Organising agriculture in the year 2000

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A similar paper on the same topic was presented at an International Association of Agricultural Economists’ seminar on Population and Food and Agricultural Development organised in collaboration with FAO and UNFPA held in Rome, December l-5. 1975. A shortened version of this Rome paper will appear in the seminar’s compendium Food Enough or Starvation for Millions? (Tata McGraw Hill of India, forthcoming). The projections presented in this article are part of a larger study involving: Donald Regier (livestock), Arthur Coffing (oilseeds), Robert Barry (rice), Martin Schwartz (computer development), and Linda Bailey, (statistical support). Significant contributions were made by a number of other Economic Research Service analysts including Wade Gregory, John Link, Myles Mielke, John Parker, Leroy Quance, and Allan Smith.

FOOD POLICY

May 1976

in

S. Rojko and Patrick M. O’Brien

The shortage of food supplies of the last four years has generated a new wave of Malthusian pessimism. The writings of the Club of Rome, Lester Brown and others emphasise faltering growth in agricultural productivity, limited natural resources, and accelerating growth in population to support their general conclusion that the world is entering a period of more or less chronic shortages, high prices, and market rationing of food.” The majority of these neoMalthusians conclude that the world will not long be able to feed all of its people adequately. They also contend that the dichotomy between the wasteful feeding of large quantities of grain to livestock in the developed countries and the subsistence malnutrition of many of the developing countries will widen rather than narrow. More radical Malthusians foresee mass starvation within a generation and suggest limited food supplies among the poorest that spreading overpopulated countries would only prolong mass malnutrition and starvation. At the rate population is growing in some of the poorest countries, simply sustaining life would eventually reduce mankind in general to near subsistence. A number of other agricultural economists and physical scientists, however, have concluded that the world food situation could well improve rather than deteriorate in the years to come.2 These scientists contend that the present precarious world food balance was brought about by a number of circumstances, largely weather related, and policy adjustments designed to limit production and reduce grain surpluses in the food exporting countries. They also conclude that there is not now nor is there likely to be over the next several decades any shortage of physical resources for the production of food. It is the size of the resource base available for use in food production, the backlog of existing agricultural technology, and prospects for technological improvements in the future which generate this guarded optimism, even with regard to the developing countries. While there are admittedly serious distribution problems, the developing world is clearly not running out of arable land nor has any biological limitation on yields been reached. Research done on land availability, agricultural technology, and human resources indicates that sufficient resources are available to sustain a 3.5% or higher rate of growth in grain production in the developing countries as a group to the year 2000. These two positions are not as contradictory as they may appear particularly if provision is made for their agreement on the crucial 203

Organising agriculture

in the year 2000

relationship between population and agricultural productivity growth rates in the food-deficit developing countries. Unaccelerated growth in food production must eventually constrain exponential growth in population whether it be through lower birth rates or through periodic reductions in numbers as a result of mass starvation or chronic malnutrition. Accelerating growth in food production, on the other hand, could well provide the favourable economic climate and social stimulus necessary for a demographic transition to lower population growth rates. Nor are their positions on resources totally contradictory. The food shortages of 1972-75 occurred during a period of adequate agricultural resources. How much of the food production potential estimated by the physical scientists is realised and, consequently, how much the world food situation improves or deteriorates depends on how effectively agriculture is organised - or more properly, reorganised - to use available physical and human resources more effectively. This reorganisation of agriculture is particularly crucial in the developing countries where traditional farming systems appear to be a major constraint on expanding or intensifying the use of existing resources. Successful reorganisation in the developing countries would make it possible to accelerate the transition from a rigid, largely subsistence, resource-exploitative agriculture to a flexible, commercialised, investment-oriented agriculture.

World agricultural systems

‘See, for example, Lester Brown, By Bread Alone, (New York: Praeger Publishers, 1975) and In the Human /merest, (Washington DC: Overseas Development Council, 1974); Dennis L. Meadows, et al, Dynamics of Growth in a Finite World (Cambridge, Mass: WrightAllen Press, 1974): and M. Mesarovic and E. Pestel, Mankind at the turning point, (New York: Dutton/Readeis Digest Press, 1974) ‘See, for example, Economic Research Service, The World Food Situation and Prospects to 7985, US Department of Agriculture, Foreign Agricultural Economic Report No 98, 1974: Food and Agriculture Organisation, Assessment of the World Food Situation, Present and Future, United Nations, Rome, 1974; and University of California, A Hungry World: The Challenge to Agriculture (Berkeley, California: University of California Press, 1974).

204

World agriculture is made up of a number of different agricultural organisations or farm systems which range from the traditional subsistence agriculture of the most backward developing countries to the commercialised, capital-intensive agriculture of the advanced developed countries. These agricultural systems are in continual flux. A country’s particular agricultural system is a function of both national and local political systems; the relationships between different agricultural systems are as complex and diverse as relationships within and between national economies. Two general agricultural systems, however, can be readily identified - in terms of resource endowment, input intensity, and institutional arrangements - for use in evaluating the effects of alternative organisations on food production, consumption and trade growth rates in AD 2000. The first system is the flexible, energy and capital-intensive, owneroperator, mixed crop-livestock system generally found in wellendowed, high-income countries of the temperate zone. Its institutions are designed to encourage farmers to take the risks inherent in largescale capital investment in agriculture and adoption of the latest agricultural technology. Its goals of growth and efficiency are facilitated by well organised input and product marketing arrangements. Its market orientation and high degree of product specialisation encourage trade among regions and across country lines. It is a highly interdependent system, often vertically or horizontally integrated, which exploits its own resources and supplements these resources with other inputs, imported if necessary. Farmers tend to be skilled technicians and agribusinessmen. Both the physical and institutional bases of this type of agriculture have been reorganised a number of times to meet the changing food and fibre FOOD POLICY

