Resources Research

Culture and systems of knowledge, cultivation and food, population and consumption

Posts Tagged ‘Unctad

Why agricultural investment ‘principles’ must be buried

leave a comment »

FAO_IYFF_1This year the Food and Agriculture Organisation (FAO) will through its Committee on World Food Security, advocate principles concerning what are called ‘responsible agricultural investments’. The adoption of principles such as these are expected to promote investments in agriculture that contribute to food security and nutrition, and which support the realisation of the right to food, particularly within national contexts of how food security is defined.

While the principles are intended to provide practical guidance to governments, private and public investors, intergovernmental and regional organisations, civil society groups, research units and universities, donors and philanthropic foundations, they will be voluntary and will not be binding upon their signatories.

FAO_IYFF_2The problem with such a conceptualisation of international or globally applicable principles is that the negative consequences that accompany investment are left undefined and therefore weak as a countervailing argument. Investment made to acquire land, to pursue industrial agricultural techniques (in contrast to policies and programmes that support smallholder cultivation), and which – experiences of the last three decades have shown – have deepened income inequalities while making those vulnerable to food scarcity and food price volatility even more so.

These investments are determined by a dominant political economy found in a country, or a sub-national region – important variations that cannot be recognised or dealt with in any meaningful way by a set of voluntary principles (nor even with the aid of a ‘knowledge platform’ on the subject set up by the World Bank, FAO, UNCTAD and IFAD.

In this article published by Pambazuka News – the pan-African community of some 2,600 citizens and organisations that make it one of the largest and most innovative and influential web forums for social justice in Africa – I have examined the rationale and background to the principles pertaining to ‘responsible agricultural investment’ (which is now referred to commonly by the ‘RAI’ short form); and also concepts about agricultural investment (or public and private spending on agricultural activities) especially what are assumed and what are implied; and a conclusion criticises the RAI and the effort to promote a multi-lateral common ground for problems that are essentially local.

FAO_IYFF_3“The adoption of RAI will aid, in any host country, the tailoring of all policies and strategies to fit investors (foreign and domestic, for the technological advantages are now common, as much as the conduits of capital flow for food and agriculture investment are many) so that they can be ‘competitive’ in the market. Instead of prioritising a model of agricultural production where women, farmers/peasants, pastoralists and all small-scale food producers are at its core, in which agro-ecological forms of farming and raising livestock are supported, and through which local markets and economies are strengthened, the draft RAI principles will if accepted legitimise policies that put the government and country at the service of such investors (both foreign and domestic, it must be noted).”

Moreover, from the point of view of human rights terms this is discriminatory; and will turn a parlous situation into a destabilising one – already countries are falling short of their obligations related to realising the right to adequate food (a foretaste of which was seen most recently during the World Trade Organisation ninth ministerial conference in 2013 December which brought to the fore disagreements about governments’ own procurement of food for public programmes as distorting world trade).

[Read the full article on Pambazuka News.]


If global food indices are descending, why are local food prices rising?

leave a comment »

The trends of ten international food commodity indices from 2006 onwards.

The trends of ten international food commodity indices from 2006 onwards.

The main chart plots the course of the Food and Agriculture Organisation (FAO) Food Price Index and nine other international food price indices. These are FAO’s cereals index, the International Monetary Fund’s (IMF) food index, the International Grains Council (IGC) wheat index, the IGC’s rice index, the UN Conference on Trade and Development’s (UNCTAD) two wheat indices, Unctad’s rice index, the World Bank’s (WB) food index and WB’s grains index.

Consumer price index trends 2006 to 2013 for five South Asian countries

Consumer price index trends 2006 to 2013 for five South Asian countries

The familiar FAO blue pair for 2013 August

The familiar FAO blue pair for 2013 August

On the main chart, after 2008 December four stages are marked. The first stage is 2008 December to 2010 July, when the indices describe a plateau but which is very much higher than where they were through 2006. The second stage is 2010 July to 2011 April, which corresponds to the second global food price rise and when all these indices rose in concert. The third stage is 2011 April to 2012 September when they all declined to another plateau which nonetheless is higher overall than the last one (stage one), but which rose steeply for a short while towards the end of the stage. The fourth stage is still current, from 2012 June, which is seeing a gradual decline in all the indices to the point they were in 2011 August-September.

I have appended to the main chart the counterpoint of the consumer price indexes from South Asian countries – Nepal, Sri Lanka, Bangladesh, Pakistan and India. The question that follows, when reading the main chart with ten indices and the CPI chart for South Asia, is why the CPI trends do not follow the international grains trends. One of the major factors (which charting this data cannot reveal, as the FAO Food Price Index does not) is the extent to which the industrialisation of prmary crops sets the retail price in the markets of Colombo or Chittagong or Karachi or Mumbai or Kathmandu. Primary crop – that is, cereals, pulses, fruit and vegetable, milk and dairy – is being moved internally, processed, packaged, moved again, retailed in modern convenience stores to a much greater degree than was the case a decade ago. Those costs lie outside what the FAO-IGC-IMF-Unctad-WB indices can describe. But we need to urgently – within these countries and as a group – share methods to gauge and monitor these costs and document their impacts on households.

A tale of five food indices

leave a comment »

Food and agricultural commodities indices behaviour from 2009 January to 2012 November. There are five series - FAO's food index, FAO's cereals index, Unctad's food sub-index, the IMF's food price index, the IGC's grains and oilseeds index.

