Estimation of Damage and Losses caused by Disasters The Agriculture Sector By J. Roberto Jovel

13Apr07 RJovel 2Contents 1.Typical effects of disasters on the sector 2.Special characteristics of agriculture sector 3.Procedures for estimating damage and losses

Typical Effects of Disasters on Agriculture Sector

13Apr07 RJovel 4 Effects of Disasters on Agricultural Sector DAMAGE (Full or partial destruction of assets in sector) Agricultural landAgricultural land Permanent plantationsPermanent plantations Irrigation/drainage systemsIrrigation/drainage systems Storage facilities, and stored inputs/goodsStorage facilities, and stored inputs/goods Farm machineryFarm machinery Farm roadsFarm roads LOSSES Production lossesProduction losses –Loss of full crop –Decline in unit yield Higher production costsHigher production costs –More irrigation required –Higher use of inputs –Cost of re-planting

13Apr07 RJovel 5 Who should assess damage and losses in the Agriculture sector The value of damage to assets should be estimated by a civil or agricultural engineerThe value of damage to assets should be estimated by a civil or agricultural engineer The value of losses must be estimated by agricultural economists. In addition to the above, the following specialists are required:The value of losses must be estimated by agricultural economists. In addition to the above, the following specialists are required: –Agronomist –Food security expert –Agriculture extensionist

Special Characteristics of Agriculture Sector Seasonality of Production

13Apr07 RJovel 7 Seasonality in Production of Agriculture Sector The agriculture sector, unlike most of the productive sectors, has a seasonality in its production related to the variation of climate along the yearThe agriculture sector, unlike most of the productive sectors, has a seasonality in its production related to the variation of climate along the year Therefore, criteria used to estimate production losses will vary depending on the time when a disaster occursTherefore, criteria used to estimate production losses will vary depending on the time when a disaster occurs In addition, agriculture sector may sustain losses without incurring into damage of its assets (case of drought)In addition, agriculture sector may sustain losses without incurring into damage of its assets (case of drought)

Procedure for Estimating Damage and Losses

13Apr07 RJovel 9 Initial Analysis of Sector Define type of productionDefine type of production –Seasonal, annual or permanent crops –Irrigated or non-irrigated agriculture –Labour-intensive or mechanized –Personal consumption or market/export oriented Define calendar of production activitiesDefine calendar of production activities –Seasonal or annual crops: planting and harvesting, how many crops? –Plantation: harvest period(s) Superimpose time of disaster on above calendar of agriculture production activities, and defineSuperimpose time of disaster on above calendar of agriculture production activities, and define –Full crop destruction? –Partial loss due to unit yield decline?

13Apr07 RJovel 10 Criteria for Estimation of Agricultural Losses of Seasonal or Annual Crops At end of season: Losses are equal to the value of the entire crop production At start or middle of season: Define whether you can replant and still harvest without impeding next crop If yes,losses are equal to the If yes, losses are equal to the value of investment made before the crop was affected by disaster (higher production year end) If not, losses are equal to value of full crop production Depending On When DisasterOccurs

13Apr07 RJovel 11 Estimation of Damage and Losses in Permanent Plantations If no destruction of trees/plants occurred, estimate losses in productionIf no destruction of trees/plants occurred, estimate losses in production If destruction of trees/plants occurred, estimateIf destruction of trees/plants occurred, estimate –Damage as value of replanting trees/plants –Losses as sum of value of standing production plus value of production losses over time required for trees/plants to mature and begin producing (might require several years)

13Apr07 RJovel 12 Step-wise Procedure to Estimate Agricultural Losses 1.Determine baseline (historical) data –Calendar of agricultural activities –Cropped area for different products –Production volume for each crop –Prices paid to farmers (farmgate price) 2.Obtain pre-disaster forecast of production –Planting intentions (surface area) –Expected unit yields –Forecasted volume of production 3. Develop post-disaster forecast of production –Case 1: Full destruction of crop –Case 2: Decline in yield of crop 4. Estimate agricultural production losses ( 2 – 3) Use“normal”productionestimates

