive Africa Agriculture Development Programme (CAADP). The CAADP’s goal is for each country to devote 10% of their national budget to agriculture in order to achieve an agricultural growth rate of 6% each year. 20 of these countries have initiated national investment plans and 6 have received a total of 270 billion USD of funding from the Global Agricultural and Food Security Program. The US Agency for International Development (USAID) increased funding to its Feed the Future Initiative, begun in 2010. The World Bank has committed itself to annual agricultural funding of 6 billion USD per year. The massive Consultative Group on International Agricultural Research (CGIAR) launched a series of unprecedented research programs in 2011. Even China and India expanded their agricultural research and food security divisions in 2011 and 2012. The private philanthropic circle has also joined in the chase for improved food policies. The Gates Foundation has recently focused billions towards agriculture in sub-Saharan Africa and South Asia.

Also in 2011, ministers of the G20 countries addressed for the first time the issue of food price volatility and food insecurity. Participating countries like Brazil, China, and India have recently switched from receiving aid to becoming major trading partners in the world food market. Their increased portion of the market gives them an increasing weight in international decision-making, decision-making driven by their own national agendas.

Some of these policies may follow in the path of the US and the EU in increased subsidies, damaging international competition and stifling growth. Thailand, the world’s largest exporter of milled rice, created a rice subsidy that drove up international rice prices in the latter part of 2011. Other countries, China included, continue to import mass amounts of grain in order to build up  strategic reserves, another factor contributing to global rises in food prices.

These changes demonstrate that global food policy and agriculture is now being intentionally integrated into the larger context of high priority global issues. Agriculture is an essential element to many international systems. Obvious ties are health and the nutrition of the world’s human populations which are, in turn, tied to health care and even generational politics. The most important security link, however, is the direct link between agriculture and water, land, and energy. These are all hot button issues in the second decade of the twenty-first centuries. Stable agriculture is the product of stable land, water, and energy usage. Agricultural security informs economic security, environmental security, and socio-political security. Agriculture shapes employment, incomes, political inequalities, basic governance, conflicts, and other key international issues. International attention to global food security and policy has been long overdue.

These functions of agriculture serve as a reminder that food production and distribution on a global scale is a powerful tool of statecraft. Strategic policies can buy votes in the UN General Assembly, support for international policies, and further other national objectives. Food aid can be an instrument of good but also solidify pathologies in culture and in government. It can restore order but also consolidate power in the hands of irresponsible leaders. As regional food security increases, the strategic leverage of food aide decreases alongside a decrease in its harmful side effects.

The Future: Boom, Boom, Boom

Three factors are coming together to encourage an agricultural boom in sub-Saharan Africa and South Asia. First, billions and billions of dollars are being pumped into agricultural projects in sub-Saharan Africa and South Asia. The money is coming from well-funded international groups through the UN, Western governments, and private investments. The money is funding infrastructural adjustments that will make agriculture more efficient, accessible, and profitable. Secondly, world food prices are on the rise. A combination of factors are pushing up food prices in 2012. Natural resource deposits, biofuel, and natural disasters continue to strain food production capacity and encourage production outside of the major grain exporters. Thirdly, slow but steady reforms in EU and US agricultural policy will encourage healthier international competition. High levels of subsidies remain but the types of subsidies are becoming less and less damaging to international trade and competition.

There are, however, factors that must be overcome for such an agricultural boom to occur. Bad government has been a constant check on economic development in sub-Saharan Africa. In many parts of Africa, recurring ethnic tensions, violence, and abusive governments have made agricultural development impossible. Recently, however, steady improvements in African governments and economies suggest that these historic issues can be overcome. After 50 years of trial and error with international aid to the continent, one must hope that the massive influx of money for agriculture will be properly distributed.

The increasing Chinese influence in Africa will also slow agricultural booms in countries where they are active. Chinese policy in the area is short sighted and not conducive to national development within the African countries of operation. China routinely enters a country, pays off its officials, imports Chinese specialists and labor, then extracts the desired resources before leaving. These actions hurt the African country in two ways. First, the country does not benefit from its resources at a local or developmental level. Secondly, the actions reinforce poor government. According to a recent study of all of Africa’s largest trading partners, China is the only country that negatively influences African governments through trade. With the money flow from the West, however, these influences can be overcome. China can not strip mine for African agricultural produce.

In summary, Africa is ready for regional booms in agriculture. The international market is ready. The land is waiting. Already businesses and governments are on the move, hoping to capitalize on the chance to both improve standards of living, develop new trading partners, and cash in on huge profit potentials.

The IFPRI states in a recent global summary, “the private sector, emerging economies, and philanthropic organizations are increasingly reshaping the structure and nature of the global food policy landscape…these new players are a largely untapped source of financial support to food security efforts in developing countries…they also offer a wealth of knowledge and expertise, providing new opportunities to address the increasing complexity and challenges facing the global food system.” It concludes, “Still, the opportunities presented by these new players have not been fully harnessed.”

The stage is set for major improvements in the development of international agriculture. If achieved, it will alter the current state of world politics, diplomacy, and power balances. Well funded multinational corporations are currently testing the waters, setting the stage for a more grass-roots movement to follow quickly on their heels. Western Europe had their agricultural glory years between 1950 and 1973. It is now Africa’s chance. Yet, even in a time of increasing predictability, unknowns still abound.

 

 

Select Sources and further reading:

International Food Policy Research Institute. http://www.ifpri.org/

CIMMYT International Maize and Wheat Improvement Center. http://www.cimmyt.org/

“Farm income and costs: Farms receiving government payments.” www.ers.usda.gov/

“Q&A: Reform of EU Farm Policy.” www.bbc.co.uk/news/world‐europe‐11216061

“From Kenya to Washington: Who’s to blame for wasted food aid?” www.theatlantic.com

Robert Calderisi, “The Trouble with Africa: Why Foreign Aid is not Working.

Michael Brooks

Michael Brooks

Michael Brooks is an OODA analyst and MLitt Candidate in International Security Studies at the University of St. Andrews. Previously, he spent three years working on global health and economic development projects in Central and Eastern Africa and the Middle East.