Food and agricultural commodities indices behaviour from 2009 January to 2012 November. There are five series – FAO’s food index, FAO’s cereals index, Unctad’s food sub-index, the IMF’s food price index, the IGC’s grains and oilseeds index.

Agricultural commodity and food price indices have ended 2012, as a group, at their highest levels in the last four years.

This chart uses index data from five series – two are from FAO (its food index and its cereals index), there is the Unctad food sub-index (of its long-running commodities index), there is the IMF food price index (which includes cereals, vegetable oils and sugar), and there is the IGC grains and oilseeds index.

I have set them all to ‘1’ in 2009 January and observed their behaviour over 46 months (until 2012 November).
For about a year between 2009 July and 2010 August, there was fairly wide divergence between this group of indices, the FAO cereals index and the IGC index maintaining a lower track, the IMF cereals index not rising above 10% of its starting value, the Unctad food index being volatile and the FAO food index at the top.

From 2010 July to 2011 March all the indices rose steeply and in concert. Thereafter till around 2012 July there was a slow general decline (from about 40% above starting point to about 25% above starting point) for all the indices (with the FAO food index about 15% above the rest).

From 2012 July there has been another steep, albeit shorter, jump for all, and at 2012 November the series at the top is the IGC index, with all five at about 35% to 45% above their starting values.

Written by makanaka

January 4, 2013 at 09:55

Right-sizing the 2050 calculus on food and population

with 2 comments

A man walks away with a bag of rice at a food distribution centre in Tarenguel, Gorgol region, in Mauritania in May 2012. A full third of the country’s population, amounting to around a million people, are at risk of severe malnutrition if rain doesn’t fall by July. Photo: AlertNet / Reuters / Susana Vera

Ever since October 2011 when the world’s seventh billion person was born, there has been a new flurry of articles and prognoses about the need to increase ‘global’ food production to feed a ‘global’ population. While this may be all very well for earth systems scientists and researchers who are accustomed to dealing with planetary scale, those in charge of planning for agriculture at national and sub-national levels find it difficult enough relating to their own numbers (in India, the population of the smallest states are between 1 and 2 million, while that of the largest, Uttar Pradesh, is close to 200 million (!) which if it were a country would be placed between the fourth and fifth most populous countries – Indonesia and Brazil).

Through this year, numerous inter-governmental agencies and large organisations – including the FAO, WFP and IFAD – have discussed the need to be able to feed a population of nine billion, which we are expected to be in 2050 or thereabouts. And so says, recently, the ‘Sustainable Agricultural Productivity Growth And Bridging The Gap For Small-Family Farms’, which is the ‘Interagency Report to the Mexican G20 Presidency’ (12 June 2012).

Explaining that “the growing global demand for food, feed and biofuel is well established”, this inter-agency report has said that income growth will increase the quantity and change the composition of agricultural commodity demand. I find this approach a troublesome one because on the one hand there is growing recognition (even if corrective action is small and mostly symbolic) that consumption is to sustainable the way energy efficiency is to total energy use. Why are large agency and inter-agency reports continuing to skirt a matter which should be dealt with head-on – that consumption of food by the populations of ‘developing’ countries, on the lines of that practiced by the populations of OECD countries – cannot be encouraged by the food MNCs and the global food retail consortia?

A man gestures at a compound belonging to the World Food Programme as it is being looted in Abyei, in this United Nations Mission in Sudan (UNMIS) handout photo taken in May 2011. Photo: AlertNet / Reuters / Stuart Price / UNMIS

It is because of this consistent refusal to see – and name – the elephant in the room that this report, to the Mexican G20 Presidency, has said: “Significant increases in production of all major crops, livestock and fisheries will thus be required”.

What are the estimates provided? “Estimates indicate that by 2050, agricultural production would need to grow globally by 70% over the same period, and more specifically by almost 100% in developing countries, to feed the growing population alone… ” I am puzzled by the easy acceptance of this simple equation by the following agencies and institutions, all of whom have contributed to this report: Bioversity, CGIAR Consortium, FAO, IFAD, IFPRI, IICA, OECD, UNCTAD, Coordination team of UN High Level Task Force on the Food Security Crisis, WFP, World Bank, and WTO.

There is a mathematics here that is eluding me. The estimate is that from now until 2050, world population will grow around 30% – from the current 7 billion to an estimated 9.1 billion. However, if population grows at 30%, why must the available food (excluding biofuels demand) grow at 70% over the same period? It is extremely difficult for most people (earth system scientists excluded) to make sense of such large numbers. In order to break up large numbers into more familiar terms, I have (from UN’s World Population Prospects 2010) extracted the following data. These are the populations of France, DR Congo, Thailand, Turkey and Iran, these are the world’s 21st to 17th most populous countries (in that order).

People buy food at a vegetable market in Tripoli in August 2011. Photo: AlertNet / Reuters / Youssef Boudlal

In 2012 their populations are: France 63.5 million, DR Congo 69.6 m, Thailand 69.9 m, Turkey 74.5 m, and Iran 75.6 m. Let’s not try to strain to look ahead as far as 2050 (by which time some of us will have returned to our ecosystems as dust or as ashes) but look to 2027, or 15 years ahead. Then, the populations will look like this: France 67.7 million, DR Congo 99.6 m, Thailand 73.1 m, Turkey 85.1 m and Iran 83.7 m.

