The Atlantic Wants You to Be Real Scared of Low Food Prices

Be afraid. Be VERY afraid.

From an article in The Atlantic:

The International Grains Council estimates that inventories of soy, wheat, barley, and corn are reaching their highest volume in 30 years. …

And what has caused this explosion in grain supplies? Prices. They’ve been unusually high in recent years and have encouraged farmers to pour money into boosting production. According to the Food and Agriculture Organization of the United Nations, from 2005 to 2013 the land used to cultivate wheat, soy, and corn grew by 11 percent globally. Never before has such a large swath of the earth been tilled.

Today’s lower prices could discourage investment and reduce future production, ushering in another period of higher prices. This cycle is nothing new, but in recent years it has been shaped by new drivers (climate change, demographic change, volatile global economic conditions) that make the swings more frequent and the range of variation more extreme.

The problem with these developments is that greater food-related volatility will bring about social and geopolitical instability.

That giant sucking sound you just heard was caused by the eyeballs of a thousand agricultural economists rolling backward into their skulls.

Three things: Continue reading

Does the International Trade of Food Rob Developing Countries of Their Food Security?

Does international trade make all parties better off? That question has preoccupied economists since well before David Ricardo published his Principles of Political Economy and Taxation in 1817, which outlined a theory of comparative advantage still taught to economics students the world over. According to that theory, trade leaves no country worse off if countries choose to specialize in producing and exporting the goods for which they have the lowest opportunity cost out of all the goods they can produce. In other words, trade is not a zero-sum game, and in most cases trade makes both countries better off.

Although the theory of comparative advantage concludes that trade leaves no country worse off in the aggregate, international trade can generate winners and losers within a given country. It is perhaps for this reason that many people question the theory of comparative advantage and believe that international trade makes certain countries worse off. That belief is especially prevalent when the trade being discussed is that between developing and developed countries, or when the goods being traded are food commodities. Opinions are even stronger when the subject is food exports from developing to developed countries, prompting arguments in favor of food sovereignty.

Indeed, the Declaration of Nyéléni, which was adopted at the 2007 Forum for Food Sovereignty, states that

Food sovereignty … puts those who produce, distribute and consume food at the heart of food systems and policies rather than the demands of markets and corporations. … It offers a strategy to resist and dismantle the current corporate trade and food regime, and directions for food, farming, pastoral and fisheries systems determined by local producers. … Food sovereignty promotes transparent trade that guarantees just income to all peoples and the rights of consumers to control their food and nutrition. It ensures that the rights to use and manage our lands, territories, waters, seeds, livestock and biodiversity are in the hands of those of us who produce food.

Food sovereignty advocates therefore argue that food security – adequate nutrition for individuals, no matter the provenance of the food commodities consumed – is not enough. Rather, one of their goals is a greater role for local foods, which necessarily means a smaller role for the international trade of food.

But does the international trade of food really threaten food security? The answer appears to “No,” according to my most recent paper, coauthored with Frank Asche, Cathy Roheim, Marty Smith, and Sigbjørn Tveteras, and which was accepted last week for publication in World Development. Continue reading

Why Do Members of Congress Vote for the Farm Bill?

My paper with my former colleague Nick Carnes on the political economy of agricultural protection, which looks at why members of Congress vote for or against the farm bill, has just been accepted by and is now forthcoming at Food Policy.

Nick and I have been working on this since early summer 2013. The idea came to us as we were having lunch and I asked him whether the data he’d assembled for his book White Collar Government included any information about whether members of Congress had worked as farmers. We began with an interest in knowing whether having worked as a farmer drove how members of Congress vote on farm bills, but we soon expanded our analysis to also include the proportion of farmers in a member of Congress’ district as well as the amount of money she had received from agricultural political action committees. This allows us to run a horse race between competing theories for what drives agricultural protection, i.e., subsidies to farmers along with the taxes and quotas imposed on agricultural imports.

After the paper was rejected twice at other journals (complete with a referee report that compared part of our paper to a high-school term paper, no less) we decided to send this to Food Policy in October 2013. Little did I know that I was going to become an associate editor of that same journal a month later!

Here is the abstract: Continue reading

Where Should the Empirical Research on Contract Farming Be Going?

I spent most of last week in Dar es Salaam at the POLICOFA – the acronym stands for “Potentials and Limitations of Contract Farming” — conference jointly organized by researchers from the University of Copenhagen and Mzumbe University. I was there because I had been asked by Niels Fold, one of the Danish researchers involved in POLICOFA, to give one of the two keynote addresses of the conference. The other one was given by Carlos Oya, from the School of Oriental and African Studies in London, who has published a really good review of the contract farming literature in 2012 in the Journal of Agrarian Change.

The title of my talk was “Empirical Research on Contract Farming: Quo Vadis?,” and it was a nice occasion for me to gather my thoughts as to where the research on contract farming should be going. If you have an interest in applied contract theory, agricultural development, agribusiness, and development, you can find my slides here.

Just Because It’s Not Cutesy Does Not Mean It’s Not Important for Development

A new World Bank working paper by Paul Brenton and coauthors looks at what roads can do for development:

Market integration is key to ensuring sufficient and stable food supplies. This paper assesses the impediments to market integration in Central and Eastern Africa for three food staples: maize, rice, and sorghum. The paper uses a large database on monthly consumer prices for 150 towns in 13 African countries and detailed data on the length and quality of roads linking the towns. The analysis finds a substantial effect of distance and share of paved road on the level of market integration, as measured by relative prices. Furthermore, the paper evaluates the additional domestic and cross-border impediments to market integration in the region and represents them on a regional map. The analysis finds heterogeneous levels of domestic market integration across countries and significant “border effects” for the majority of contiguous countries in the sample, which reveal that markets are more integrated within than between countries. Countries that are members of the same regional trade agreement have substantially “thinner” borders with other members. Finally, the analysis shows that countries with less integrated domestic markets and “thicker” borders with their neighbors also have a higher prevalence of food insufficiency. These findings support policy efforts in tackling domestic and border impediments to transactions such as reforming customs, simplifying nontariff measures, addressing corruption, improving the quality of roads, and deepening regional trade agreements.

The emphasis is mine. None of these results are very surprising, but roads and infrastructure, even though they are about the least sexy investment an international development donor can make, are necessary for economic development.

Indeed, while they may not lend themselves to cool behavioral “nudges”or clever experimental designs, roads and infrastructure are what leads to the existence of markets, markets are what leads to more trade, and trade is what leads to large numbers of people attaining higher levels of welfare.

This is especially so when it comes to roads leading to lower food prices. Everyone needs food to live, and in developing countries, people often spend up to 80 percent of their income on food alone, which means that a significant reduction in food prices helps almost everyone. Just something to keep in mind the next time someone suggests handing out laptops to kids in developing countries