1 Nut 304: Food Security, Nutrition, and Development November 16, 2010 Investing in Food Production, Part I Guest lecturer: Will Masters

Definitions and measurement (weeks 1-3) Household-level interventions –Capital formation: microcredit programs (wk. 4) –Income support: conditional transfers (wk. 5) –Nutrition enhancement: child feeding etc. (wk. 6) –Policy analysis exercise on food transfers (wk. 7) Market-level interventions –Price levels and stability (week 8) –Agricultural trade (week 9 from Lynn Salinger) –Investing in food production (weeks 10 & 11) –Economywide growth (wk 12 from Bea Rogers) Integrated policies (week 13) 2 Investing in food production This week in context -- the Nutr 304 story so far…

World Bank, World Development Review 2008: Agriculture for Development –released October 2007, first WDR to address agriculture since 1986, whose theme was Trade and Pricing Policies in World Agriculture; WDR 1982 was also on ag. W.A. Masters (2005), “Paying for Prosperity: How and Why to Invest in Agricultural Research and Development in Africa”, J. of Int. Affairs, 58(2), 35–64. –Review for a special issue on Finance Challenges of the Millennium Development Goals. Rockefeller Foundation (2006), “Africa’s Turn: A New Green Revolution for the 21st Century.” –Launch document for AGRA, the Alliance for a Green Revolution in Africa Glenn D. Stone (2010), “The Anthropology of Genetically Modified Crops.” Annual Review of Anthropology 39: –Nice impartial review from an outside discipline (not agricultural science or economics); insiders are much more pro-GMO 3 Investing in food production Background readings for this week

4 Investing in food production Outline for today Why a special focus on agriculture? Why do some regions, like Africa, lag behind? How does farm size matter for productivity? How has foreign aid for food productivity changed? How has private agricultural R&D changed?

5 Investing in food production Why a special focus on agriculture? In low-income places where food is scarce, agriculture is: –The largest sector most people, most use of natural resources, most exports –The poorest sector most poor people, most degradation of resources, most taxation of exports

6 Farming is what poor people do! Source: World Bank (2007), WDR 2008: Agriculture for Development. Washington: The World Bank.

7 Farming is what poor people do: Should donors join the exodus from agriculture ? In low-income places where food is scarce, agriculture is: –The largest sector most people, most use of natural resources, most exports –The poorest sector most poor people, most degradation of resources, most taxation of exports In general, agriculture offers: –low productivity relative to other sectors –variable productivity relatively to other sectors –limited prospects for growth or future stability The overwhelming flow of investment is to off-farm activity –the route out of poverty is out of agriculture Within rural areas: richer farmers invest in nonfarm rural enterprises Within poor countries: individuals and households migrate to urban areas Across countries: migration, trade and investment favors non-farm work Why not focus on urbanization, to buy the food people need?

8 In any given year… –Food availability is limited, so someone must grow food Objective #1 is productivity, so even more people and resources can move to faster-growing sectors –Nonfarm jobs are limited, so the poorest farmers have no choice Objective #2 is productivity, to relieve poor farmers’ poverty, during the transition before they move to faster-growing sectors –Among non-farmers, the poorest spend more on food Objective #3 is productivity, to reduce the cost of food and allow people to spend more on other things And eventually… –Farmland remains available, and food production remains important for environmental, cultural and social reasons Objective #4 is productivity, for “multifunctional” objectives  Investment in agriculture is always about productivity, to fuel other sectors; farm output rarely grows very fast Investing in food production Why a special focus on agriculture?

9 1)Increasing supply, so as to meet rising demand demand growth = population growth + elasticity×income growth 2)Increasing exports, so as to buy imports for other things 3)Reducing labor use, so as to free workers for other things 4)Generating capital, for investment in other things 5)Increasing rural demand, for buying other things Investing in food production Why a special focus on agriculture? The classic formulation is:

10 In starting AGRA, the Alliance for a Green Revolution in Africa, the Rockefeller Foundation (2006) argued: 1)Africa missed out on farm productivity gains elsewhere, 2)R&D-driven productivity gain requires philanthropic action, beyond what companies & governments can do. Some reasons for the neglect of agricultural productivity are: 3)Gains are non-excludable (private firms can’t capture value) 4)Gains are international (national governments can’t either) 5)Gains are difficult to observe and predict (need impact data) Investing in food production What’s different now?

11 Investing in food production Why did Africa miss out on the green revolution? Source: World Bank (2007), WDR 2008: Agriculture for Development. Washington: The World Bank.