Thus we see that, as the ‘Interagency Report to the Mexican G20 Presidency’ has explained, it is indeed some ‘developing’ countries which will need to provide for considerably more food being grown and made available – DR Congo will have, in this short span of years, 30 million more people! Turkey will have more than 10 million more! The growth – again for the 2012 to 2027 period alone – is France 7%, DR Congo 43%, Thailand 5%, Turkey 14% and Iran 11%.

Does it then still make sense to speak of 2050 horizons and 2.1 billion more people when we are at best talking to national planners, sectoral administrators and thematically-oriented agencies accustomed more to district boundaries than continental spreads? I say it doesn’t – and the less time and money and conferencing we expend on these beyond-humanscale numbers the more sense we will make to those in need of guidance. The question then resolves itself as being more prickly, and more in need of hard answers – if the 30 million additional people in DR Congo are to choose a diet that has 50% less meat and 50% more indigenous vegetables and tubers and roots in it, will DR Congo still – over this period alone – need to plan for growing 43% more food (grain) to keep pace with population growth? Will Turkey need to do the same (time to encourage more çorbasi and less schwarma perhaps!)?

Why the West wants to wreck UNCTAD

with 2 comments

How much damage do the financial and ruling elites of the western power blocs think they can get away with? A great deal, it is clear, judging from the stoutness of the defences raised to protect the UNCTAD (United Nations Conference on Trade and Development) and its analytical mandate.

One of the less conspicuous UN agencies, UNCTAD was set up in 1964 to support developing countries to strengthen their weak position in international economic structures, and to design national development strategies. As Martin Khor, Executive Director of the South Centre, explained, it became a kind of secretariat on behalf of developing countries, providing a small pro-development balance to the huge organisations dominated by the developed countries, such as the OECD, the IMF and World Bank.

In the past 20 years, the developed countries (OECD) have tried to curb the pro-South orientation of the UNCTAD secretariat and its many reports. The inter-governmental discussions became less significant, while UNCTAD’s pro-development mission was increasingly challenged by the developed countries.

What is this mission? UNCTAD says it promotes the development-friendly integration of developing countries into the world economy, that it has progressively evolved into an authoritative knowledge-based institution whose work aims to help shape current policy debates and thinking on development, with a particular focus on ensuring that domestic policies and international action are mutually supportive in bringing about sustainable development.

Note the stress on development, and not market, not trade and not finance. This is the problem for those who would seek to scuttle UNCTAD. It is a trend that seemed to have subsided in the past decade, but in the past two months, the meetings in Geneva to prepare for UNCTAD XIII, some developed countries have reportedly attempted to dilute the areas of future work of UNCTAD, to the frustration of the G77 and China.

Hence the statement, which is now widely available on the internet, by civil society organisations which have gathered in Doha, Qatar, for UNCTAD XIII meeting (21-26 April), which has said:

“The importance of UNCTAD’s work has been highlighted by the global financial and economic crisis and its continuing catastrophic effects on peoples and economies. Over the years while the Bretton Woods twins led the cheerleading for unbridled liberalisation and deregulation of markets and finances which produced the crisis, UNCTAD’s analysis consistently pointed out the dangers of these policies. The economic turmoil provoked by the crisis makes UNCTAD’s mandate and work even more relevant.”

“CSOs in Doha demand that UNCTAD’s crucial research and analytical work especially on 1) the global financial crisis, and 2) other development challenges including those arising from globalisation be maintained. UNCTAD serves as an important countervailing forum where the interests of developing countries can be paramount when trade, development and interrelated issues are being discussed. This value and its proven track record is why the attack on UNCTAD’s mandate has to be resisted.”

The CSOs in Doha are concerned that group of countries which includes Japan, USA, Switzerland, Canada, South Korea, Australia, New Zealand and which also includes the European Union (EU) are so opposed to UNCTAD’s vital analytical and advisory work on finance and responses to the crisis that they are refusing to even reaffirm UNCTAD’s mandate as agreed in Accra.

What is clear is that this group now sees UNCTAD’s work as a global defence against the effects of new economic policies, which in their many mutations have since the early 1980s heaped unspeakable misery on hundreds of millions around the world, in the South. These policies, as UNCTAD has also helped show, have led directly and indirectly to pervasive and chronic economic inequality, insecurity, unemployment and under-employment, casualisation, informalisation, a heightened level of labour exploitation, the emasculation of protective factory acts and labour laws.

That is why the civil society organisations present in Doha for UNCTAD XIII contrasted the interest the major powers have shown in strengthening the IMF and World Bank (and in using bodies of questionable accountability such as the G20 to block truly multilateral responses to the crisis of neoliberalism) with their negative attitude to UNCTAD. They noted that the IMF and World Bank continue to peddle policies which caused and have been discredited by the crisis. And they have demanded that the OECD-oriented group of would-be UNCTAD wreckers keep their hands off the organisation.

Written by makanaka

April 20, 2012 at 17:49

Global Commodities Forum 2012

leave a comment »

UNCTAD’s Global Commodities Forum is back. The theme of this third meeting (23-24 January, 2012) is “Harnessing development gains from commodities production and trade”. Participants are to discuss the debt crisis and analyse the trade-related innovations developed in response to it.

This year, the Forum will focus on ways to spur development through commodity production and trade, and on practical approaches to developing supply markets in commodity-dependent developing countries. Participants are also expected to discuss the sovereign debt crisis and analyse the trade-related innovations developed in response to the credit crunch. A special session is going to be dedicated to identifying opportunities for applying existing private-sector solutions to the challenges faced by developing countries.

