Kostas Stamoulis Prabhu Pingali Ellen McCullough Agricultural and Development Economics Division (ESA) FAO, Rome
Objectives and Structure
Poverty Focus Describe fundamental changes in food systems Identify the forces which drive those changes and the role of trade Underline the importance of heterogeneity What are emerging challenges for poverty reduction ? Transformation and Food System Changes Transformation process: The process in which the share of agriculture declines in favour of other sectors
Changes in Food Systems : the changes in the organization of food markets at all levels as a result of changes in demand patterns and technology Agricultural Transformation: a global phenomenon Low Income Lower Middle Income Upper Middle Income High Income 0 10 20 30 40 50 60 70 80 -1,000 4,000 9,000 14,000 19,000 24,000 29,000 34,000 39,000 44,000 49,000 54,000 GDP (US$ per Capita) Share of Agriculture (% GDP) High Human Development Medium Human Development Low Human Development Source : Pingali ( 2006) Transformation Process 0 . 2 . 4 . 6 . 8 A g r i c u l t u r e / G D P 4 6 8 10 12 log(1995 US$) agriculture/GDP agriculture/GDP*lac fitted value whole sample fitted value lac Source: WDI 2003 (1961-2002) Agricultural Share on GDP and Income per capita Source : Bravo, Ortega and Lederman (2004) The Changing Food System Inputs Primary production Processing and packaging Distribution and retail Consumption Individuals Enterprises Governed by Institutions: Rules and regulations Markets (Contracts) Transport Services Food Systems Changes: Driving Forces Rising incomes Diet diversification out of staples (Engels Law, Bennett Law) Demographic Shifts Urbanization Rising food prepapers opportunity cost Technology Transportation and food handling Chain management (logistics ) Globalization Foreign direct investment (in retail and production) Trade liberalization
The other face of globalization FAO: State of Food Insecurity, 2004 The Emergence of Large Retail
New Rules for a New Game Centralization of procurement Squeezing of supplier lists Shift from spot markets to specialized wholesalers to guarantee q and q New intermediaries and logistics Contract farming Preference for limited transactions Rise of private standards Quality, safety not common for internal trade The contribution of International trade Trade links and interactions have not been explored in a systematic way Trade has not been the primary mover Stable shares of imports in total consumption of dev.ing countries Small relative to sales of processed by subsidiaries Meat, F and V trade shares in total consumption unchanged in a 20 years The Reardon U hypothesis of the role of trade Relative Importance of Trade, 1960-2005 (Share of imports and exports in domestic food supply) 1960 1970 1980 1990 2000 1960 1970 1980 1990 2000 World Africa Asia South America -1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 1960 1970 1980 1990 2000 Cereals Fruits Vegetables source: FAOSTAT 2006 The U hypothesis Share of Imports of processed products originating in the region 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 9 8 6 1 9 8 7 1 9 8 8 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 Years S h a r e Argentina Brazil Transforming Food Systems : Challenges for Rural Poverty Reduction Rapid spread of the chain model expected in future Competition for market share is at the chain level ( margins) Standards, quality and stability not just for exports More generalized impacts than on small farmers Food System Transformation: Country-level heterogeneity Traditional Agriculture Modernizing Agriculture Industrialized Agriculture Share of Ag in GDP >30% 10%-30% <10% Share of Ag labor in total >50% 15-50% <15% Market Orientation Subsistence National International Output Mix Food Staples Food Staples + high value Highly differentiated Scale Economies Not Important May be Important Important Transformation Process: Country Classifications 0 20 40 60 80 100 0 10 20 30 40 50 60 70 Share of Agriculture in GDP (%) Rural Population (% of total) Low Income Lower-Middle Income Upper-Middle Income High Income URBANIZED Economies CAT 2 CAT 1 Agricultural transformation: Heterogeneity across production systems Increasing scales of production Reversal of the farm size productivity relationship Declining competitiveness of marginal lands Increasing risk of biodiversity loss and environmental sustainability Rural Non Farm Income Shares 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% A l b a n i a
2 0 0 2 B o s n i a
2 0 0 1 B u l g a r i a
1 9 9 5 B u l g a r i a
2 0 0 1 G h a n a
1 9 9 2 G h a n a
1 9 9 8 M a l a w i
2 0 0 4 E c u a d o r
1 9 9 4 E c u a d o r
1 9 9 5 E c u a d o r
1 9 9 8 G u a t e m a l a
2 0 0 0 N i c a r a g u a
2 0 0 1 P a n a m a
1 9 9 7 P a n a m a
2 0 0 3 N e p a l
1 9 9 6 V i e t n a m
1 9 9 8 RNF Farm Rural Income Generating Activities ( cont) Figure 6: RIGA income shares 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% A l b a n i a
2 0 0 2 B o s n i a
2 0 0 1 B u l g a r i a
1 9 9 5 B u l g a r i a
2 0 0 1 G h a n a
1 9 9 2 G h a n a
1 9 9 8 M a l a w i
2 0 0 4 E c u a d o r
1 9 9 4 E c u a d o r
1 9 9 5 E c u a d o r
1 9 9 8 G u a t e m a l a
2 0 0 0 N i c a r a g u a
2 0 0 1 P a n a m a
1 9 9 7 P a n a m a
2 0 0 3 N e p a l
1 9 9 6 V i e t n a m
1 9 9 8 Crops Livestock Ag. wage RNF wage RNF self-employment Transfers Other Conclusions Rapid transformations change the balance of concerns between domestic factors and international trade. Heterogeneity of impacts and focus Commodity focus: narrow Agriculture focus : narrow Up-stream and downstream activities Conclusions ( cont) Under-researched aspects, hard to capture in global models Several policy prescriptions overlap Balance of awareness much lower.. until today. Thank you http://www.fao.org/es/esa/ejade/vol_1/vol_ 1_2/cover_en.htm Food System Transformation: Household Level Heterogeneity Access to assets, credit Management skills (source of rents) Access to services, such as appropriate production and marketing extension and technology Institutions Pluriactivity and Diversification
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