May 1976

Organising agriculture

in the year 2000

needs of the expanding, more affluent population of the developed countries. In short, it is an investment and trade oriented system which emphasises flexibility - ie the ability to adjust to meet new or different situations. At the other extreme is the subsistence or semi-subsistence agriculture typical of much of the developing world. While this traditional agriculture may have rural institutions flexible enough to adjust to the initial needs of agricultural development, its institutional arrangements are fitted to the needs of a stagnant, generally traditional society rather than to the growth needs of the expanding, economies. more of semi-industrialised aflluent population Agriculture generally functions without an extensive input or product marketing system. It exploits resources within its own limited geographical region and seldom augments basic resources with capital investments or high productivity inputs since institutional incentives as well as monetary incentives are weak and often totally lacking. This traditional system is capable of a limited, piecemeal adaption of technological improvements borrowed from the developed countries. A small number of progressive farmers adopting this borrowed technology can generate initially higher rates of growth in production. Purely technical change without institutional change, however, would leave many farmers out of development, and would widen existing commercial and subsistence sector disparities even further. Without drastic changes in rural institutions to mobilise resources for both the production and distribution of added output, initially higher growth rates would not be sustainable. The full production potential of existing resources as well as the potentially higher consumer welfare levels implied in any increase in production and improvement in food distribution would remain beyond reach. The remainder of this paper focusses on identifying the key characteristics of these general agricultural systems and on forecasting the role each is likely to play in reorganising agriculture to meet man’s food needs in the year 2000. Analysis is limited to the cereal, oilseed and livestock sectors. Given the importance of these sectors, however, the balances projected under each of the alternative systems can be used as an indicator of the general food situation.

Alternative 3 A formal mathematical model designed to capture the interactions of the world cereal, oilseeds, and livestock economies is used in this study to project key economic variables to the year 2000. The basic inputs to this model are population and income growth rates, demand and supply price elasticities, input variables, assumptions about underlying and economic trends and policy constraints. The parameters for the mathematical relations were synthesised either from statistical analyses or judgement of experts. For more detailed descriptions of this see approach, the Economic Research Service studies Alternative Futures for Food in the World GrainOilseed Livestock Economies, Working paper, USDA, 1975, and World Demand Prospects for Grain in 1980. USDA, Foreign Agricultural Economic Report No 75,1971.

FOOD POLICY

May 1976

futures

This section of the article presents a quantitative evaluation of the effects of three alternative agricultural systems on food production and consumption growth rates in the developing countries and the production and trade adjustments implied for the developed countries. Treatment of the centrally planned economies - the USSR, Eastern Europe, and the People’s Republic of China - is limited to projections of imports and exports necessary to balance trade on the world level. A mathematical model is used to project the impact of alternative developing country agricultural systems to the year 2000.3 Projections of food supply and demand to AD 2000 are subject to a number of qualifications. Estimating rates of change in population, income, and a number of other crucial supply variables as well as their interrelationships for more than 10 or 15 years call for individual projection studies in themselves. The whole complex of income growth, population growth, resource endowment, technical growth in food production, and growth in industrial production is closely 205

Organising agriculture in the year 2000

interrelated. Rapid population growth increases demand for fixed resources and can easily affect productivity adversely, given the scarcity of natural resources and capital relative to labour generally found in the developing countries. Increasing labour productivity and employment on the other hand seem to be necessary if the per capita income levels generally associated with slowed population growth rates are to be reached. International comparisons show that birth rates and income growth tend to be inversely related. The same tendency is also likely to be true within nations. Thus, broad participation in accelerated income growth seems to be essential if any slowing of population growth is to be achieved in the developing countries. Given current per capita consumption levels in these countries, income growth means increased food demand which, given relatively fixed agricultural resources, must be met largely through technological advances in agriculture. The scenarios outlined below consider these population, income and productivity interrelationships in the light of alternative agricultural systems. A lternative I A modified continuation of the trends of the 195Os, 196Os, and early 1970s is postulated. No marked successes are assumed in slowing population growth on the demand side or in augmenting limited resources, in reforming agrarian institutions or in accelerating technological change on the supply side. The specific assumptions are as follows: Population. The UN’s modified median growth rates used in Alternative I provide for little reduction in population growth rates in the key food-deficit developing countries. Some limited tapering off in growth rates is provided for the 1990s but only after sustained high growth through the 1980s. The compound annual growth rate for the developing countries as a whole is projected at 2.7% from 1970 to 1985, and at about 2.5% from 1985 to 2000, giving a 30-year rate of 2.6%. These growth rates mean an annual increments of 92 million people by AD 2000 compared with 1975’s increase of 54 million people. Roughly three-fifths of this increase is concentrated in already over-populated, food-deficit developing Asia. The compound rate for the developed countries over the same 30-year period is 0.7% which pulls the world rate down to 1.9%. Income growth. Compound annual growth rates for per capita income from 1970-2000 are assumed to be 2.7% for the developed world and 2.9% for the developing countries. This level of income growth in the developing countries pushes per capita levels from $436 in 1975 to $900 in AD 2000 (1975 dollars). Although economic theory suggests that consumers respond to higher real incomes by reducing their demand for cereals and increasing demand forlivestock products, the income levels projected to AD 2000 for the developing countries are not high enough to generate much movement out of cereals. On the contrary, these higher income levels are likely to generate increased demand for cereals in many areas, as consumers reduce intake of lower preference starchy crops and pulses. The wealthier countries of East Asia and OPEC, as well as a few grain exporters, however, are likely to undergo appreciably larger dietary shifts from cereals to livestock products. In these selected

206

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developing countries and in the developed countries in general, decreases in consumer demand for cereals and increases in demand for livestock products are small at low-income levels, rise significantly at intermediate levels and ultimately taper off at very high levels. At the high-income levels of the most developed countries, both income growth and consumer response are projected to decline due to their high per capital income and livestock comsumption levels.