The third GCF is divided into two parallel streams: the Plenary A stream treats the Forum’s overall theme of harnessing development gains from commodities production and trade; the Parallel B  stream examines the development of supply markets in commodity-dependent countries.

Plenary A: Recent developments in international commodities trade, their impacts and implications (Joint A1/B1); The sovereign debt crisis and its impacts on commodities production and trade (A2); Trade-related financial innovations developed in response to the post-2008 credit crunch (A3); Key challenges facing commodity-dependent developing countries (A4/5); Identifying emerging opportunities in the changing global energy mix (A6); Practical examples of supply chain development in developing countries (A7).

Parallel B: Recent developments in international commodities trade, their impacts and implications (Joint A1/B1); In practice: Financing commodity-based development in developing countries (B2/3); Expanding access to markets and trade-enabling tools (B4/5); Identifying potential opportunities for collaboration (B6/7).

From the concept note: Many developing countries are heavily dependent on exports of commodities. Throughout most of the 1980s and 1990s, prices for these goods remained low, but since 2002 they have risen considerably. Despite the resulting increase in the value of their chief exports, most commodity-dependent developing countries (CDDCs) have been unable to convert the additional revenue into a diversification of their export industries. Since 2002, the number of countries whose commodity exports represent more than 60% of merchandise exports has risen from 85 to 91.

Their persistent dependence on commodities exports has been particularly poignant for CDDCs as the fallout from the 2008 global economic crisis continues.  Many of these nations are dependent on imports of food, oil, and manufactured goods. Poverty and food security are often pressing concerns. As the global crisis has squeezed government and household budgets, CDDCs find themselves less able to confront these major challenges. It is vital for them to realize greater lasting value from their commodities exports.

Over the past year, the pressure on CDDCs has increased with the worsening of the sovereign debt crisis, which threatens to reduce the amount of credit available to commodities producers and to increase the amount of speculative capital that flows from financial markets into commodities in search of profitable investments. Continued price volatility in commodities markets has prompted high-level collaborative international action, including most recently by the UN High Level Task Force (UN HLTF) and the G-20 grouping of major economies. This year’s UNCTAD Global Commodities Forum (GCF) will focus on what CDDCs can do to reverse the pattern. The event’s theme is ‘Harnessing development gains from commodities production and trade.’

FAO’s World Food Day sermon, well balanced with a few blind spots

leave a comment »

This is worth a close read for it reflects, in my view, the pull and tug of various opinions and convictions inside the United Nations Food and Agriculture Organization (FAO), the single entity that we rely on the most to inform us about the state of cultivators, what they’re growing in our world, and who isn’t getting enough of those crops as food.

I have extracted some important paragraphs of this publication [get it here as a pdf], and commented on them. Here goes:

“At the level of individuals, people living on less than US$1.25 a day may need to skip a meal when food prices rise. Farmers are hurt too because they badly need to know the price their crops are going to fetch at harvest time, months away. If high prices are likely they plant more. If low prices are forecast they plant less and cut costs.”

Yes and no. The one-dollar-a-day global poverty line really ought to be done away with. It means nothing at national level and less within countries. Trying to equate real prices and actual consumption (in grams or hundred grams a day) with purchasing power parity-adjusted international dollars is generally a pointless exercise that generates lists and rankings that distract rather than inform. Anyway, the important part of what FAO said here is that when they’re under a certain daily income line, people can’t buy food to eat what they need to. The comment on farmers making decisions based on expected prices is a good one, something that most people miss, assuming that farmers are as interested in food security as academics are – which is quite untrue. For a farming household, sowing a field is a cost, and that cost needs to be more than recouped in order to make the decision to sow a good one.

“Rapid price swings make that calculation much more difficult. Farmers can easily end up producing too much or too little. In stable markets they can make a living. Volatile ones can ruin them while also generally discouraging much-needed investment in agriculture. Recognizing the major threat that food price swings pose to the world’s poorest countries and people, the international community, led by the G20, moved in 2011 to find ways of managing volatility on international food commodity markets. Under the presidency of France’s Nicolas Sarkozy, the world’s 20 largest economies agreed that any strategy directed to that purpose should have the protection of vulnerable countries and groups as its main priority.”

Now here’s the FAO getting to grips with today’s problem. Rapid price swings is what we tend to call volatility – this can be volatility in retail food prices, or in input prices for farmers, or in offtake (purchase at the farm gate or local market) prices of harvested crops. I don’t see any stable markets the FAO is referring to here. Under Europe’s Common Agricultural Policy (CAP) the stability is constructed by coordinating a monstrous array of incentives and subventions – causing instability elsewhere in the world and particularly when that ‘elsewhere’ is importing (under duress) European agri products and processed food. But that’s another though related story.

The idea of “much-needed investment in agriculture” is an ill-defined one. The best investment a farmer can make, so goes an old Indian proverb, is that she walks the soil of her field every day with her bare feet – and that means for the farmer to till her land and come face to face with her natural resources and biodiversity. It is not the sort of investment the ‘market’ can understand. But FAO ought to, especially since it also has a Save And Grow programme aimed at addressing the organic, low input, community side of cultivation. This is an example of the contradictions in this FAO document. The “international community” is a tired and non-existent label, describing nothing while pretending to be collegial. Mediocre editorial writers still use it but no realists do. The G20 statement this time around may be a little less wishy-washy than it was last year, but that is scant comfort to the hungry or to the cultivators of small plots.