13Apr07 RJovel 13 Estimation of Agriculture Losses in Case of Unit Yield Decline 1.Obtain pre-disaster forecast of production volume 2. On basis of agronomists´ advice, estimate volume of production after disaster 3. Using historical information about farmgate prices, select/adopt price unaffected by disaster scarcity 4. Estimate value of losses as product of volume production loss (1 minus 2) times farmgate price selected (3)

13Apr07 RJovel 14 Impact on Food Security A disaster may have a significant impact on food crops as to affect food security of the population Whenever that is the case, a food balance must be carried out taking into consideration –Food demand by population –Pre-disaster food stock –Post-disaster production –Resulting food deficit Estimates must be made of required food imports to compensate for the losses

13Apr07 RJovel 15 Impact of Losses on Macro- Economy The agriculture sectorial assessment team must also estimate any macro-economic impacts arising from the disaster in the sector The following estimates must be provided to the macro-economist: Decline in traditional exportsDecline in traditional exports Increase in traditional imports (incl. food imports)Increase in traditional imports (incl. food imports) Required post-disaster government expenditures (incl. food imports to be paid by government)Required post-disaster government expenditures (incl. food imports to be paid by government)

13Apr07 RJovel 16 Information requirements and sources Requirements Statistical data on production, surface area and unit yields of crops at national and sub-national levels Calendar of agricultural activities Unit prices paid for products at levels of –Farm gate –Wholesale –Retail Agricultural production forecast for current year Food balance data Sources of Data Ministry of Agriculture Ministry of Commerce

Application to Kenya drought case Obtain (from Agricultural Economics Department) quantitative information for calendar years 2008, 2009, 2010 and 2011, on –Annual production forecasts for seasonal and permanent, food and cash crops, for each crop and for each season in year, including planting intentions (hectares) and expected unit yields (Kg/ha) –Actual production obtained for above, including harvested area (ha), unit yield (Kg/ha) and prices paid to producers, and at wholesale and retail levels (KSh/kg) –Actual quantities of annual exports of different agricultural products This information is required at Province and District level 13Apr07 RJovel 17

Assessment of Related Losses The Food Processing Industry

13Apr07 RJovel 19 Usual Destination of Agricultural Production Agricultural production is destined to –Direct consumption by farmers –Processing at agro-industries After processing, these same products are sent to markets for distribution and sale to the public and/or for export When agricultural production is lost, there occur subsequent losses in the forward links of the food chain –Agro-industry –Commerce

13Apr07 RJovel 20 Forward Links in the Food Production Chain Losses in the processing of agriculture products – and of other primary production such as fishery and livestock as well – are not always accounted for in the agriculture sector Their inclusion here or in the industrial sector depends on where they are accounted for in the national accounts of the disaster-stricken country

13Apr07 RJovel 21 The Agriculture to Market Chain Agricultural production Direct consumption by farmers Agro- processing industry Agro-based Commerce

13Apr07 RJovel 22 Step-Wise Procedure to Estimate Agro-Industrial Losses 1.Obtain volume of losses in agriculture production, from previous analysis 2.In consultation with agriculture specialists, ascertain per cent retention of each product retained by farmer for direct consumption 3.Estimate volume loss of input to agro-industry (1 – 2) 4. IfInput/Outputtables are available 4. If Input/Output tables are available a)Determine Industry/Agriculture Ratio b) Estimate Agro-industry loss (by combining 3 and 4a) 5. If not, use wholesale and farmgate prices as proxy to ascertain added value during processing a)Subtract farmgate price from wholesale price to obtain price differential b) Estimate agro-industry loss (as 3 x 5a)

Application to Kenya drought case For the case of most common food products – sugar, coffee, tea, grains – obtain the following information for years 2008, 2009, 2010 and 2011: -Quantity of raw materials processed -Prices paid ex-factory (wholesale) and retail -Sales or value added taxes -Quantity of processed goods exported abroad -Prices paid for such exports -Export taxes Estimate decline in processing and sales of such food products due to primary agriculture losses 13Apr07 RJovel 23

Thank you !!