Agricultural reorganisation. Under this alternative, the developing countries are assumed to make only limited progress in reorganising agriculture to meet their changing food and fibre needs. Considerable effort may be made to reform agrarian institutions and to accelerate technological modernisation, but only modest success is anticipated by AD 2000. In the area of institutional reform in the developing countries, the expense of reforming tenure arrangements is likely to be prohibitive enough and the effects disruptive enough in the short term to justify government inaction despite unquestionable long-term benefits. Increased rural population is likely to lead to a further deterioration in the minifundia situation and to aggrevate polarisation of the rural population into small groups of large, commercial, progressive farmers and a large group of small, subsistence farmers. Unresolved problems in product and input marketing are also likely to be aggrevated by large populations and the increased need for manufactured inputs. Increases in urban resource-augmenting, populations, often unemployed and virtually always poor, are likely to strain product marketing systems. The cost of collecting, distributing and subsidising food for an increasingly large, vocal urban poor is likely to drain development funds. In an effort to minimise government subsidy costs, supply procurement prices are likely to be kept low. The consequently higher import requirements projected under this alternative are likely to use much of the foreign exchange needed to import high productivity inputs or the machinery and technology needed to expand production facilities at home. The short supply and high price of inputs and generally low procurement prices are expected to discourage indigenous production and dampen the average farmer’s incentive to make the long-term investments and development planning necessary to modernise agriculture. Funds available for the indigenous research, extension and education necessary to develop and disseminate a specifically tropical or semi-tropical agricultural technology are likely to be limited; most developing countries will continue to import agricultural technology poorly suited to their own particular problems. The technological breakthroughs needed to raise productivity despite unresolved tenure and marketing problems are, therefore, unlikely to be forthcoming. The basic agrarian institutions of the developed world described in the introduction are unlikely to change drastically over the next 30 years. The flexible organisation of agriculture in the developed countries will allow the food importing and exporting countries alike to change resource mixes and agricultural institutions to meet changing supply and demand conditions both at home and abroad. Adoption of modern resource-augmenting agricultural technology and use of high productivity inputs in the developing countries are assumed to grow at a rate somewhat below that of the last 20 years. Fertiliser use per hectare of grain is expected to be 30-35 kg in FOOD POLICY

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207

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developing Asia, 35-40 kg in developing Africa and West Asia, and 40-45 kg in Latin America. Comparable 1970 base levels were calculated at 17 kg, 27 kg and 30 kg respectively. Expansion rate of the area irrigated is projected to slow to substantially below 1% per year; no marked improvements are expected in the critical area of water management. New and existing irrigation facilities are likely to run at 50-75% of capacity. Pesticide usage is likely to continue to be essentially curative rather than preventive and limited primarily to insecticides rather than herbicides and fungicides. Up to two-thirds of the O-4 horsepower per hectare likely to be used in agriculture is expected to come from animal or human labour. Given reduced growth in these complementary areas, the use of high yielding varieties and the adoption of multiple cropping will expand very little. The successful reorganisation of agriculture in the developing countries is, then, expected to lag well behind growth in their food and fibre demand. Agriculture in the vast majority of the developing countries is likely to continue to be based on a relatively closed soil, plant and animal cycle - on an equilibrium system that affords man little return after provision is made for the support of the system. The cycling of plant and soil nutrients through livestock, but ultimately back into the soil is assumed to continue to be of great importance. Growth in productivity in the developing countries will continue to lag due largely to limits on the injection of improved inputs, (ie chemical fertilisers, pesticides, high yielding varieties, etc), and updated technology (ie water control, multiple cropping, selective mechanisation, etc). Without marked increases in these energy injections, the developing countries will be unable to replace closed farming systems, yielding man little more than a subsistence return, with open, energy-intensive systems yielding appreciably higher returns. While the assumptions outlined above apply to most of the developing countries there are likely to be exceptions. Both South Korea and Taiwan are expected to follow the Japanese agricultural development pattern. The OPEC countries, particularly Indonesia, are likely to increase the use of energy related inputs at a faster rate than other developing countries. Input usage patterns are assumed not to change drastically in the developed countries. While considerable effort is being expended in many of the more advanced countries to develop alternative sources of energy, it is generally assumed that fossil fuels will continue to be the major source of energy used in agriculture to AD 2000. For any one country, developing as well as developed, it is the balance among oil, coal, and gas which will be crucial. Nuclear energy currently plays a minor role and it is not expected to increase its contribution substantially unless further breakthroughs occur. But while energy costs are assumed to continue to be relatively high, the energy situation per se is not expected to change developed country agricultural organisation drastically. A number of adjustments such as the adoption of energy conserving practices including minimum tillage, etc is expected. Agriculture in the developed world is projected to continue being both capital-intensive and energy-intensive. A particular country’s degree of capital and energy intensity will vary according to its resource endowment, factor availabilities, and grainlivestock mix. The tendency in the USA towards larger units, the replacement of labour with machinery, a rapid rise in purchased 208

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Organising agriculture in the year 2000

inputs, and product specialisation with marked increases in output per man hour as well as per hectare is expected to predominate, particularly in the major exporting countries and the larger countries of Western Europe. Some variation is expected in a few of the Western European countries and particularly in Japan. In the Japanese case, small farms will probably remain small. Increases in productivity are likely to result from the further substitution of smaller-scale, two-wheel, tractor-type technology for the draft animal and the farm labourer, and from continued emphasis on use of fertiliser, pesticides, and high-yielding varieties. The increasing energy and capital intensity of both US and Japanese type systems, however, is expected to put a premium on the efficient use of high cost, skilled labour. A lterna tive II This is an upper bound projection tracing out the effects of a successful reorganisation of agriculture and slowed population growth in the developing countries. The assumptions regarding the developed countries are essentially the same as those under Alternative I. Changes in production, consumption, and trade in the higher income countries are generated in response to changes in supply and demand in the developing countries and their effect on the world market. The specific assumptions made for the developing countries differing from those of Alternative I are outlined below. Population. Population growth in the developing countries is assumed to slow appreciably earlier than in Alternative I. The average growth from 1970- 1985 is assumed to be somewhat lower than the 2.7% of Alternative I, particularly in the early 1980s. Marked decreases through the mid- 1980s and 1990s however, are expected to reduce the growth rate for the period as a whole to 1.9%. The annual increment in AD 2000 would be 58 million people compared with a 92 million increment under the higher Alternative I growth rate.