“Today’s turbulent commodities markets contrast sharply with the situation that characterized the last 25 years of the twentieth century. Between 1975 and 2000 cereal prices remained substantially stable on a month-to-month basis, although trending downwards over the longer term. For despite rapid population growth – world population doubled between 1960 and 2000 – the Green Revolution launched by Dr Norman Borlaug in the 1960s helped food supply to meet and even exceed demand in many countries, including India, thanks to the work of M. S. Swaminathan, then Director of the Indian Agricultural Research Institute.”

Oh dear. This is one step forward and three back for the FAO. It should not – not – go looking at Green Revolution history in an attempt to encourage beleaguered small farmers and consumers battered by food price inflation. Yes, the Indian Council of Agricultural Research (ICAR) and CIMMYT (the CGIAR International Maize and Wheat Improvement Centre) will establish the Borlaug Institute for South Asia in India. This institute will be at the forefront of the so-called Second Green Revolution in eastern India (and thereafter sub-Saharan and East Africa). The kind of infrastructure demanded by the first Green Revolution by way of irrigation canals, dams with extensive command areas, provision of rural electricity to run pumpsets with, heavily subsidised inorganic fertilisers produced by a monolithic industry closely allied to the petro-chemicals industry and fossil fuel suppliers – all these were overlooked in the rush to raise yield per hectare. We do not want to see that being attempted again with public monies. It is this investment – rather this big fat public money pipe – which kept cereal prices “substantially stable on a month-to-month basis” in what used to be called the First World. It is not possible there now, it is not possible here (Asia and Africa) now. And that’s what FAO should have said, clearly and bluntly.

“In fact there was, in the Western Hemisphere at least, an over-abundance of food, caused in no small part by the generous subsidies which OECD countries paid to their farmers. But the picture today is a very different one. The global market is tight, with supply struggling to keep pace with demand and stocks are at or near historical lows. It is a delicate balance that can easily be upset by shocks such as droughts or floods in key producing regions.”

So it does try to say this, in a push-me-pull-you sort of way, but the truth is there is no delicate balance. Markets do not tolerate delicate balances because investors have no time for such niceties.

“In order to decide how, and how far, we can manage volatile food prices we need to be clear about why, in the space of a few years, a world food market offering stability and low prices became a turbulent marketplace battered by sudden price spikes and troughs.”

Hear, hear.

“The seeds of today’s volatility were sown last century when decision-makers failed to grasp that the production boom then enjoyed by many countries might not last forever and that continuing investment was needed in research, technology, equipment and infrastructure. In the 30 years from 1980 to date the share of official development assistance which OECD countries earmarked for agriculture dropped 43 percent. Continued under-funding of agriculture by rich and poor countries alike is probably the main single cause of the problems we face today.”

Why does the FAO continue stubbornly to see “investment” as an output of only, and exclusively, national agricultural research systems that are in the vast majority of countries government departments with little real connection to growers and household consumers, or are adjuncts of industrial agriculture multinationals? The seeds of volatility (FAO’s pun, not mine) were planted when commodity exchanges invented commodity futures in collusion with banks and investment consulting companies – production booms were not, in the ecological economics framework of measuring things, booms of any kind, nor were they seen in many countries other than the subvention-drunk OECD of the 1970s and 1980s. In this para, FAO has blundered clumsily by now apportioining some blame to “continued under-funding” while having already mentioned the “generous subsidies” years in the West.

“Contributing to today’s tight markets is rapid economic growth in emerging economies, which means more people are eating more meat and dairy produce with the need for feedgrains increasing rapidly as a result. Global trade in soymeal, the world’s leading protein feed for animals, has grown 67 percent over the past 10 years.”

Hear, hear. Type 2 diabetes and the burden of non-communicable diseases (see the WHO’s recent campaign) have also increased dramatically as a result of the wanton carpet-bombing of “emerging economies” (another revolting label) by the food-agbiotech-retail MNCs.

“Population growth, with almost 80 million new mouths to feed every year, is another important element. Population pressure is compounded by the erratic and often extreme meteorological phenomena produced by global warming and climate change. A further contributing factor may be the recent entry of institutional investors with very large sums of money into food commodity futures markets. There is evidence to suggest that food prices may have surged partly as a result of speculation. But there is considerable debate over the issue.”

Yes and no. FAO is right about the impact of population growth, about climate change (it has an enormous amount of documentation on the subject), about institutional investors and how they distort prices and about food speculation and its effects on street prices. There is plenty of evidence. There is not “considerable debate”, unless the FAO thinks that the angry bleatings of bankers to the contrary is some sort of debate. If so, it should consult its fellow UN agency, the United Nations Conference on Trade and Development (UNCTAD), which this year released a study titled ‘Price Formation in Financialized Commodity Markets: The Role of Information’. The UNCTAD experts who wrote this paper concluded that the commodities market isn’t functioning properly, or at least not the way a market is supposed to function in economic models, where prices are shaped by supply and demand. But the activities of financial participants, according to the study, “drive commodity prices away from levels justified by market fundamentals”. This leads to massively distorted prices, which are not influenced by real factors but by the expectation that economic developments will improve or worsen.

“Lastly, distortive agricultural and protectionist trade policies bear a significant part of the blame. In addition, with agriculture now substantially part of the wider energy market, any shock to the latter – such as unrest in a producing country – can have immediate repercussions on food prices. Responding to food price volatility therefore involves two different kinds of measures. The first group addresses volatility itself, aiming to reduce price swings through specific interventions while the other seeks to mitigate the negative effects of price swings on countries and individuals. One measure frequently invoked under the first heading is the setting up of an internationally held food stock able to intervene on markets to stabilize prices. But FAO’s view is that such a stock would be of dubious value, as well as expensive and difficult to operate. Also, government intervention in food markets discourages the private sector and hinders competition.”

Again the FAO push-me-pull-you is at work here, but the premier food agency has made some important points. The connection between agriculture and energy is one – and that means biofuels, which has a para to itself in the FAO document. Conflict is also brought in as a factor affecting prices – in how many food-producing and exporting countries is there now war or armed conflict? The idea of ‘strategic food reserves’ – which countries in South-east Asia and in the Persian Gulf region are pursuing – has been given short shrift, rightly in my view. But once again the FAO makes a tired attempt to placate the pro-WTO groups by bemoaning protectionist trade policies – which in WTO-speak means no barriers to entry for OECD food products anywhere so that all that accumulated legacy subsidy can pay back a little. Not acceptable, FAO folks. And to round off the contradictory para, the FAO statement again criticises “government intervention” as hindering competition. Governments have to serve their citizens according to constitutions and charters – these are internal matters and this is where sovereignty and self-determination come before market. Better believe it FAO. At least, for now.

BRICS, agricultural commodities, G20 and experiments with truth

with one comment

There’s a flurry of activity around the start of the G20 and the IMF-World Bank meetings. Some of this activity has to do with food and agriculture, and with the agricultural commodity markets and its ties to the financial markets. While the G20 has a lot to do with the growing strength of the BRICS bloc and the IMF, what stands out is a trenchant and insightful commentary by Unctad’s Trade and Development Report 2011 on the matter of agricultural commodities and the markets (exchanges rather) which control them.

Financial investment in commodities as a proportion of global oil production, 2001–2010. Chart: Unctad Trade and Development Report 2011

It has attracted the attention of Emerging Markets, a periodical (online too) which talked about food price and agricultural commodities markets with Joerg Mayer, senior economic affairs Officer at Unctad. Emerging Markets has quoted Mayer as having said that the risk management strategies promoted by the World Bank “only make sense if you assume that exchanges are working well for hedging purposes – and our research shows that, when large numbers of financial investors are present, they don’t work well“. Hear, hear.

Mayer said that the World Bank’s approach would also be logical “if you assume that financial investors have no impact on prices, or that their presence improves [pricing]”. Of course to make such an assumption is to agree with an untruth, for Unctad’s Trade and Development Report 2011 has said quite plainly that strong investment across agricultural commodities markets mean that they have “followed more the logic of financial markets than that of a typical goods market”.

The chapter ‘Financialized Commodity Markets: Recent Developments and Policy Issues’ from the report is worth reading closely and in full. Here is an indicative paragraph:

“The commodity price boom between 2002 and mid-2008 and the renewed price rise of many commodities since mid-2009 have coincided with major shifts in commodity market fundamentals. These shifts include rapid output growth and structural changes, both economic and social, in emerging-market economies, the increasing use of certain food crops in the production of biofuels and slower growth in the supply of agricultural commodities. However, these factors alone are insufficient to explain recent commodity price developments. Since commodity prices have moved largely in tandem across all major categories over the past decade, the question arises as to whether the very functioning of commodity markets has changed.”

Prices and net long financial positions, by trader category, selected commodities, June 2006–June 2011 (CIT = commodity index traders; PMPU = producers, merchants, processors, users). Chart: Unctad Trade and Development Report 2011

Unctad’s research on the subject has shown that investors are motivated by “factors totally unrelated to commodity market fundamentals”. This is as bald an assessment of the behaviour of investors as you can hope to see from an inter-governmental organisation (the World Bank and International Monetary Fund are incapable of stating truths like this one).

“Against this background, the French Presidency of the G-20 has made the issue of commodity price volatility a priority of the G-20 agenda for 2011, since excessive fluctuations in commodity prices undermine world growth and threaten the food security of populations around the world (G20-G8, 2011). These fluctuations are seen as being related to the functioning of financial markets and the regulation of commodity derivatives markets.”

Unctad’s Trade and Development Report 2011 has argued for tighter regulation of financial investors, including limits on the positions taken by individual market participants; a rule to prevent banks that have insider information about commercially based market sentiment undertaking hedging operations for clients; a similar rule to prevent physical traders betting on outcomes they are able to influence; and a transaction tax or a requirement to hold positions for a minimum amount of time.

Instead, the World Bank’s analysts have generally argued that price volatility is driven by fundamentals, such as input costs, which other economists have failed to include in their calculations. This is an argument that cannot stand up to the merest suggestion of an examination of the cost of cultivation for, while inputs do cost more from one year to another in high-input farming (in Asia and Africa and South America, even with smallholders who are held to ransom by industrial agriculture companies) these are not the “fundamentals” the Bank-IMF crowd insist are responsible. The trouble is, they won’t admit to any others. Worse, they have enfleshed this delusionary tack with the help of their old collaborators, such as JP Morgan, which now has a hedging business that works on agricultural commodities markets and this year joined the World Bank/International Finance Corporation to launch an Agricultural Price Risk Management Facility, “designed to fund small players to hedge more effectively” (nudge, nudge, wink, wink, etc).