Why do some regions lag in food production? “The Old Agricultural Lag,” in No Easy Harvest: The Dilemma of Agriculture in Underdeveloped Countries, by Max Millikan and David Hapgood. Boston: Little, Brown and Co., Kenneth Boulding’s answer, written (hastily) in 1966:

13 Looking at the data…. How can we explain this classic observation? Why do some regions lag in food production?

Source: Y. Hayami and V. Ruttan (1985) Agricultural Development: An International Perspective. Baltimore, The Johns Hopkins University Press. There is a close link between new seeds & fertilizer

Source: Reprinted from W.A. Masters, “Paying for Prosperity: How and Why to Invest in Agricultural Research and Development in Africa” (2005), Journal of International Affairs, 58(2): Today, the main concern is Africa’s lag

Source: Reprinted from W.A. Masters, “Paying for Prosperity: How and Why to Invest in Agricultural Research and Development in Africa” (2005), Journal of International Affairs, 58(2): Africa’s fertilizer use grew in the 1960s-70s, but could not be sustained

17 Africa faces big geographic hurdles

More recent data: Is Africa’s green revolution finally arriving? USDA estimates of average cereal grain yields (mt/ha), Source: Calculated from USDA, PS&D data ( downloaded 7 Nov Results shown are each region’s total production per harvested area in barley, corn, millet, mixed grains, oats, rice, rye, sorghum and wheat.

Rural population pressure varies widely by region and over time we are here: ≈480 m. ≈1.1 b. ≈310 m. ≈1.4 b. Current rural population Source: Calculated from FAOStat (downloaded 17 March 2009). Rural population estimates and projections are based on UN Population Projections (2006 revision) and UN Urbanization Prospects (2001 revision). Africa faces a severe demographic headwind Falling rural pop. allows rising land per rural person Rising rural population implies decline in available land per rural person

20 How many people work on each farm? Note: Countries shown are, from left to right: China, Cape Verde, Japan, Yemen, Lao P.D.R., Philippines, Pakistan, Senegal, Greece, Morocco, French Guiana, Algeria, Portugal, Netherlands, Belgium, Ireland, Austria, Germany, France, Denmark, Luxembourg, Venezuela, Finland, Brazil, Chile, Sweden, Uruguay.

Average farm size is available land per farm household 21 Reprinted from Robert Eastwood, Michael Lipton and Andrew Newell (2010), “Farm Size”, chapter 65 in Prabhu Pingali and Robert Evenson, eds., Handbook of Agricultural Economics, Volume 4, Pages Elsevier.

A big window of opportunity: Africa’s rural pop. growth rate is slowing fast no change Source: Calculated from FAOStat (downloaded 17 March 2009). Rural population estimates and projections are based on UN Population Projections (2006 revision) and UN Urbanization Prospects (2001 revision). Demographic conditions are changing From above 2% per year, for over 30 years to about 1.3% per year and falling

Slide 23 How does farm size relate to technology adoption? Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.

Slide 24 How does farm size relate to labor use? Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.

Slide 25 How does farm size relate to access to credit? Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.

Slide 26 Taking account of all inputs: Farm size and total factor productivity Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.

Slide 27 So, how does farm size distribution matter? Reprinted from Thomas P. Tomich, Peter Kilby and Bruce F. Johnston, 1995, Transforming Agrarian Economies: Opportunities Seized, Opportunities Missed. Ithaca: Cornell University Press.

Food productivity growth helps to accelerate transition to non-farm activity, and to alleviate poverty during the transition Africa has faced particular geographic hurdles in food productivity, and demographic pressure driving farm size down –Smaller farms are not necessarily less productive; they adopt innovations faster for seeds, fertilizer & other divisible, labor-using inputs and adopt more slowly for machinery and other lumpy, labor-saving inputs; they achieve highest total productivity when land is distributed equitably, –But in any case reduced land per farmer reduces farm income, unless offset by productivity growth 28 Investing in food production Today’s story so far…

29 The need for more food does gradually slow down…

30 But is the agricultural engine slowing down too soon?

31 One reason for slower growth is declining Green Revolution aid

HealthAgriculture Food AidDebt Relief Total ODA (right axis) ODAcommitments to Africa in selected sectors and total, (real US dollars per capita) Source:Author's calculations, from OECD Development Assistance Committee (2008),Bilateral ODA commitments by Purpose( deflated by OECD deflator (2005=100) and divided by midyear population estimates for Sub-Saharan Africa from the U.S. Census Bureau, International Database. Reproduced from W.A. Masters (2008), “Beyond the Food Crisis: Trade, Aid and Innovation in African Agriculture.” African Technology Development Forum 5(1): 3-15.African Technology Development Forum Since the mid 1980s we have contributed very little to Africa’s farm productivity gains Foreign aid to African agriculture fell to about US$1 per capita (vs. $4/pers. in health and $38 in total ODA). What happened to the level and mix of foreign aid?

33 Worldwide trends in agricultural R&D Reprinted from Philip G. Pardey, Nienke Beintema, Steven Dehmer, and Stanley Wood (2006), “Agricultural Research: A Growing Global Divide?” Food Policy Report No. 17. Washington, DC: IFPRI.