Income growth. Per capita income growth is assumed to increase appreciably faster under Alternative II due to marked progress in reducing population growth, raising labour productivity in goods and service sectors outside agriculture and, at least in part, in winning substantially larger capital and technical aid flows from the developed countries. A large part of any increase in income, however, will still have to be generated in agriculture and related sectors, given what is expected to be the essentially agrarian nature of the average developing country economy. Per capita income under this alternative would rise by about 5% per year to $1450 in AD 2000 compared with $900 under Alternative I. This rate of increase and the absolute levels reached by the 1990s would be high enough to accelerate the shift from essentially cereal diets to mixed cereal-livestock diets. This shift in demand would eventually accelerate development or expansion of grain feeding operations. These increases in grain-feeding would be most marked in parts of East Asia, North Africa and the Middle East, and Latin America. However, shifts would still be minimal at most in Sub-Sahara developing Africa, South Asia, and parts of East Asia. Agricultural reorganisation. The developing countries to have made significant progress in raising agricultural FOOD POLICY

Mav 1976

are assumed productivity

209

Organising agriculture in the year 2000

levels. These increases in productivity are due as much to institutional and organisational changes as to expanded use of improved inputs to augment limited resources. In the area of institutional reform the developing countries are assumed to have resolved the issue of resource tenure - ie the use and/or ownership of the major factors of production - in such a way as to encourage long-range investment and development planning. Sufficient public and private credit is assumed to be available to make capital expansion and use of high cost inputs possible for the small and medium size farmer as well as the larger agribusinessman. Improvements in input and product marketing systems are assumed to have eased key distribution bottlenecks and to have made the efficient movement of larger food supplies in both urban and rural areas possible. Government food subsidy expenditures are expected to be lower than under Alternative I, owing not only to lower population levels but also to technological innovations reducing product costs and to increased income growth reducing the plight of the urban poor. The technological innovations necessary to improve agricultural productivity and lower production costs, while keeping farm returns high, are assumed to be the direct result of substantial investments in primary research on specific developing country problems - possibly conducted at the international level - and in secondary education and extension work at the national and local level. Input levels under this scenario range from 25-50% higher than under Alternative I. Fertiliser use is expected to range from 60-70 kg/ha in Latin America to 50-60 kg/ha and 40-50 kg/ha respectively in developing Asia, and developing Africa and West Asia. Comparable increases in irrigation, use of pesticides, high yielding varieties, and multiple cropping are also assumed. Selective mechanisation is assumed to have eased labour constraints during crucial planting and harvesting seasons without having aggravated rural underemployment problems or having added to urban unemployment.

A lterna tive III This is largely a median projection falling somewhere between Alternatives I and II. It is perhaps the most realistic of the alternatives from the standpoint of readily attainable improvements in the food situation in the developing countries. Population is assumed to increase at an average compound rate of 2.2% in the developing countries or at a pace roughly half way between the UN’s median rate and Alternative II’s optimistic 1.9%. Per capita income growth is assumed to average 4% per year compared with 2.9% under Alternative I and 5% under Alternative II. Some movement out of cereal diets is possible at this growth rate but at nowhere near the pace projected under Alternative II. Tropical and semi-tropical agriculture is assumed to have been largely reorganised along the lines of Alternative II but without the sufficient injections of foreign and domestic capital needed to maximise growth in production.

Implications It is generally agreed that it is possible to make projections for the next decade based on reasonably certain assumptions. Projections to 210

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May 1976

Organising agriculture

in the year 2000

the year 2000, however, are based on assumptions which are Attaching probabilities to projections is themselves projections. consequently difficult at best, particularly because projection exercises themselves are designed to test alternatives and, hopefully, to change policies to avoid potential supply and demand problems. For the developed world as a whole, the projections indicate that the capital and energy intensive, market and trade oriented agricultural systems currently in place will be able to meet growing foreign and domestic food and feed demand. Given the productive capacities of most of the deficit high income countries, continuation of present agricultural and trade policies will help to keep self-sufficiency levels in most of the Western European countries at about their current height. Countries like Japan, of course, will continue to import the bulk of their grain consumption. The developed exporters, ie the USA, Canada, and Australia, appear to have the physical capacity to expand production to meet any of the world import demand levels projected under Alternatives I, II, and III. Data also indicate that the combination of the maximum domestic demand of the developed exporters and foreign import demand are also within their economic capacity or the level of production at which producers become largely unresponsive because of rising costs, and the increasingly marginal quality of resources. Combinations of peak export levels and maximum domestic consumption would imply a grain area harvested in the major exporting countries of less than 42% of their total arable area compared with levels of 33% in 1970 and the previous record of over 45% reported in the early 1950s. Total world area in grain under this same maximum production measure would account for about 45% of arable area as compared with 42% in 1970. If the total arable area expands at the rate of the last two decades, grains would account for about the same share of both the exporters and the world’s total in AD 2000 as in 1973-74. Yield increases under the three alternatives are from 25-50% higher than in the base period in most of the developed countries and from 50-90% higher in the developing countries. In all cases, however, yields are well within the bounds of existing technology. Alternatives I, II, and III also imply that continued high energy costs in the developed countries will mean inflationary pressure on agriculture as a basic materials industry. It also appears that agriculture would not fare as well under high inflation rates as under low rates of inflation. In general, problems of pricing, chronic shortages or surpluses either from natural disasters (weather) or from policy decisions, will continue to be the main problems in the developed countries as their agricultural sectors adjust to changing foreign demand and competition. All three alternatives also suggest that the nature of the food problem facing the developing world depends to a large extent on a number of demand factors in the developed countries. The amount of grain available to the developing countries over and above their own production - be it in the form of commercial or concessional imports - hinges on the degree to which the developed countries, particularly the lower income countries outside the USA, Japan, and the EEC build up or expand their grain-fed livestock sectors. Food production capacities and income levels are such in the developed countries that there is no question of adequate diets of well over 3000 calories per FOOD POLICY

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211

Organising

agriculture

in the year 2000

day. What is in question, however, is what proportion of these calories will come from grain-fed livestock products. Consumption of livestock products in the lower income developed countries is relatively low. If income grows rapidly in these countries and is translated into demand for livestock production, and if these countries adopt the grain-feeding production techniques of the USA, demand for feed would put pressure on world grain supplies. Grain available from the surplus developed countries, particularly as food aid or as concessional imports, would be much more limited. Grain prices would be pushed up substantially as food demand bid against feed demand. In many cases, poor, marginally self-sufficient Table

1. Total

gra,n.

1970

Regmns and alternatIve

futures

base level and projections Area harvesteda

Y leld

to AD2000 Produc ,lO”

Used for Feed

Total used

exports

Per cap,ta co”s”mptlo” Feed

Growth

Total

Area

rates 1970 2000

Produc-

Per cap~ta

tlon

c0”s”lllptIOfl

IMha)

1%)

1970 Base level Developed Exportersb

142 97 45

28 28 30

402 267 134

253 157 96

374 202 172

362 599

534 1171

-36

220

393

255

l-6

401

108

407

-7

96

361

Developing South and East Asia Afr,ca and West Asia Lmn America

255 158 50 47

1 1 1.0 1-o 14

279 163

29 3

22 11

17 3

52 64

6 21

3oc 175 64 61

173 167 154

Total

651

l-7

1082

391

1081

172

42 40 46

721 508 213

450 254 195

592 311 281

20 18 21

621 364 103

86 17

726 406 162

lmportersc Centrally

Planned

Alternatwe Id Developed Exporlersb lmportersC Centrallv

125 46

Planned

Developlrlg South and East Asra Afr,ca and West Asia

30 67

-11

1

129 196 ~-67

13 78

226

110

304

521 740 374

685 906 539

06 08 01

20 22 1.6

24 8 16

07 O-8 05 1 1

27 27 23 29

04 03 0.4

O-5

0.8 -0-9 1 1

-24 316 202

-105 -41

23

153

15 56

95

195 185 172 267

TCJtde

488

28

7342

538

1318

0

177

288

07

23

Alternatwe Ild Developed Exportersh

154 109

43

614 328 286

786 383

710 954 549

03 04

199

53 129 -76

543

46

667 457 210

469 270

46

01

1 7 1 -a 15

302 192 47

23 21 25

698 407 119

113 36 17

725 428 147

-28 -21 -28

37 20

06 0.7

31 31

1 1 12

27

172

60

150

21

125

05 10

28 34

O-8

63

238 237 193 312

456

3-o

1365

582

1339

0

149

342

o-5

2-3

I- 1

162

42 41

461

533

18

09

159 -72

766 379

699 933 544

04

198

604 320 284

87

263

46

690 479 211

06 01

20 15

08 1 1

22 20 24 26

670 392 113 165

101 27 16 58

731 426 152 153

62 35 39 12

31 14 19 111

221 218 184 292

06 07 05 1 .o

30 30 26 32

08 09 06 09

29

1360

562

1335

0

135

320

O-6

23

0.8

Latin

America

lrllPOrtC!iS= Centrally

Amer~a

Total Alternatwe

22

10 --0 7 1 1 _

_

-25

06

11

IlId

Developed Exportersb IRlpOrterSC Centrally

42

158

Planned

CevelopIng South and East Asca Afr,ca and West Asia L&n

4ae 66

-59 4

116 46

~25

Planned

Developing South and East Asia Africa and West Asia La,,” Amema

308 196

Totale

470

4Ee 64

Includes area under rmulti,,Ie cropwng USA, Canada. South Africa. Australja and New Zealand ; EEC, Other Western Europe, Japan Excludes Centrallv Planned exccipi for trade ’ Doer not Include Central Atma, wh,ch was 9 Mha I” 1969.71

212

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Organising agriculture in thejlear 2000

developing countries would find the opportunity cost of improving consumption levels at home relative to exporting grain to more afIluent developed countries prohibitive. The poorest food deficit developing countries could find the prices the countries are willing to pay for feed too high to pay for all but the most crucial food imports. Much the same would also be true if even the EEC and/or Japan attempted to raise livestock consumption to levels approaching those prevailing in the USA. In either case, a very affluent developed world could make it harder or virtually impossible for the poorer developing countries to raise per capita grain consumption levels much faster than 0.4% per year. Alternative-specific implications and assumptions follow. (See also Table 1.) Alternative I Under this Alternative, the cereal import gap of the developing countries could easily increase to 10.5 million metric tons, substantially above current levels of 35 million tons and the 1970 level of 22 million tons. As a share of total usage, the gap would increase from 7% in 1970 to 14% by the year 2000. While the increase in percentage points may be small, the 105 million tons figure would put a severe strain on the developing countries’ generally weak foreign exchange position and could require large concessional sales or direct food aid from the developed countries. Under Alternative I, the failure to do much to reduce populaton growth rates or raise agricultural productivity levels significantly limits any improvement in per capita cereal and consequently per capita food consumption severely. Per capita cereal consumption increases from 173 kg in 1970 to 195 kg in the year 2000, or at a rate of about 0.4% per year. Indigenous production, however, barely keeps pace with the growth in population. As a result, the developing countries in most of Asia and Africa continue as essentially cereal based economies. In Latin America, where the man to land ratio is much lower, livestock will continue to be an important source of calories. However, population pressure and infrastructure constraints are expected to preclude any substantial improvements in diets in most of these countries as well. The demand levels projected under Alternative I are well within the world’s productive potential owing largely to the surplus capacity of the major exporting countries. However, periodic weather variations in a chornically grain-short developing world or policy fluctuations in the exporting countries aimed at accumulating or reducing stocks, or both, are likely to introduce an element of world supply and price instability. It is quite likely that intermittent periods of surplus and concessional sales, and periods of shortages and market rationing could result in higher average grain prices in the long term as both the developed countries and the developing countries attempt to adjust to an expanding but fluctuating grain gap. Alternative II Here the interaction of lower population growth rates, higher income growth rates and agricultural reorganisation generates substantial improvements in the developing world’s food balance. Cereal consumption levels are projected at 238 kg per capita reflecting an average compound annual increase of about 1%. Net FOOD POLICY

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imports would fall off to less than 28 million metric tons or to about the levels of the early 1970s. If Thailand and Argentina’s net exports are left out, however, even under Alternative II the developing world’s net imports would be 59 million metric tons or slightly higher than base period levels. A substantially larger portion, however, of this would be imported for feed by the more afluent developing countries. Domestic production is projected to account for over 96% of Alternative II’s higher consumption level due to sustained growth in production at an average rate of 3.1% per year. The increases in grain availabilities projected under Alternative II are large enough and demand for livestock products buoyant enough to generate some growth in livestock feeding, particularly in pork and poultry. While grains are projected to continue to make up the bulk of the diet in developing countries, livestock products will be an important source of calories particularly in the OPEC countries, the high income East Asian countries, and the traditional livestock exporters of Latin America, and in parts of East Africa. Alternative III Alternative III’s combination of population, income, and productivity growth rates somewhere between those of Alternatives I and II reflect the benefits of the agricultural reorganisation of Alternative II but at lower levels of foreign and domestic capital investment. Cereal imports are projected at 62 million metric tons or substantially below the level of Alternative I, but still roughly double the levels of the early 1970s. As a share of total usage, imports would account for 8% or about the share of the early 1970s. Consumption levels are projected at 221 kg or high enough to allow some livestock feeding, but concentrated in a relatively few of the higher income countries.

4 H.F.

Breimyer, ‘The food-energy balance’, Chapter 16. Food Enough or Starvation for Millions, Tata McGraw Hill of India forthcoming: Brown, By Bread Alone. OD tit: and D. McEntire. Building Agricbltbal Research Systems in the Developing Countries (New York: The Agricultural Development Council, Inc, 1970)

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New frontiers No provision was made under any of the alternatives for the beneficial effect of new technological breakthroughs or for the realisation of the full potential of existing agricultural technology in, for example, soil management and plant and animal genetics. Research and development currently in its formative stages and likely to have long gestation periods could well tap the unused biological potential of plants and animals in much the same way as the expanded use of upgraded fertilisers and location-specific hybrids increased corn production in the USA over the last four decades. While there are undoubted natural biological limits on yields imposed by the maximum rate at which plants convert sunlight, carbon dioxide, water and other nutrients, these natural limits are seldom approached under even the best of circumstances. Despite its crucial importance, the process of photosynthesis is still not fully understood. Efforts to simply realise the potential of the process as it exists now without any improvements could raise food production drastically.4 Unforseen breakthroughs in the energy area could also have an impact on the organisation of agriculture and its productivity levels. The long-term beneficial effects of solar and nuclear energy experiments are difficult to project. Inferences from the present state of energy technology suggest that large-scale production of electricity and energy intensive byproducts from coal and nuclear sources is the most promising low-cost alternative to use of petroleum. Associated FOOD POLICY

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agriculture in the year 2000

with this type of power production, however, is the generation of heat generally dissipated in water or other liquids. The energy dissipated in heat is actually larger than that converted into electricity. In addition, because of the possibility of radioactive emission, a so-called ‘exclusion area’ or buffer zone around plants might be necessary. Any system which can use this unwanted heat productively could reduce the cost of producing electricity drastically. One such process might involve ‘foodplexes’, or the introduction of an entirely new food and fibre system based on the energy that would otherwise be wasted5. These foodplexes could house an integrated set of activities that would produce, under a controlled environment, a variety of fruit, vegetable and animal products that otherwise would not be possible. The foodplex would include processing and marketing facilities which, given the location of power plants and, hence, foodplexes near large population centres, would reduce per unit transportation costs. Much of the concept of ‘foodplexes’ is still in the exploratory stage but they could well have an impact on the location, level of production, and direction of trade in commodities, particularly in those which are sensitive to climate.

Characteristics

of alternative farming systems

The final section of this article summarises an originally more detailed statement of the characteristics of the agricultural systems described above and their implications for raising productivity levels in developing countries. The number of characteristics discussed here has arbitrarily been limited to three: natural resource endowment; input intensity; and agrarian institutions.

‘Alan A. Bird, Foodplexes - Are They A Key To Better Living For All? USDA, Economic Research Service, Working Material dated October 1, 1975.

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Natural resource endowment Natural resource endowment is likely to continue to play the dominant role in shaping the organisation of agriculture well beyond the year 2000. While research and investment have allowed man some leeway in adopting natural resources to fit his changing food and fibre needs, basic soil and climatic factors are not easily altered and, consequently, are likely to function as the primary limitation on any future reorganisation. Resource endowment varies greatly across and within regions and countries. The world’s supply of arable land is neither evenly distributed nor uniform in quality. Arable land as a share of the total land area ranges from as high as one-third in most of the developed countries, to as low as 10% in developing Africa. If adjustments are made to reflect population pressure, the average area of arable land in the world is O-4 1 ha per capita, but this ranges from a low of 0.05 ha per capita in Japan to a high of 3.0 ha per capita in Australia. Reserves of semi-arable land in the form of permanent meadows and pastures also vary greatly from an average of 0.76 ha per capita, to a low of 0.0004 ha per capita in Thailand and to a high of 30.4 ha per capita in Australia. The quality of a country’s land endowment is also affected by the soil fertility; soils range from extremely fertile, highly productive prairie and alluvial types through the podozlic types to the marginal latosolic types. Superimposed over this pattern of arable land distribution and soil quality is a climatic dimension. In the world’s three climatic zones, frigid, temperate and tropical, organised agriculture is possible only in

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6 R. Christensen, Economic Progress of Agriculture in Developing Nations, 1950Foreign Agricultural 1968, USDA, Economic Report No 59; McEntire, op tit; President’s Scientific Advisory Committee, The World Food Problem, The White House, 1967; and Erik Thorbecke, The Role of Agriculture in Economic Development (New York: Columbia University Press, 1969). The original version of this section presented at the IAAE seminar contained a more detailed presentation and bibliography which are available from Economic Research Service: USDA, Anthony S. Rojko and Patrick M. O’Brien, Agriculture in the Year 2000, Working papers available from USDA, Economic Research Service, 1975.

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areas of the last two. Of these two zones, the temperate zone, which includes the majority of the developed countries, appears to be better suited to highly productive, capital and energy-intensive food and fibre production. The temperate zone is marked by extensive deposits of fertile prairie soils, chernozems, reddish-chestnut soils, gray brown podzolic soils and alluvial soils. Extensive research has been done on soil management in this zone and on the development of cropping patterns which maximise farming returns and minimise soil fertility losses. Rainfall is adequate, generally regular and fairly evenly distributed. Growing seasons are long enough and temperature variations within seasons limited enough to allow a winter crop to be harvested in early and midsummer in most areas or a spring crop to be harvested in autumn in virtually all areas. The tropical zone is generally less well suited to the high productivity, resource-intensive agriculture found in the temperate zone. Variations in soil types and climatic conditions are appreciably wider than in the temperate zone. Tropical soils in general tend to be less fertile, often badly leached and weathered, and are consequently more difficult to manage. Over two-thirds of the soils in the tropical zone fall into a leached, shallow and dry classification, all of which are generally low in micronutrients and nitrogen. The 2550% of these soils considered arable require substantial investments in order to be more than marginally productive. The soils in the remaining alluvial, light and dark coloured, base rich classes are concentrated in rainy, dry, semi-desert and desert zones which increases the investment necessary to make even these natively fertile soils productive under constant or semi-constant cultivation. Successful transplanting of the particular capital and energyintensive agricultural systems found in the developed countries is not likely in the tropical or semi-tropical developing countries. If agricultural reorganisation is to be planned on the basis of a single continuum stretching from traditional developing systems to modern developed systems, there is little chance that advances can be made in the developing countries. Existing tropical and semi-tropical agriculture is based on a closed soil-plant-animal cycle. A high return tropical or semi-tropical agriculture can be organised but only on the basis of substantially higher, specifically tailored, energy inputs in the form of water control, fertilisers, pesticides, improved varieties, mechanisation and multiple cropping. This same type of transition has been made several times in successive reorganisations of temperate zone agriculture but not to the same extent as is necessary in the tropical zone due to its particular soil and climate problems and population constraints. Injections of these added energy inputs along temperate zone farming patterns will probably aggrevate basic soil management and climate problems. While higher initial growth rates might be possible via this route, sustained although somewhat lower growth rates depend on keeping some form of the many traditional practices such as slash and burn or shifting cultivation, intercropping and interplanting tree and ground crops.6 Input intensity Extensive theoretical research and field experimentation done in many of the more advanced countries have led to the development of a number of high energy inputs and techniques which can be used to augment the supply or intensify the use of existing agricultural FOOD POLICY

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Organising agriculture in the year 2000

I O30

I

I

50

70

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1.

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binations of 102

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Developing

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level

metric

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for AD 2000 under Alternative Source: Economic Reserch Service,

50

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I

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I

I 350

1 400

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200

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Service,

May1 976

USDA

resources. Many of these developments are based on improvements of existing practices such as irrigation, multiple cropping or selective breeding. But the majority of these advances are relatively new as in the case of chemical fertilisers, pesticides, and dwarf, early-maturing photoinsensitive varieties. While each of these inputs can be treated as a single element, the initial successes of the green revolution have emphasised their complementarity when used together in conjunction with broader agricultural reorganisation. Introducing or expanding the use of high productivity inputs in the developing countries in order to raise agricultural productivity involves substantial capital investment to finance not only the inputs but the infrastructure needed to make them effective. The benefits gained in reorganising agriculture to take advantage of these inputs, however, have proven great enough in the few developing countries currently making the transition to warrant the effort. If application of chemical fertilisers is used as a proxy for the use of the entire high productivity input package, isoquants for the major regions of the developing world relating input usage to cropland harvested at the production levels projected for 2000 would appear as in Figures 1, 2 and 3. If current institutional arrangements, input levels, and their implied productivity levels were maintained unchanged to the year 2000, the area needed to produce grain alone would exceed the total supply of arable land available in developing South and East Asia, and would account for roughly three-fourths of all the arable land available in Latin America and developing Africa and West Asia. Optimum usage of a high productivity bundle of physical inputs in conjunction with institutional reform, however, would allow the developing countries to meet total projected grain needs with less than a 3% increase in grain area as a share of total arable area. Increases in harvested area at even half the rate of the last 20 years would put grain area as a share of arable area in the developing countries at 42% compared with 39% in the base period.’ Institutions The realisation of the full potential of agricultural reorganisation also depends on marked changes in the institutional organisation of agriculture - particularly those institutions affecting development incentives, input and product marketing, and research, education and extension.* Factors dampening agricultural development incentives. The rate at which agriculture is reorganised in the developing countries depends to a large extent on changes in resource tenure - ie, the right to or conditions of use and/or ownership of resources. The skewed resource use and ownership patterns prevailing in most developing countries make reorganising tenure systems critical if small and medium size farmers are to take the risks inherent in the transition from a low-productivity, labour intensive subsistence agriculture to a high-productivity, more capital-intensive commercial agriculture. Any proposed tenure reform must be evaluated on a demand as well as a supply basis. How increased production is generated through changed ownership or use of agricultural resources and the number of people participating in the benefits can be as important as the increase itself. Increases in farm production need to be distributed among the population so as to generate sufficient direct food or 217

Organising agriculture in the year 2000

indirect non-food demand to absorb the increases in production and farm income without creating surplus supplies, depressed farm prices or inflated consumer prices in the country or in the cities. Agricultural production may not increase as rapidly or as dramatically if based on widespread participation in reorganisation, but it is likely to provide a more stable basis for the country’s general economic and political development.9

‘Christensen, op tit; Dana Dalrymple, Survey of Multiple Cropping in Less Developed Nations, USDA, Foreign Agricultural Economic Report No 91, 1971; Stanley A. Hetzler, Applied Technical Measures Promoting for Growth (London: Routledge and Kegan Paul, 1973); ERS studies Alternative Futures for Food in the World Grain Oilseed - Livestock Economies and World Demand Prospects for Grain in 1980, op Montague Yudelman, cit., and Technological Change in Agriculture and Employment in Developing Countries, Development Centre Studies, Employment Series No 4, 197 1. 8 George H. Axinn, Principles oflnstitution Building (Bangkok: Asian Agricultural College and University Press, 1970); I. Baldwin, A System of Services to Support Agricultural Development. (Bangkok: Asian Agricultural College and University Melvin G. Blase, Press, 1970); Institutions in Agricultural Development (Ames, Iowa; The Iowa State Unversity Press, 1971); and Kenneth H. Parsons, Institutional Aspects of Agricultural Development, University of Wisconsin Press, Land Tenure Centre Reprint Series No 28,1967. 9 Peter Dorner, The Economic Case for Land Reform: Employment, Income Distribution and Productivity (Wisconsin: University of Wisconsin Press, Land Tenure Centre. 197 1); Donald Kanel, Size of Farm and Economic Development. University of Wisconsin Press, Land Tenure Centre Reprint Series No 31, 1967; and D. McEntire, Land Reform Goals and Economic Development, Land Reform and Cooperatives No 1. FAO. 1973.

Factors affecting input and product marketing. Problems of marketing have received comparatively little consideration in planning agricultural development despite the fact that development generally leads to greater product specialisation and, in turn, to a greater need for market exchange of goods and services. Planning to date has centred on increasing the production rather than improving the distribution of goods, and on primary rather than secondary or tertiary services. The initial successes of the green revolution, however, have led to greater interest in marketing. The channelling of large increases in production through traditional marketing systems has led to regional shortages and surpluses, larger transportation and storage losses, rocketing distribution costs, wider variations in seasonal prices, and generally falling farm prices - all with little real increase in consumer welfare. Dependence on traditional arrangements for the marketing of inputs has also failed to meet farmers’ needs for a wide variety of high-productivity non-farm inputs during short, crucial periods in the crop year. Traditional marketing arrangements have also acted to slow factor mobility and inhibit the resource transfers to the agricultural sector necessary to sustain initially higher production and consumption growth rates. In those countries where rapid modernisation has continued with only minimal changes in existing marketing structures, development has tended to polarise the large commercial farmers and the small subsistence farmers even further. At the same time, those countries transferring quantum increases in food production to urban areas through traditional marketing channels have found that much of the increase in urban welfare is based on larger government subsidy expenditures rather than on larger supply availabilities. Successful marketing programmes to date have used multiple pricing to meet the politically more pressing urban food budget goals without compromising farm production or resource allocation goals. Incentive support pricing of key products combined with subsidised distribution of inputs can be used to boost production in the countryside without raising product prices in urban areas. An annual review of support prices and input subsidy programmes also allows governments to intervene in the market’s allocation of agricultural resources and to direct rural development. Developing countries with limited resources relative to population and food requirements have not been able to intervene selectively to encourage food production, to improve distribution systems, or to reduce urban food costs without prohibitively large budget expenditures. Agricultural resources and supply price elasticities are such that large government expenditures supporting product prices at appreciably higher levels are necessary to generate added production. Costly increases in production prove even more costly to distribute at subsidised prices in urban areas. In a limited number of the more advanced developing countries even FOOD POLICY

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Organising agriculture in the year 2000

where resources are limited and supply responses low, the cost of multiple pricing has dropped off as marketing improvements, land tenure reform, and the adoption of high productivity technology reduced product costs to levels more compatable with urban food target prices.‘O

‘O Kurt Ft. Anschel, Agricutlural Cooperatives and Markets in Developing Countries (London: Praeger Publishers, 1970); G. Fletschner, The Role of Agricultural Marketing in Agrarian Reform and Land Settlement Projects. Land Reform and Cooperatives No 1, FAO, 1972):Nurul Islam, Agricultural Policy in Developing Countries (London: Macmillan, 1974); and Otto M. Schniller, Cooperation and Integration in Agricultural Production (Bombay: Asia Publishing House, 1969). ” Dana Dalrymple, Measuring the Green Revolution: The Impact of Reserch on Wheat and Rice Production. USDA, Foreign Agricultural Economic Report No 106, 1975, and McEntire, Building Agricultural Research Systems in Developing countries, op cit.

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Factors affecting research, extension and education. The importance of organising indigenous research, extension, and education institutions within the developing countries has been largely masked by the success of the green revolution and by the backlog of agricultural technology awaiting adoption in virtually all the poor countries of Asia, Africa and Latin America. The dramatic spurts of increased productivity that enabled the world to feed 50% more people with less than 20% more land over the last 20 years would not have been possible without substantial on-going investment channelled through a network of research centres, extension services, and education facilities. Despite agreement on the importance of indigenous research in developing countries there is little agreement on the types of research institutions that should be developed. The bulk of the investment in research institutions to date has been aimed at developing land grant types of institutions similar to those found in the USA. It is not surprising, then, that these transplanted institutions have generally failed to fill all the research functions of the state experiment station, the USDA, private enterprises, and farm associations and cooperatives. The bulk of the indigenously-developed technology currently being using in the developing countries was developed and diffused by a few, relatively low-cost, international agricultural research centres including the International Rice Research Institute and the International Centre for Corn and Wheat Improvement. All of these centres have been established as multinational research and training institutes rather than as components of a university system or a national ministry of agriculture. Multi-disciplinary teams of scientists from the natural and social sciences are assembled to invent, develop, or adapt new, more productive techniques for tropical and semi-tropical agriculture. Emphasis is put on the economic use of scarce professional manpower and the development of pragmatic, commodity-specific techniques. More specific adaptive and protective research is generally carried out at the country level often by personnel trained at the international centres. It is the secondary, national team that addresses the problems of making new technology available to farmers in a form they can easily adopt given local agricultural resources and rural infrastructure. These secondary and tertiary areas of research are crucial since technological innovations in the developing countries must provide a very high margin of profitability and a high probability of success under optimum conditions in order to offset inadequacies in field execution”.

219