Correlation between commodity and equity indexes, 1986–2011 (The data reflect one-year rolling correlations of returns on the respective indexes on a daily basis). Chart: Unctad Trade and Development Report 2011

Said the chapter ‘Financialized Commodity Markets: Recent Developments and Policy Issues’ from the Trade and Development Report, 2011:

“Indeed, a major new element in commodity markets over the past few years is the greater presence of financial investors, who consider commodity futures as an alternative to financial assets in their portfolio management decisions. While these market participants have no interest in the physical commodity, and do not trade on the basis of fundamental supply and demand relationships, they may hold – individually or as a group – very large positions in commodity markets, and can thereby exert considerable influence on the functioning of those markets. This financialization of commodity markets has accelerated significantly since about 2002–2004, as reflected in the rising volumes of financial investments in commodity derivatives markets – both at exchanges and over the counter (OTC).”

We think the G20 participants (finance ministers, central bank administrators and similarly high-powered persons) ought to have mentioned the matter. Instead, this is what they said.

“The BRICS countries, represent quite a big share of the global economy. In today’s crisis period, internal demand of each economy is important, and we should find a way to enlarge internal demand in our economy.” – China Central Bank chief Zhou Xiaochuan. “We represent a group of countries where there is (an) enormous amount of demand for resources at home for poverty reduction … so there is going to be big, big tension between giving money to a multilateral institution for the purpose of restoring global stability and meeting our own aspirations at home.” – Reserve Bank of India governor Duvvuri Subbarao.

“Enlarge internal demand” and “enormous amount of demand for resources at home”? Isn’t that exactly the sort of prognosis the World Bank, IMF and IFC will happily enlist as fundamentals of food prince index drivers? As for the rest of us, it’s back to promoting and practicing ecological economics.

The carefully constructed mirage of the ‘green economy’

with 3 comments

Not a week goes by nowadays without one high-profile institution or high-powered interest group directing us all to be part of the ‘new, green economy’. That’s where the next jobs are, where innovation is, where the next wave of financing is headed, where the best social entrepreneurship lies. There are the big inter-governmental organisations telling us this: United Nations Environment Program, UNCTAD, OECD, International Energy Agency, the big international lending agencies like the World Bank and Asian Development Bank. There are big think-tanks telling us the same thing – backed up by hefty new reports that are boring to read but whose plethora of whiz-bang charts are colourful. There are big companies, multinationals and those amongst the Fortune 500, also evangelising the new green economy and patting themselves on the back for being clean and green and so very responsible.

Artisanal blacksmith and his family, Maharashtra, India

What on earth are they all talking about? Does it have to do with us average, salaried, harassed, commuting, tax-paying types who are struggling with food inflation and fuel cost hikes and mortgages and loans that break our backs? Are they talking to our governments and our municipalities, who are worried about their budgets and their projects and their jobs too?

Here are a few answers from working class Asia. Let’s start with restating a couple of trendlines. One, the era of growth in the West is over. Growth is Asia is what is keeping the MNCs and their investors and bankers and consultants interested, and this means China and India (also Brazil, Russia, South Africa, Indonesia). Two, the environmental consciousness which began in the 1970s to spread quickly in the West led to many good laws being framed and passed. These were responses to the industrial and services growth in the Western economies. As globalisation took hold, people in less industrialised countries – ordinary citizens – saw what had happened in the West and learnt from their experiences with industrialisation. Green movements took root all over Asia and South America, protests were common, confrontations just as much, and global capital found itself being questioned again, even more fiercely.

These are the two major trends. The forces of production want to move much further into what used to be the ‘developing’ world, but want to meet much less resistance. That’s why they appeal to the consumer minds of China, India and the other target countries – you need jobs, homes, nice cars, big TVs, cool vacations, credit, aspirations, and lifestyle is what the messages say, whether they’re from telecom companies or condominium salesmen. But it’s hard to market all this stuff – real stuff, virtual stuff – to people who are still struggling to make ends meet.

This was after all the old 'green economy'. A late 19th century painting in a maritime museum near Mumbai, India

That’s where the ‘new, green economy’ tagline and its earnest-sounding philosophy comes in. “The main challenges to jump-starting the shift to a green economy lie in how to further improve these techniques, adapt them to specific local and sectoral needs, scale up the applications so as to bring down significantly their costs, and provide incentives and mechanisms that will facilitate their diffusion and knowledge-sharing,” said one of these recent reports. Look at the text which contains all the right buzzwords – ‘scale up’, ‘jump-start’, ‘applications’ (that’s a favourite), ‘knowledge-sharing’, ‘local’.

This makes the ‘old economy’ sound good but changes nothing substantial on the ground, or on the factory shopfloor or for the tens of thousands of little manufacturing units that do small piecework jobs for the bigger corporations up the chain. The world’s business philosophy has changed drastically even without the impact of environment and energy. To drive home this point, it has been a long time since we heard anything like ‘industrial relations’, and that alone should tell us how far the dominance of capital has reached, when labour, whose organisation gave the West its stellar growth rates in the 1960s and 1970s, has now become all but ignored. This is because the dominant interests associated with capital have insisted, successfully for investors and for pliant governments, that the manufacturing firms break loose from the industrial relations moorings they had established. The restructuring of firms to emphasise leaner and meaner forms of competition – as the ruthless management gurus and greedy consulting agencies instructed – was in line with market pressures that are viewed by the powers-that-be as crucial to the revitalisation of the economy.

Read their greenwash carefully and the control levers are revealed. “Further innovation and scaling up are also needed to drive down unit costs. Technologies will need to be ‘transferred’ and made accessible, since most innovation takes place in the developed countries and private corporations in those countries are the main owners of the intellectual property rights covering most green technologies.” So says ‘World Economic and Social Survey 2011: The Great Green Technological Transformation’ (UNESCO, Department of Economic and Social Affairs). Rights and access are built in from the start, as you can see.

And yet it is this very system of production, of the arrangement of capital and of the effort to weaken working regulations that is now talking about the ‘green economy’. Why do they even imagine we should believe them? They are the ones who have remained locked into the fossil fuel economy and who have partnered the enormous influence of the finance markets, who have followed every micro-second of the way the dictates of capital flows and what the market investors want in their endless quest for greater profits in ever-shorter cycles of production. For the major business of the world, ‘green economy’ is yet another route to super-profits and the consolidation of both forces of production and masses of consumers. The difference between now and the 1970s is that today they are able to successfully enlist the apparently authoritative inter-governmental organisations with their armies of economists and social scientists and engineers, to support this new profiteering. Only now, the cost is planetary.

Dear scientists and donors, what part of ‘agro-ecology’ don’t you understand?

with one comment

“Resource-conserving, low-external-input techniques have a proven potential to significantly improve yields,” Olivier De Schutter, the United Nations Special Rapporteur on the Right to Food, has told the UN Human Rights Council at its Sixteenth session.

“In what may be the most systematic study of the potential of such techniques to date, Jules Pretty et al. compared the impacts of 286 recent sustainable agriculture projects in 57 poor countries covering 37 million hectares (3 per cent of the cultivated area in developing countries). They found that such interventions increased productivity on 12.6 millions farms, with an average crop increase of 79 per cent, while improving the supply of critical environmental services.”

“Disaggregated data from this research showed that average food production per household rose by 1.7 tonnes per year (up by 73 per cent) for 4.42 million small farmers growing cereals and roots on 3.6 million hectares, and that increase in food production was 17 tonnes per year (up 150 per cent) for 146,000 farmers on 542,000 hectares cultivating roots (potato, sweet potato, cassava). After UNCTAD and UNEP reanalyzed the database to produce a summary of the impacts in Africa, it was found that the average crop yield increase was even higher for these projects than the global average of 79 per cent at 116 per cent increase for all African projects and 128 per cent increase for projects in East Africa.”

Olivier De Schutter, United Nations Special Rapporteur on the Right to Food

Olivier De Schutter, United Nations Special Rapporteur on the Right to Food

The most recent large-scale study points to the same conclusions, De Schutter has said. Research commissioned by the Foresight Global Food and Farming Futures project of the UK Government reviewed 40 projects in 20 African countries where sustainable intensification was developed during the 2000s. The projects included crop improvements (particularly improvements through participatory plant breeding on hitherto neglected orphan crops), integrated pest management, soil conservation and agro-forestry. By early 2010, these projects had documented benefits for 10.39 million farmers and their families and improvements on approximately 12.75 million hectares. Crop yields more than doubled on average (increasing 2.13-fold) over a period of 3-10 years, resulting in an increase in aggregate food production of 5.79 million tonnes per year, equivalent to 557 kg per farming household.

The Special Rapporteur’s recommendations:
As part of their obligation to devote the maximum of their available resources to the progressive realization of the right to food, States should implement public policies supporting the adoption of agroecological practices by:
• making reference to agroecology and sustainable agriculture in national strategies for the realisation of the right to food and by including measures adopted in the agricultural sector in national adaptation plans of action (NAPAs) and in the list of nationally appropriate mitigation actions (NAMAs) adopted by countries in their efforts to mitigate climate change;
• reorienting public spending in agriculture by prioritizing the provision of public goods, such as extension services, rural infrastructures and agricultural research, and by building on the complementary strengths of seeds-and-breeds and agroecological methods, allocating resources to both, and exploring the synergies, such as linking fertilizer subsidies directly to agroecological investments on the farm (“subsidy to sustainability”);
• supporting decentralized participatory research and the dissemination of knowledge about the best sustainable agricultural practices by relying on existing farmers’ organisations and networks, and including schemes designed specifically for women;
• improving the ability of producers practicing sustainable agriculture to access markets, using instruments such as public procurement, credit, farmers’ markets, and creating a supportive trade and macroeconomic framework.

The research community, including centres of the Consultative Group on International Agricultural Research and the Global Forum on Agricultural Research, should:
• increase the budget for agroecological research at the field level (design of sustainable and resilient agroecological systems), farm and community levels (impacts of various practices on incomes and livelihoods), and national and sub-national levels (impact on socio-economic development, participatory scaling-up strategies, and impacts of public policies), and develop research with the intended beneficiaries according to the principles of participation and coconstruction;
• train scientists in the design of agroecological approaches, participatory research methods, and processes of co-inquiry with farmers, and ensure that their organizational culture is supportive of agroecological innovations and participatory research;
• assess projects on the basis of a comprehensive set of performance criteria (impacts on incomes, resource efficiency, impacts on hunger and malnutrition, empowerment of beneficiaries, etc.) with indicators appropriately disaggregated by population to allow monitoring improvements in the status of vulnerable populations, taking into account the requirements of the right to food, in addition to classical agronomical measures.