34 A global food productivity slowdown? Julian M. Alston, Jason M. Beddow, and Philip G. Pardey (2009), “Agricultural Research, Productivity, and Food Prices in the Long Run.” Science, 325(5945):

35 Source: Reprinted from K.O. Fuglie (2010), “Total Factor Productivity in the Global Agricultural Economy: Evidence from FAO Data,” in Julian M. Alston, Bruce A. Babcock, and Philip G. Pardey, eds. “The Shifting Patterns of Agricultural Production and Productivity Worldwide.” Ames, Iowa: Iowa State University, pages The slowdown has been in the quantity of inputs used, not overall efficiency or ‘total factor productivity’

36 Source: Reprinted from Julian M. Alston, Matthew A. Andersen, Jennifer S. James, and Philip G. Pardey (2010), “Shifting Patterns of Agricultural Production and Productivity in the United States,” in J.M. Alston, B.A. Babcock, and P.G. Pardey, eds. “The Shifting Patterns of Agricultural Production and Productivity Worldwide.” Ames, Iowa: Iowa State University, pages For example, how has input use changed in the US?

Slide 37 Productivity of input use is driven by R&D, which has had huge payoffs around the world… Source: J.M. Alston, M.C. Marra, P.G. Pardey & T.J. Wyatt (2000). Research returns redux: A meta-analysis of the returns to agricultural R&D. Australian Journal of Agricultural and Resource Economics, 44(2),

38 Source: Reprinted from P. Pardey (2010), “Reassessing Public–Private Roles in Agricultural R&D for Economic Development,” in A.G. Brown, ed., World food security: can private sector R&D feed the poor? Deakin, Australia: Crawford Fund, pages Almost all ag. R&D in poor countries is gvt. funded; private agric. R&D is limited even in rich countries Share of agricultural R&D funded by the private sector, 2000

39 For example, how has US agricultural R&D changed? Reprinted from P.G. Pardey (2009), “Reassessing Public ‐ Private Roles in Agricultural R&D for Economic Development.” Slides presented at the Crawford Fund Annual International Conference, 27 October 2009, Parliament House, Canberra. Trends in U.S. Public and Private Agricultural R&D, 1950 ‐ 2007

GMO seeds have been developed and adopted quickly… Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: ISAAA Brief No. 41. ISAAA: Ithaca, NY ( Global Area of Biotech Crops, 1996 to 2009: Industrial and Developing Countries (millions of ha) Indust. Co.: 5.4% of 1.29 b. ha Worldwide: 2.5% of 4.96 b. ha Dev’ing. Co.: 1.5% of 3.67 b. ha Approx. share of global farm area in 2008 The most visible private ag R&D is in biotech

GMOs have been effective in only four major crops Global Area of Biotech Crops, 1996 to 2009, By Crop (millions of hectares) Maize: 24% of 157 m. ha Soybeans: 70% of 95 m. ha Canola: 20% of 30 m. ha Cotton: 46% of 34 m. ha Share of global area for that crop in 2008 The impact of GMOs has been surprisingly narrow Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: ISAAA Brief No. 41. ISAAA: Ithaca, NY (

Global Area of Biotech Crops, 1996 to 2008, By Trait (millions of hectares) Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: ISAAA Brief No. 41. ISAAA: Ithaca, NY ( The impact of GMOs has been surprisingly narrow GMOs have been effective for only two kinds of traits

USA 64 m. Mexico 0.1 m. Honduras <0.05 m. Colombia <0.05 m. Bolivia 0.8 m. Chile <0.05 m. Argentina 21 m. Uruguay 0.8 m. Paraguay 2.2 m. Brazil 21.4 m. S.Africa 2.1 m. Australia 0.2 m. Burkina Faso 0.1 m. Philippines 0.5 m. India 8.4 m. China 3.7 m. Egypt <0.05 m. Romania <0.05 m. Slovakia <0.05 m. Poland <0.05 m. Czech R. <0.05 m. Spain 0.1 m. Portugal <0.05 m. Canada 8.2 m. Global Status of Biotech/GM Crops (hectares in 2009) New biotechnologies have not (yet?) helped raise food productivity in the world’s poorest areas only cotton mainly cotton Costa Rica <0.05 m. Egypt <0.05 m. Reproduced from Clive James (2010), Global Status of Commercialized Biotech/GM Crops: ISAAA Brief No. 41. ISAAA: Ithaca, NY ( The impact of GMOs has been surprisingly narrow

To conclude… 44 Why a special focus on agriculture? Why do some regions, like Africa, lag behind? How does farm size matter for productivity? How has foreign aid for food productivity changed? How has private agricultural R&D changed? Back to today’s outline: