While farmers overall benefit from increased food prices, poor rural families generally lack the capacity to adjust their production to this trend and are vulnerable to price fluctuations. According to a survey conducted by the Provincial General Survey of the National Statistical Bureau in Fujian Province in 2007, poor farmers actually reduced their sale of agricultural products during the first half of 2007 as the price of food increased. As a result, their income from selling agricultural products dropped by 3.7 per cent during the first half of 2007. Poor people now tend to consume more of their own agricultural products, thus reverting to subsistence agriculture.
Higher food prices force poor rural people to reduce their consumption of food such as meat and oil. The survey indicates that poor farmers reduced their consumption of pork by 15 per cent and eggs by 20 per cent. Meanwhile, farmers tend to buy food that is available at lower price, which usually corresponds to poorer quality and nutritional value.
Those who are relatively better off will produce more agricultural products and raise more livestock to take advantage of higher prices. For them, a fair part of the income they earn from selling grain at a higher price compensates the increased cost of production. For example, the increased price of pork enables a farmer to sell a pig for an additional 300 Yuan (US$ 43). At the same time, the increased price of piglets and feed almost matches the increased sale price of a pig.
In 2007, the price of food for producers increased on average by 10 per cent compared to 2006. Based on national averages (which differ among provinces), the increase is particularly significant for the following products:
For consumers (buyers), food prices increased by 23.3 per cent between February 2007 and February 2008. Following are some examples based on national averages (which differ among provinces):
In China, food continues to be widely available and the grain harvest has been average and above during the last few years. The problem falls on the poorest members of society, who are unable to afford the price of more expensive food.
In addition, rising food prices and increased government subsidies to producers are encouraging farmers to increase the quantity of their agricultural products, implying increased demand for land. Areas for the cultivation of soybean, maize and vegetables have increased in northeast China provinces. For example, over the last year, the cultivation area in Jilin province increased by 1.44 per cent, of which soybean by 17.12 percent, maize by 0.2 per cent and vegetable by 13.2 per cent.
High prices of food may become a routine phenomenon for the years to come given the world trend of demand and supply. Developing counties will have to find effective ways to prevent their poor rural population from becoming poorer. Continued investment in infrastructure and agro-technology would certainly help them benefit from increased food prices. As consumers, poor rural people are also more vulnerable to increasing prices, so certain policy schemes would also be necessary to shelter them from those negative effects (read the article ‘Governments respond to increasing food prices – examples from China, Pakistan and the Philippines’)
Growing vegetables helps nomadic families in Mongolia improve nutrition and reduce food expenditures
A child holds potatoes from a family garden. The vegetables help the family to improve nutrition and reduce expenses
Through the Rural Poverty Reduction Programme (2003-2011), IFAD supports poor nomadic herders living in four of the poorest provinces of Mongolia to secure sufficient food and income for their families. Nomadic families often have limited food supply and practically no cash income. The programme supports them especially in growing vegetables for consumption and sale to increase income. The recent dramatic increase food prices is having a negative impact for the Mongolian population and particularly for poor rural households.
The Rural Poverty Reduction Programme supports nomadic families in Mongolia mainly by providing them with potato and vegetable seed, hand tools, greenhouses, funds for potato storage, and training related to growing and preserving vegetables.
Initially, the programme aimed to support some 18,000 households in growing vegetables. By the end of 2007, it had supported more than 22,400 households in vegetable cultivation.
The programme is working in 79 villages or soums (second-lowest administrative unit) of four provinces (Arhangai, Bulgan, Hentii and Huvsgul), located in different climate, forest and steppe regions. Before the programme was implemented, in some villages people believed that it was impossible to grow vegetables in cold weather conditions and on rocky soil. However, with the support of the programme, people learned to cultivate potatoes and vegetables.
Nomadic herders move throughout their own and neighboring provinces, following better pastures. With the support of the programme, they formed groups to grow potatoes and vegetables in permanent areas. In this way some members could tend to the flocks while others (those who own fewer than 200 livestock, primarily sheep and goats) took care of the vegetables. Herders share the harvest depending on their contribution in cultivation.
Herders claimed that the sharing of responsibility is one of the major advantages of becoming a member of a group. Families living in soums are now growing vegetables such as beans, peppers, tomatoes, soybeans, melons and others that are not common for rural residents, or even generally in Mongolia.
The recent dramatic increase food prices has had a negative impact on the Mongolian population, and particularly poor rural households. The consequences for one of the programme participants, Ms D. Oyunjargal, resident of Ogiinuur soum in Arhangai province, is a common one. Though she is not a nomad, this example has implications on nomadic households since they have to rely on flour products when vegetables are unavailable. Hence, they are directly affected by increased prices.
In 2006, the programme provided Ms Oyunjargal with an oven for her small bread-making business. “My business is getting worse due to the increased price of flour,” she says. Ms Oyunjargal makes 34 loaves of bread per day which she sells in her soum (made up of 800 households) for MNT 600 (US$ 0.52) each.
She claims that just at the beginning of April 2008 she bought a 50 kg sack of flour for MNT 34,000 (US$ 29.2). Today, the same amount of flour costs MNT 46,000 (US$ 39.5) – 35.3 per cent more. Nevertheless, she continues selling bread for the same price as before.
As some shops in the soum bring bread from Ulaanbaatar and sell it for MNT 650 (US$ 0.56), Ms Oyunjargal is afraid that she would not sell any bread if she increased her price. She claims that her profit decreased from 60 to 30 per cent following the increased price of flour.
According to programme participants, IFAD’s support helped them improve their food security. The main food in rural areas for the whole year is meat and flour. The cultivation period for vegetables is from mid-May to September. Now, with programme’s assistance, herders claim to eat vegetables (mostly potatoes) from September to at least February. During this period they are also able to sell more vegetables, while in spring it is difficult since they lack storage and therefore try to sell their products soon after the harvest. Because of lack of vegetables during spring, herders eat more flour products. Increasing prices of bread has significant implications on their food security during this period.
The Government of Mongolia has taken some measures to reduce the burden of increasing prices on the Mongolian population. This includes tax exemption on imported flour and soft loans to local wheat farmers to prevent wheat prices from increasing yet again in autumn. However, the price of flour (produced in the country and imported) is increasing, which is making it very difficult for poor (also less poor) rural residents, since products made of flour (such as bread, buns, snacks and noodles) are among the main foods in rural areas of Mongolia, especially when vegetables are not available.
Gun-Uyanga Soninbayar, Monitoring and Evaluation Officer, Rural Poverty Reduction Programme
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Wheat crisis and rising food prices threaten food security in Pakistan
A man stirs milk with a stick to produce ghee, a semi-liquid clarified butter
In Pakistan, IFAD is currently supporting about 500,000 people, especially herders, landless people and smallholders. These poor rural people live in marginal, mountainous and rainfed areas that are generally food-deficit. Unable to produce enough food for themselves, the majority of these people purchase food most of the time. However, the wheat crisis and rising prices of food items might result in increased under- and malnutrition as their purchasing power is further weakened and they cut back on food consumption.
Food is generally available in Pakistan except for wheat at certain times of the year. The country experienced one of the worst wheat crises towards the end of 2007 as a result of exports of wheat in early 2007.
To stabilize the prices of wheat, which were expected to fall in view of surplus production, the Government of Pakistan decided to allow wheat to be exported. Based on its estimated excess harvest – 23.5 million tonnes against an estimated consumption of 21.5 million tons – the government lifted the ban on exporting wheat and set an export target of about 1.3 million tonnes. Private traders anticipated high demand – and higher prices – from neighboring countries, including Afghanistan, India and Iran, and began an aggressive buying campaign as well as smuggling wheat to neighboring countries. These factors created the wheat crisis.
The government eased the situation by importing some 2 million tonnes of wheat at the cost of about US$ 1 billion. However, it created fiscal problems due to the high prices of wheat in the international market. Fiscal problems were exacerbated by rising oil prices.
Because of the importance of wheat as Pakistan’s leading agricultural commodity, the government has intervened heavily in wheat markets, with the objective of stabilizing prices at levels affordable to consumers. For example, it has been procuring wheat at administratively set prices to support incomes of farmers and subsidizing wheat sales to flour mills or directly to consumers.
Rising food prices
Latest figures show that food prices are increasing for Pakistani consumers. Inflation rates based on the Consumer Price Index, Sensitive Price Index and Wholesale Price Index in February 2007 increased by 11.3 per cent, 14.6 per cent and 16.4 per cent respectively by February 2008.
Since most IFAD-supported people are net buyers (consumers), the current situation of rising food prices is a threat to their food security. Higher expenditure on food commodities is negatively affecting their purchasing power and is leading them to cutting back on consumption. According to a survey conducted by the World Food Programme in March 2008, the number of people deemed “food-insecure” in Pakistan had risen by 28 percent – from 60 million in March 2007 to 77 million in March 2008.
The current trends of increasing prices, food insecurity and another expected wheat crisis in 2008 due to lower-than-expected output are likely to result in increased under-nutrition and malnutrition. In addition, increasing oil prices and inflation during the last two years have contributed to higher prices of all crops. Under such conditions, IFAD’s “target group” is likely to grow more wheat mainly for household consumption. If the current trends continue, and no appropriate safety net measures are put in place, there is a risk that poor households will have no option but to begin to sell their assets, such as livestock.
In Pakistan, IFAD launched a special “Food Prices Impact and Beneficiary Response” survey of its beneficiaries in eleven districts of its project area. The results and analysis of the survey (expected to be available at the beginning of June 2008) will guide IFAD’s country programme response to meet the challenges of increasing food prices.
Based on the outcomes of the survey, IFAD in consultation with the Government of Pakistan, will initiate a reallocation and realignment process of the existing portfolio. IFAD also recommended to the Government of Pakistan that the focus of a new project planned for 2008/09 should be on boosting agricultural production in the context of the food crises.
Additionally, at the initiative of IFAD, the three Rome-based agencies made a joint presentation to the United Nations Heads of Agencies/Country Team on Food Price Hikes in Pakistan. The presentation resulted in establishing a United Nations Inter-agency Task Force on the impact of food prices.
FAO, IFAD and WFP also received a request from the Government of Pakistan for assistance in assessing the soaring food prices and preparing short-, medium- and long-term action plans. The Task Force is now initiating a comprehensive study on the issues and options for addressing the impact of soaring prices on food security, and seizing the opportunity offered by higher demand to expand agriculture and fight rural poverty.
Qaim Shah, Proxy Field Presence, Pakistan
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Filipinos change their agricultural practices and production systems to secure enough food for their families
Farmers transplant rice seedlings in Bulak, on Cebu Island
In the Philippines, IFAD assist rural poor people, particularly farmers, fisherfolk, indigenous peoples and beneficiaries of agrarian reforms who are sellers and buyers of agricultural and aquaculture products. IFAD also supports micro-entrepreneurs engaged in food businesses. Affected by continuously increasing prices of food, farmer participants in IFAD-supported projects and programmes started changing their agricultural practices and production systems, with the objective of generating higher income for their families.
Prices of staple food and other crops are increasing in the Philippines too. In 2007, the buying price of palay (unhusked rice) ranged between PHP 8.50-9.50 per kg (US$ 0.20-0.23). In 2008, the price had increased by almost 50 per cent. Buyers in Northern Mindanao pay PHP 1,300 (US$ 31.4) for a 50 kg pack of premium rice this year – about 30 per cent more than in 2007.
The poverty incidence in the Philippines increased from 24.4 per cent in 2003 to 26.9 per cent in 2006. This means that about 32.9 million, or one out of three Filipinos, live on less than US$ 1 per day. The vulnerability of poor people is exacerbated by continued increases in the prices of food. With their limited means, most poor people may not have enough food to eat, especially for their growing children, which could lead to malnutrition and even higher instances of hunger.
To cope with rising food prices and secure sufficient food for their families, many farmers participating in IFAD-supported projects and programmes in the Philippines have endeavoured to increase their productivity by improving, if not altogether changing, their agricultural practices and production systems. Some farmers have switched to organic farming mainly because of the low cost of inputs, since organic farming does not require chemical fertilizers. Furthermore, organic products sell at higher prices, which means higher revenue for farmers. Others have heeded government’s advocacy of planting high-value cash crops by planting jathropa to supply the growing demand for biofuels. Their goal is to earn more money and to be able to buy more expensive food.
Yolando Arban, Country Programme Management Facilitator and Knowledge Management Officer, the Philippines
Higher food prices, fewer meals in Sri Lanka
Children eat lunch at their school in Ranaketugana Village
About 7 per cent of the Sri Lankan population lives on less than US$ 1 per day. IFAD supports small-scale producers who fall into this category. Most of them have to rely on their agricultural products to meet their subsistence needs. “About half the population of Sri Lanka is living in a situation where prices are beyond their reach. This should have been given much more attention a long time ago,” said Mr Sarath Fernando, a smallholder and farmer leader from Sri Lanka, during the BBC World Debate “Food – who pays the price?” Improving farmers’ income is one way of enabling farmers to ensure enough food for their families.
Food in Sri Lanka is widely available mainly because of high imports of essential items to meet the local demand. Out of the total consumption in 2004, about five per cent of paddy, 30 per cent of potatoes and 78 per cent of dried milk were imported from abroad.
These figures indicate that there is sufficient food at the national level. However, prices are increasing. “In recent months, food prices in Sri Lanka have more than doubled,” said Sarath Fernando during the BBC World Debate in February 2008.
Rising food prices mean rising food insecurity at the household level. Increased food prices have a negative impact on the poorest Sri Lankan people. Impact assessments conducted in IFAD-supported projects revealed that poor rural people have been adopting various coping strategies to face food insecurity, such as:
- reducing the number of times they eat
- altering the amount and the type of food they eat
- adopting seasonal migration
- mortgaging and selling properties or other assets.
The first two coping strategies can lead to malnutrition. The fourth coping strategy can push poor people further into poverty.
Farmers represent about 70 per cent of the rural Sri Lankan population. They are IFAD’s main target group. The rising food prices affect farmers as they are also consumers. One effective way of reducing the impact of rising prices on farmers is by improving their income, which has become depressed for a number of reasons. The harvesting of crops at the same time causes low prices during the harvesting seasons. Lack of rural storage structures, high post-harvest losses, and degrading lands due to soil erosion and improper land-use techniques also contribute to depressed prices for agricultural products, as farmers are not able to secure optimal production. Insecure land tenure contributes to land degradation.
IFAD-supported programmes in rural Sri Lanka address these difficulties. Some of the activities it supports in the dry zone areas, Uva Province and poorer parts of the Central Province include:
- introducing technology through different extension strategies such as farmers’ field schools and targeted training
- providing facilities to produce seed materials and organic fertilizer to secure the supply of farm inputs
- investing in collective processing facilities and promoting out-grower systems to improve post-harvest products
- facilitating the collection of market information
- initiating the value chain to promote farmers’ entry into commercial agriculture.
To increase rural incomes and enable farmers to cope with the food crisis, IFAD also supports non-farm income generation through rural financing and promoting business and micro-enterprises. Almost all IFAD-supported programmes support these activities.
Such interventions could be more effective with increased political will, targeted policy debate on issues such as land tenure and subsidies, commitment of project partners, close supervision and effective monitoring.
Anura Herath, IFAD Field Presence Facilitator, Sri Lanka
Governments respond to increasing food prices – examples from China, Pakistan and the Philippines
A worker transports cabbage to the vegetable market in Mantalongon, on Cebu Island
In response to increasing food prices, governments across Asia and the Pacific have introduced a number of measures to reduce the amount of stress on poor farmers and their families.
The government has introduced measures to increase farm gate prices of grains (mainly rice and wheat) by about 4 per cent, increase subsidies for grain and pork production, reduce export subsidies for certain grains and their products (such as wheat, rice, soybean and maize) and reduce import tax on some grains. For example, the import tax on soybean was decreased from 3 to 1 per cent.
The government has also adopted mandatory approval for price increases of certain products that are necessary for the day-to-day survival of citizens. These include grain products, edible oil, beef/lamb and their products, eggs, milk and liquid gas. Subsidies have been introduced to urban poor people in some provinces and cities.
To a large degree, however, farmers’ benefits from increased food prices and government subsidies have not been significant. The additional amount paid by consumers to purchase more expensive food and government subsidies largely cover farmers’ increased cost in production and distribution.
The State Council held a teleconference on 27 March 2008 chaired by Premier Wen Jiabo. The conference was a response to increasing international and national prices of agricultural products, grain export limits of producing countries, the rising inflation rate as well as the snow disaster in China early this year. During the conference, measures were discussed to ensure an ample production and supply of agricultural products, mainly cereals, in 2008. These measures include:
- significant increase in subsidies for means of production (including seeds)
- increase in minimum farm gate price of rice and wheat
- increase in the central fiscal budget for drought, flood control and infrastructure improvement
- increased subsidies for production loan interest and insurance premiums
- facilitation of agro-product distribution
- animal disease control
- enhancement of rural financial services
Various ministries have also adopted supportive measures in their areas. On 3 April 2008, the China Banking Regulatory Commission issued instructions to banking institutions to enhance accessibility of financing services by rural entities and individuals and expand agricultural insurance.
The Ministry of Agriculture has also adopted various programmes to support production, such as the programme on prescribed fertilization based on soil testing. Soil is tested to understand its nutrient requirement, and a fertilization formula is developed based on the test. The programme will cover two thirds of agricultural counties, anticipating yield increases by 6-10 per cent in these counties. The Ministry’s programme on supporting pig raising has started to stabilize pork prices and supply. Pork was one of the commodities that witnessed the sharpest price increase.
In 2007 the government introduced the Ration Card Scheme, in which cardholders are able to buy wheat, edible oil and pulses from utility stores owned by the government at subsidized prices. This measure has mostly benefited urban consumers. A large number of poor urban and rural people have not been able to take advantage of this subsidy due to limited outreach of utility stores. In addition, since the subsidies through the utility stores were not specifically targeted at poor and vulnerable people, everyone irrespective of their economic situation, had access to them. This led to leakages irregularities in the scheme.
To protect poor urban and rural families from increasing food prices, it will be necessary to introduce different targeted safety net approaches such as:
- Ban on exports of wheat
- Reduction in duty of food imports
- Efforts to check smuggling of food items to other countries.
Recently the new government increased the procurement price of wheat by about 23 per cent. The aim is to meet the procurement target for operational (4 million tonnes) and strategic stocks (1 million tonnes) for planned distribution and stock build-up. Food subsidies and rations are also under discussion by the new government, but to date no concrete policy has been announced.
In the Philippines
The government has introduced the following measures to ensure sufficient supply of rice, the country’s staple food:
- crackdown on hoarders and retailers who mislabel rice subsidized by the government as commercial rice
- huge imports of rice from neighboring countries such as Viet Nam and Thailand
- cancellation of permits to rice dealers reselling rice subsidized by the state to avoid artificial price hikes
- allocation of PhP 5 billion (US$ 120 million) as a subsidy to rice farmers
- increased National Food Authority’s buying price for palay by 42 per cent to motivate farmers to plant more.
The President of the Philippines, Gloria Macapagal-Arroyo, has declared that her Administration would make all efforts to mitigate the adverse effects of the continued increases in the prices of food, particularly among the impoverished population. She has committed to ensure that there would be food on the table for all Filipino households.
Sun Yinhong, IFAD Sub-Regional Officer, China, Qaim Shah, Proxy Field Presence, Pakistan, and Yolando Arban, Country Programme Management Facilitator and Knowledge Management Officer, the Philippines
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Issue 5: Agricultural technology choices for poor farmers in less-favoured Areas of South and East Asia
Between 1965 and 1990, improved bioagricultural technology and water control lifted hundreds of millions of people out of poverty in several countries of the Asia and the Pacific region, mainly by increasing employment and the production of food staples and making products more affordable.
However, this Green Revolution technology bypassed millions of rural people in less-favoured environments (uplands and mountains, marginal coastal areas and drylands). Rainfed agriculture dominates in these areas, which are also subject to critical socio-economic constraints such as poor access to markets, infrastructure and services. The incidence of poverty is high. Agricultural productivity growth is slow and declining due to natural resource degradation, particularly soil erosion and reduced fertility, caused by the overgrazing of livestock and the limited use of soil and water conservation measures.
Agricultural productivity has also slowed in many irrigated and favourable rainfed areas in countries of the region. This is due to diminishing returns on conventional technologies and natural resource degradation, including through salinization, water logging, soil nutrient deficiencies and groundwater depletion.
Because of these problems, alternative agricultural technological approaches are being promoted by development partners among poor smallholders in less-favoured areas. These technological approaches include low external input and sustainable agriculture, organic agriculture and biotechnology.
This paper reviews the available evidence on the adoption and impacts of these technological approaches, the constraints faced by farms and communities and related policy and institutional issues. Based on this review, the paper assesses the potential of these technological approaches to improve productivity and natural resource management and reduce poverty in the less-favoured areas of South and South East Asia. It then provides recommendations concerning technology strategies to reduce poverty among poor farmers in these areas.
This study was undertaken by the International Food Policy Research Institute, in collaboration with the Asia and the Pacific Division of IFAD. The findings and recommendations of the study should be of interest to policymakers, development practitioners, donors, academics and civil society.
The paper was writtenby John Pender, Environment and Production Technology Division, International Food Policy Research Institute, Washington, DC. Read full paper
Occasional papers are a series of studies on emerging thematic issues in the Asia and the Pacific Region published by IFAD. The papers contribute to IFAD’s efforts to share the knowledge and experience emerging from its activities and those of its partners in the region.
For more information, please contact Valentina Camaleonte, Asia and the Pacific Division, IFAD