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Institute for Agriculture and Trade Policy
covering sustainability as it intersects with food, rural development, international trade, the environment and public health.
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June 22, 2011
Spotlight G-20: Agriculture Ministers should strengthen government role in volatile markets
Tomorrow the first ever summit of G-20 Agriculture Ministers will take place in Paris. The French government is to be commended for the initiative. Concerned by the evident disarray in government responses to the food price crisis of 2007-08, the French government moved quickly and deliberately to consider how best to respond. One of their investments, one that might be overlooked in the drama of a G-20 summit, has been in research to understand what kinds of tools governments have used to respond to price spikes and volatility, and how effective those tools have been, particularly in developing countries, and particularly with an eye on reducing poverty and vulnerability to hunger. The results of that investment is informing the debate at many levels, and is a welcome addition to a literature that is otherwise rather too orthodox.
One of the main contributors to this research is Franck Galtier, who works with part of the French agricultural research institution CIRAD. Galtier makes the point that countries are each quite different and need their own distinct mix of policies to respond to the specificities of their situation. Galtier has built a typology of responses to price volatility with four categories: measures to prevent (or mitigate) volatility and measures to cope with it, crossed with measures that are designed to leave the private sector in charge versus measures that require the state to intervene. One of his important conclusions is that, by far, the largest share of international policy advice (and money) for the last twenty years has focused on policies and programs that use public funds either to build infrastructure and open borders, or to manage risk and facilitate participation in commodities markets. Public interventions to mitigate volatility—to keep prices stable—have been widely neglected. Yet common sense and long experience suggest they might be the best use of money.
A number of governments (notably the U.S., Canada, U.K. and Australia) remain firmly committed to this lopsided policy agenda. We can expect the neglect of important public policy tools to regulate markets to be evident in the summit outcomes, even though a number of G-20 countries intervene heavily in their domestic agricultural markets, and to great effect, successfully limiting the incidence of hunger in their countries (for instance in China and Indonesia). The report prepared for this meeting at the G-20’s behest by ten international institutions (and discussed on this blog by Jennifer Clapp last week) also betrays an allergy to public regulation of markets.
It is ironic that many of the countries so averse to public policies that interfere in markets have biofuel policies that illustrate the worst kinds of market distortion. The U.S. even dares describe its biofuel sector as an “infant industry”! Demand from the biofuel industry, propped by billions of dollars worth of public subsidy and minimum use mandates, has exacerbated price spikes and increased the vulnerability of populations whose food supply is in some measure dependent on imports from international markets. Another example of market distortion is the role of excess speculation in financial markets. In 2009, the G-20 Heads of State set themselves the task of improving the governance of commodity futures markets, acknowledging their role in causing price volatility: “We have agreed to improve the regulation, functioning and transparency of financial and commodity markets to address excessive commodity price volatility.” Yet on this question, too, the U.S., Canada and others continue to block action (see here for a commentary on U.S. efforts to block reform).
One of the most obvious ways to intervene to reduce the likelihood of excessive price volatility is to manage a public stock. The international organization report was dismissive of the tool as expensive and ineffectual and made no recommendations for any stocks policy beyond an emergency reserve to be operated by the World Food Program. Even this is too much for the U.S. and—U.S. officials claim—some others in the G-20; this small but important step is now the only issue still not agreed ahead of the summit. The U.S. suggests a feasibility study is needed ahead of the pilot project now in discussion. This is nonsense, of course. The point of the pilot is to see if the idea can work; there is more than enough experience—and need—to move on this question without holding things up with time-wasting exercises.
In practice, the question is not whether or not to hold stocks—countries mostly have stocks—but how best to use them. The international community is letting developing countries down, especially the poorest developing countries, by refusing to acknowledge the political necessity of stockholding and applying themselves to ensure they are managed as well as possible. The U.S., Canada, Australia and others are firmly set against anything that might “interfere” in the market (unless it’s a biofuel mandate). They argue public stocks crowd out the private sector, which is no doubt true, but is Cargill holding stocks for the same reason a government might? How much might they hold? Would they tell anyone what they hold? Will they release stock to ease pressure on prices, or might they be tempted to hold stock to nudge prices higher? Is it reasonable to depend on the handful of global grain traders to handle something as politically sensitive as supply to international food markets? Remember, no one actually knows the exact numbers, but a 2003 estimate from the Boston Consulting Group claimed only four grain traders controlled 73 percent of global grain trade. Competition has definitely not improved since then.
Over the last twenty years, developing countries have shifted from net food exporters to net food importers and are more dependent than ever on international markets. Richer countries are managing things their way: China is not going to stop stockholding. Russia is not going to allow a prohibition on export bans. Yet the U.S. is all but refusing to allow a discussion of stocks, even though high levels of price volatility are closely correlated to low levels of reserves.
Meanwhile, G-20 Agriculture Ministers might want to think about who it is they hope to export their surplus grain to. Unless agricultural exporters are willing to give meaningful assurance to importers that there is plenty of supply in international markets, importers are going to look for other solutions. Indeed, they already are. And while much greater investment and support for local food production is essential, trade is a useful and important part of most countries’ food security strategies. Stocks provide a limited but essential tool in this mix; they provide a necessary level of comfort that the market will deliver. As such, they deserve more space on the G-20 agenda—too late for tomorrow’s summit, maybe, but it’s time to look again at that neglected quadrant of tools called public regulation to curb the likelihood of excessive volatility. It’s time for political pragmatism to prevail.
—Sophia Murphy, IATP's senior advisor on trade, food security and global governance issues. This post also appears on the Triple Crisis blog.
May 17, 2011
The global impact of China's pig industry
China’s pig industry has global impact, new report finds
Shift to industrial production affects farmers, food security and environment
Minneapolis – China’s decision to shift toward industrial pig operations, and away from smaller-scale production, has important implications for the future of China’s farmers, the environment and global agricultural markets, finds a new report by the Institute for Agriculture and Trade Policy (IATP).
The report, Feeding China’s Pigs: Implications for the Environment, China’s Smallholder Farmers and Food Security, by Mindi Schneider, traces the history of China’s pig industry as it has evolved over the last several decades from backyard production to highly industrial operations. The paper examines the global implications of China’s decision to rely on imported soybeans to feed the country’s pig industry.
“China’s pig industry has become more and more dependent on multinational agribusiness investment and imports for feed,” said IATP President and China expert Jim Harkness. “This development has changed the dynamic of agriculture in China and pushed smaller-scale pig producers out of business. It has also played a role in increasing demand for agricultural land internationally.”
China is the biggest pork producer in the world—almost all of its 50 million metric tons of production in 2010 (half of all the pork in the world) was consumed domestically. While domestic companies dominate the Chinese pork industry, transnational agribusiness firms like Archer Daniels Midland, Bunge and Cargill dominate the country’s soybean crushing industry. The growth of the country’s pork industry is a direct result of polices that have liberalized trade for some products, like soybeans, and retained protections and other policy tools like a pork reserve, in others.
The policies are a response to growing demand for meat in China, but they will not close the dietary and income inequalities that persist, and serious environmental and public health costs are escalating, according to the report. The increased liberalization of agriculture is taking a toll in rural China, where smallholder farmers struggle to access markets and make a living. Industrial livestock production generates more than 4 billion tons of manure annually, which has grown into one of the largest sources of pollution in China’s waterways. Globally, as more land is converted to soybeans to feed China’s pigs, there is an increase in pesticide and fertilizer use, as well as a loss of biodiversity. The heavy use of feed additives, such as hormones and antibiotics, in China’s livestock production has been linked to a variety of health concerns.
“The crises of industrial agriculture are emerging in China as it is elsewhere in the world,” said Schneider. “This signals an opportunity for policymakers to consider supporting more sustainable ways forward.”
The paper recommends that China reassess the impacts of its strong adoption of industrial pork production and pig feeding on China’s population and environment. Redirecting research and subsidies from industrial systems to locally embedded systems, while maintaining food reserves, are steps in the right direction that could help meet national food security, development and environmental needs.
Read the full report.
G-20 struggles to face up to agriculture price volatility
Last week, a background paper for the G-20 Summit of Agricultural Ministers on price volatility from eight international organizations appeared . The paper, dated May 2, was presented last week to the sherpas who are preparing for the summit, to be held in Paris on June 23.
The analysis treats the failures of international markets seriously. It provides a clear and useful explanation for why price volatility, so useful at low levels in the movement of goods, becomes a serious problem when price swings are too large. Yet the paper is fundamentally dissatisfying.
The start and end points of the recommendations (more so than the analysis) is how to ensure open market liberalization works. And even at that, ends up compromised by the politics of free trade, in which poorer countries can be held to a much higher standard than the richer countries that fund the international agencies providing the advice. So on the one hand, developing countries should further increase their dependence on international markets, while relying on finance (including loans) from the international system—finance that has a poor track record to date, both for timeliness and adequacy. On the other hand, the G-20 countries themselves can continue to disrupt those same international markets, asked only to moderate their public subsidies and mandates for biofuels.
The authors of the report do not question whether the emergence of high levels of volatility in international markets, at a time when international markets are more important to more countries’ food security than ever before, warrants a more fundamental rethink from the governments that are so central to agricultural trade (most of the them G-20 members). Given the mix of agencies involved in drafting the paper, and the critiques some of those organizations have provided of globalization, especially since the food price and financial crises in 2008, this is a pity.
New elements—fundamentally important elements—have been introduced into this final version of the paper, which is the third version to have circulated. For instance, the paper now discusses how to tackle very high levels of food waste, which plagues rich and poor countries alike, though for quite different reasons. Some of the more questionable claims (such as the need to increase food production by 100 percent by 2050) have been toned down, though they remain problematic (the final version suggests a 70-percent increase is needed).
Yet the recommendations are anything but bold. Volatility in international agricultural commodity markets is a problem that is both hurting G-20 interests and that G-20 member states could largely remedy. Instead of promising money to other countries, and thinking of new ways to manage risk, the G-20 need to look to their own policies to consider how to mitigate the causes of uncertainty that are feeding current levels of volatility.
The G-20 includes most of the major exporters of food. Most of the members continue to push for market access for their products—even those, such as China and India, that carefully control their domestic agricultural markets. The G-20 (and the companies they host) have a lot at stake in ensuring international markets function in ways that meet importers’ interests. G-20 members, such as Argentina and India, exacerbated the 2008 food crisis by taxing or banning certain food exports. Others, such as the United States, Canada and European Union persisted in biofuel subsidies that created pressure on demand, and raised prices, at a time when a number of countries were facing food riots. The implications of what the food exporting countries did were not lost on poor net food importing countries (known by the acronym NFIDCs), which are now looking with significantly renewed interest at the possibility of increased food self-sufficiency.
With hindsight, the failure of net food exporters to accept the legitimacy of NFIDC demands for safeguards to protect their access to food, while at the same time insisting on their right to distort international markets with domestic preoccupations was probably the last straw for the Doha negotiations. There is no sign, unfortunately, that the international organizations who authored the report have been given (nor yet taken) the leeway to comment on this crisis in the consensus that has shaped international trade policy since the early 1990s.
Members of the G-20 house the world’s largest agribusinesses, the commodity exchanges that set commodity futures prices, produce most of the grain-fed livestock and provide the subsidies and mandates that prop up the industrial biofuel industry. While the NFIDCs turn to diversifying their food security strategies to encompass more than increasingly unreliable international markets, the G-20 has it within its power to lessen the likelihood and the degree of volatility itself. They have a significant interest in using that power. Unfortunately, there is far too little in the IO contribution to the G-20 Agricultural Ministers’ Summit to help them achieve this realization.
 FAO, IFAD, UN HLTF, UNCTAD, and WFP, together with the World Bank, IMF, WTO and the OECD.
April 29, 2011
New primer on excessive speculation in agricultural commodity markets
IATP has just released a first-of-its-kind collection of writings about excessive speculation in commodity markets and the toll it has taken on agricultural prices. Excessive Speculation in Agricultural Commodity Markets: Selected Writings from 2008–2011 includes a total of 19 different pieces covering everything from the basics of what speculation in commodity markets looks like to why such speculation is responsible for the agricultural price crisis, as well as information on regulating excessive speculation.
In the foreward, IATP's Steve Suppan writes:
As former National Director of Intelligence Dennis Blair told a stunned U.S. Senate Select Committee on Intelligence on February 12, 2009, the global economic crisis, triggered by financial and commodity market deregulation, has replaced Al-Qaeda as the number one U.S. national security threat. Blair’s intelligence agencies forecast widespread regime destabilization if the economic crisis continued to fester without major policy and political reform within two years. His agencies did not specify what reforms were needed nor advocate for their enforcement. That is up to us.
Among others, the extensive list of authors includes Olivier De Schutter, the U.N. Special Rapporteur on the right to food, Michael W. Masters and Adam K. White, Daryll E. Ray, Harwood D. Schaffer, David Frenk and IATP's own Steve Suppan.
Download the full text, or each section individually:
Full Text: Excessive Speculation in Commodity Markets: Selected Writings from 2008–2011
Table of Contents and Foreword
Section I. Overview
Section II. Excessive Speculation and the Agricultural Price Crisis
Section III. Regulating Excessive Speculation
April 25, 2011
Fair trade, supply and demand, and Peace Coffee
When IATP started Peace Coffee in 1996, its position as the country's first certified 100-percent organic and fair-trade coffee company was more than just a first—it was the central idea behind the company. Peace Coffee's use of fair-trade, organic green coffee beans helps connect farmer cooperatives around the world to consumers. Over the years, IATP has continued its work advocating for fair trade and Peace Coffee has flourished, with a new coffee shop in Minneapolis and an ever-growing, passionate staff. The piece below first appeared in Peace Coffee's April Peace Spokes newsletter, written by Anna Canning, Peace Coffee's project manager. It addresses the issues affecting the rising price of coffee and what it all means for farmers, co-ops and coffee drinkers.
Harvest Update, by Anna Canning
Perhaps you've already noticed it in the grocery aisle; perhaps you're an avid follower of the commodity markets; or perhaps you've read, seen, or heard the news lately: coffee prices are up. "What's going on in the commodity market?" seems to be the question of the season. It's a complex system and experts disagree on the precise causes of the rapid rise in coffee prices that have now reached 34-year highs -- and no one can say for sure whether they'll continue to rise or fall. General consensus is that we're experiencing the interaction of a few factors. As we reported last year, recent harvests in many areas have been lower, which producers are attributing to changing weather patterns, putting pressure on the available supply of quality coffee. Add to that increasing coffee consumption around the world in producing countries such as Brazil and as well as in emerging markets such as China, where more people are reaching for a coffee mug every day.
So far, that's classic supply and demand, forces whose interactions are sketched quite neatly in a straight diagonal line across the pages of high school econ text books across the country. Real life, however, is not so neat. In recent years, as the rosy glow paled on the notion of investing in real estate and vague mortgage products, investors flocked to diversify into commodities. Increased speculation has increased volatility across the markets for various products and means that an increase in coffee prices can no longer be so cleanly linked to bad weather in Brazil, for example (if curious, our parent organization IATP has thought extensively on this topic.
All these factors impact commodity market prices for basic, Folgers' grade coffee. Similarly, as more coffee drinkers come to appreciate coffee as more than a generic caffeine delivery system, demand is increasing for specialty grade coffee. We've long told the story of the coffee we roast as being unique from region to region, community to community, not just "decaf" or "regular" or the "washed mild" of the trade. That's not just marketing hype and just as the flavor of each bean is unique, so too is the impact of recent developments on each farmer group.
Fifteen years ago, the story of Fair Trade could be distilled into a few talking points: in those days of low market prices, the goal was to pay coffee farmers a fair, stable minimum price, provide access to markets and financing while cutting out the middlemen who profit at the expense of small-scale farmers. When prices are up, the simple story "Fair Trade pays higher prices to farmers" is no longer quite so true. Indeed, high commodity market prices can cause logistical challenges for co-ops as they scramble to communicate with their sometimes far-flung members and compete with deep-pocketed local middlemen for coffee.
Queen Bean Lee recently returned from a trip to Guatemala to visit some of our producer partners there: Apecaform (from whom we've been buying the beans that make up the Guatemalan Dark roast and the backbone to this year's Pollinator Blend) and Chajul, another long-time trading partner. Her stories of this trip sum up some of the evolution of Fair Trade, and what remains relevant in these days of high coffee prices.
Last year when we were beginning to look ahead to this year's harvest and the escalating coffee market, we sat down with the other members of our importing cooperative and the farmers that we buy from. It was quickly clear that this was to be a year in which cash would be crucial. At the request of several savvy farmer co-ops, we increased the amount of pre-financing that we'd help secure and increased the minimum price on the contracts to allow access to that financing (read more on how this works). This means that while some organizations have struggled to come up with the cash to purchase their member's coffee, well-managed co-ops such as Apecaform and Chajul are currently able to collect coffee in a competitive marketplace. For isolated communities such as Chajul, these well-run co-ops play an especially vital role—not only are they paying competitive prices for coffee, they continue to provide much needed community projects (for more on this, see Kyle's account of the trip in this issue).
The next chapter in this new Fair Trade market remains to be written. One thing seems clear: amidst all these changes, it's no longer really meaningful to speak of a Fair Trade market or a specialty coffee market in general; the local market is key. Similarly, the answer to whether these higher prices are good for coffee farmers ends up being a qualified "it depends" on which ones and where. At Apecaform, yields are down which means that while the price per pound may be high, less coffee means that individual farmers aren't getting a raise. Meanwhile, at Chajul, times are good. Weather patterns that have set back other farmers haven't reached their fields. A few months ago when in Ethiopia, Lee observed that country's response to higher prices for the crop that makes up such a large part of the economy: Plant more coffee! Such large-scale projects to increase cultivation of coffee could of course create a glut of Ethiopian coffee in a few years when this spring's seedlings start to set cherries. Yet which of these trends will prevail remains to be seen. What is clear is that a well-managed co-op continues to serve its members well, in good markets and in bad, providing good economic stability and development.
Just as each year's harvest arrives with slightly different nuances in the cup, so too each season's harvest has its themes, its challenges and its successes. While the challenges are clear, it's truly inspiring to see how our long-term producer partners are responding to them. This is the eleventh season that we've been buying coffee from Apecaform and that relationship continues to evolve and to demonstrate the potential for the next decade, whatever it may bring.
April 19, 2011
Agriculture in rural India: How will it cope with free trade?
IATP's Shefali Sharma is part of a delegation visiting rural areas in India to assess the human rights impacts of the country's trade and investment policies.You can view her previous post here.
New Delhi – Last I wrote, I was embarking on a journey into some of the most rural villages of Southern India. Over a four-day period, our team met with groups of farmers—men and women—in the State of Andhra Pradesh. We travelled from west to east across Chittoor District and then took an overnight train to the Northern district of Medak, covering hundreds of kilometers.
Our difficult task was to understand what small farmers in India grow, how much they keep for eating and how much they sell to the market. We wanted to understand if they can continue to sustain themselves and their consumption needs through growing food alone and whether they have access not just to food, but adequate nutrition all year long.
We also wanted to understand whether a European Union–India Free Trade Agreement (FTA), currently under negotiation, would have an impact on their livelihoods. In particular, what role does dairy and poultry play for their income and food security and what would liberalizing investment with the European Union do to land access and natural resources for local farmers. Historically, the European Union has a habit of dumping both dairy products and poultry parts in developing countries, decimating small-scale dairy and poultry producers in the process. For example, Ghana’s poultry sector was wiped out when frozen poultry parts flooded Ghanian markets and the EU-India FTA is likely to include an “asset”-based definition of investment, including both “movable and immovable property.”
In the village of Yalakallu, we met both with small producers and landless agricultural wage workers (all photos here by Harneet Singh). Often the small farmers were also wage laborers because they did not have income all year from growing food and were forced to work for daily wages as income. A small farmer in the Indian context means ownership of as little as .5 to 5 acres of land. The farmers with whom we met owned on average only one to three acres of land. The bulk of their growing sustains food consumption for their families and any surpluses are sold to the local market. Water, however, is an acute problem in the village and most of the agriculture is rainfed. Increasingly erratic weather means heavy rains at unwanted times and drought in other parts of the growing season. These farmers have two growing seasons. They grow crops like rice, finger millet and vegetables in the rainy season (July to October), and grow lentils like red gram and green gram in the dry season (November to May or June). Some are also growing tomatoes and cabbage to sell to wholesale retailers, but because the prices of tomatoes had recently crashed, many of the tomato growers said they would be watching their tomatoes wither in the fields this year.
For these farmers, dairy plays an important role because they receive payments every two weeks from cows and buffalo they raise on the farm while feeding them with crop residues from their own fields. Most of the farmers we talked with owned one or two cows that deliver 2–4 litres of milk a day. But a system of small traders delivers this milk to the local dairy. For decades, India has invested in developing a cooperative dairy sector that has been increasingly privatized over the past decade. Cheap imports of skim milk powder from Europe to make cheap reconstituted milk would certainly impact these small farmers.
It was immediately evident that their ability to withstand even a little risk was very small. Some farmers we talked with have tried ventures like small poultry operations (from 1000 to 5000 chicks) to supply to domestic chains, but when the chicks die or get diseases, the company they sell to can abruptly terminate the contract. These risky business arrangements can involve loans and indebtedness—a common feature amongst all of these farmers. Rising food prices haven't necessarily helped these farmers yet because the wholesalers and retailers have retained most of those gains. In other parts of the same district, farmers with up to five acres of land are contracting with domestic broiler chicken firms. They are raising up to 5000 chicks, taking out loans to do the initial investment in setting up these farms. At the end of the year, they earn about 100,000 Indian rupees—spending 50,000 INR on loan repayment, keeping the rest for themselves. The profit margins are low to minimal and debts pass over from year to year. Water for the chickens competes with water for their farms.
Our visit to the next neighborhood in Yalakallu was with landless Dalits (the lowest caste in India’s extremely hierarchical caste system). The women and men depend on wage labor and forest produce for feeding their families. Thanks to India’s public food distribution system, they are able to procure rice and sometimes lentils from government-subsidized ration shops at prices as low as 2 rupees per kilon but rising food prices mean their income brings less and less food. During these times, they compromise on food security—eating rice or finger millet with a watery juice of tamarind. In better times, their diet is supplemented with leafy vegetables and lentils, a key source of protein in these villages.
Owning livestock is difficult. Without land, farmers cannot supplement their income and nutrition through dairy or goats, though many of them keep raise poultry, feeding them with kitchen waste, and local chicken varieties are much hardier than chickens produced for the broiler industry.
It quickly became evident that these small farmers and landless laborers are facing obstacles when it comes to accessing land. Urbanization, real estate developers and industrial operations are increasingly fencing these people out of grazing land. Access to land is critical. Those who own land, even a small plot, can feed their families through most of the year, and have a much better chance at nutrition and healthier lives than their counterparts who live on wage labor alone.
The EU and India’s investment provisions will mean more demand for land and natural resources as EU investors look to extract minerals in India and set up mechanized processing plants. This has already been the case with Indian companies taking over land in the countryside. It also means greater competition for scarce water and electricity.
We heard numerous stories over the last few days about the tradeoffs and choices these small food growers and agricultural laborers are making, even now. More difficult choices may not be far off.
April 14, 2011
Free trade and human rights: a voyage into India's countryside
IATP's Shefali Sharma is part of a delegation visiting rural areas in India to assess the human rights impacts of the country's trade and investment policies.
I am in Bangalore tonight—a key metropolis for India’s economic growth story. In Bangalore reside many of India’s premier IT companies and back-end offices for multinational companies, be it for telecommunications or travel. But I won’t be staying in the silicon valley of India for long. Tomorrow, a team of us—from an Indian NGO called Anthra, a German development organization called Misereor, the Heinrich Boell Foundation, a photographer and I—will be waking up at the crack of dawn and driving three hours from the South Indian state of Karnataka to another southern state called Andhra Pradesh.
Over the next four days, we'll visit the districts of Chittoor and Medak and talk to people in the villages of Yallakulu, Raipedu and Chennapur. Our purpose? To understand how changes in India’s international trade and investment policies are likely to affect dairy farmers and food growers in some of the most rural areas of India.
India is negotiating a free trade agreement with the European Union and talking about possibilities of a future trade deal with the United States. While such deals often take place behind closed doors between governments and their industrial lobbies, such agreements can have drastic impacts on environmental and other public interest laws and regulations. Trade and investment policies also have a lot to say about who will continue to eke out a living while facing increased competition. Under these agreements, the most powerful and the least powerful must be treated “alike” under the free trade concept of nondiscrimination.
Human rights law, on the other hand, stresses the need to discriminate in favor of the marginalized and vulnerable populations and claims supremacy over all other international law. This principle sets the stage for our next few days where we will be learning about the lives of people dependant on dairy production (something the European Union wants to import into India with much greater ease) and growing other agriculture commodities. In particular, based on the stories they will tell us, we will analyze to what extent the right to food—the “physical and economic access at all times to adequate food or the means to its procurement”—is being respected under the liberalization policies the Indian government has steadily been adopting. And how a Free Trade Agreement (FTA) with the EU may strengthen or undermine this critical right.
We begin this journey after an intensive, two-day consultation in New Delhi on building a Human Rights Impact Assessment of key areas of the FTA that are likely to impact small food producers in India. These consultations provided us with data and information we needed to understand the changes that are taking place in the dairy, poultry, food retail, India’s public food distribution system and in land-based investments. Now, we go to the field to see how these changes are playing out in the lives of vulnerable people themselves. Stay tuned.
April 12, 2011
Five reasons carbon markets won't work for agriculture
Carbon markets are viewed as the primary source of climate financing. The experience to date demands a reevaluation of their ability to exact real, sustainable change, particularly in relation to agriculture. Here are five reasons why poorly designed and regulated carbon markets should not be part of a global climate treaty.
1. The high cost to people, health and the climate
Market-based mechanisms aim “to enhance the cost-effectiveness of, and to promote, mitigation actions.” But thus far, carbon emissions trading has been cost-effective only for those firms that have received billions of dollars in carbon credits for free from governments that can afford to subsidize their industries. It is certainly not cost-effective for the millions of people whose health is impaired because they live near industrial facilities that choose to buy offset credits rather than invest in pollution prevention. (U.S. courts are beginning to investigate the public health effects of carbon markets.) Nor is it cost-effective for the indigenous peoples dispossessed of their land to make way for carbon-offset investors’ projects.
Market-based mechanisms should be evaluated according to broader criteria, such as vulnerability, harm to food production and sustainable development, and on the basis of equity and common but differentiated responsibilities.
2. Fostering excessive speculation
One new market proposal is “green sectoral bonds” from the International Emissions Trading Association (IETA). Under this proposal, “green sectoral bond” investors would receive developing-country carbon credits to repackage and trade as derivatives. Developing countries would incur debt in contracts for which they, and not private contractors of mitigation technologies, would bear liability for failure to meet stipulated GHG reductions. Because countries, not private firms, are liable for bond performance failure, an ensuing chain of climate debt could prevent developing countries from accessing capital markets. This proposal would also shift historic responsibility for mitigation significantly to developing countries.
The derivatives component of market proposals are vulnerable to excessive speculation that has plagued commodity markets since at least 2007 and exacerbated price volatility. There is considerable evidence of excessive speculation in commodity markets, aided by deregulation, especially in energy. Carbon and energy prices tend to move together. When hedge funds and commodity index funds add carbon to their portfolios, this speculation—and volatility—will increase.
Market mechanisms are also vulnerable to the common crimes, deceptive market practices and tax fraud that have plagued trading under the European Union’s Emissions Trading Scheme (ETS).
3. Exacerbating food price volatility
When wheat and other cereal prices surged in September 2010, the FAO’s Committee on Commodity Problems held an emergency meeting. The committee found that speculation was one of the key factors in the prevailing volatile and escalating prices in the cereal market and agreed that further work must be done to enhance transparency and manage the risks associated with new sources of market volatility.”
Carbon is considered a commodity like oil, rice, maize and wheat. Excessive speculation in carbon is likely to exacerbate food and commodity price volatility. Bundling carbon derivatives into index funds with other commodities would also tend to destabilize prices. Highly volatile oil and food commodity prices impact economic stability and the agriculture sector as a whole, given the high dependence on fossil fuels for synthetic fertilizers, transport, distribution and storage.
4. Measurement difficulties and transaction costs
Offset projects in the agricultural sector would create significant challenges of measurement and environmental integrity. Like the forestry sector, leakage (carbon sequestered in one project leaked through land-use changes elsewhere), permanence (carbon is highly variable in soil and may not be stored permanently) and additionality (the degree to which the carbon stored is additional to what would have been stored in a business-as-usual scenario) are significant barriers to the environmental integrity of soil-carbon offsets.
There is a lack of data and measurements of in situ soil types, climate variability, past and future land use, and management practices. Soil carbon content can be highly variable depending on crops and their cropping cycles, human activity, land tenure and the climate itself. A costly combination of quantitative and qualitative field data with sophisticated models would be required to achieve greater accuracy with no guarantee of lasting emissions reductions.
The World Bank BioCarbon Fund’s pilot soil-carbon sequestration project in Western Kenya acknowledges that it cannot accurately measure carbon in the soil. Instead, the World Bank will use a series of proxies to measure for soil-carbon sequestration. The transaction costs associated with this project are more than 1 million USD.
The FAO acknowledges the high transaction costs involved in these projects and the potential impacts on small-scale farmers and food security. It estimates that close to 17 billion euros could be required between 2010 and 2030 to establish appropriate mitigation measures, monitoring, reporting and verifying methodologies and convert them into carbon credit equivalents.
Carbon market “readiness” projects that include agriculture will divert institutional, human and monetary resources away from direct support of climate adaptation for small-scale farmers.
5. Undermining the transition to sustainable agriculture that respects human rights
Offset projects could create additional challenges for land rights and food security. To be profitable, agriculture soil carbon projects will require that a large number of farmers’ activities are aggregated into a “carbon pool.” Such schemes require a large number of hectares to be profitable for project developers, investors and traders. Aggregating small farmers for the sake of carbon credits will create the potential for increased social conflict and human rights violations around land tenure, land grabbing and the displacement of food production in favor of more easily calculated carbon sinks.
Such aggregated projects could foster a range of untested, costly and controversial technologies that farmers are asked to adopt as “quick fixes” for ease of measurability. Technologies such as biochar and genetically modified mono-cropping could be promoted at the expense of locally appropriate, affordable and ecological approaches that help small producers adapt to climate change while sequestering carbon.
A different approach
There is a real risk that the market-based approaches under consideration at the UNFCCC will continue to fail—both financially and environmentally. Market-based offsets that do not result in emissions reductions further jeopardize the agriculture sector’s ability to adapt to a dangerously warming planet. The focus on market mechanisms is a critical distraction from curbing the real sources of pollution and supporting agricultural practices that reduce emissions while ensuring food security, environmental integrity and rural livelihoods. The reduction of nitrous oxides associated with synthetic fertilizers and emissions from the industrial livestock industry should be starting points for mitigation actions related to agriculture. Direct public support for local seed banks, agroforestry and organic practices are only a few of many that are much less costly and can provide adaptive and mitigation benefits.
Alternative proposals for climate finance exist and need the political courage of governments be to put into action.
Download the PDF of this factsheet or see the fully cited February 21, 2011 comment to the UNFCCC it is based upon.
April 08, 2011
U.S. subsidizes Brazilian cotton to protect Monsanto's profits
On February 18, Republicans in the House of Representatives defeated an obscure amendment to the House Appropriations bill by a 2-to-1 margin. The Kind Amendment would have eliminated $147 million dollars that the federal government pays every year directly to Brazilian cotton farmers. In an era of nationwide belt tightening, with funding for things like education and the U.S. Farm Bill on the chopping block, defending payments to Brazilian farmers may seem curious.
In order to understand this peculiar political move, one has to look all the way back to 2002, when Brazil filed a case in the WTO challenging U.S. cotton subsidies. In 2004, the Dispute Settlement Body of the WTO found in favor of Brazil, ruling that government subsidies afforded U.S. cotton producers an unfair advantage and suppressed the world market price, which damaged Brazil's interests. After multiple appeals the WTO upheld the original ruling, and by 2009 the U.S. still had not reformed its cotton programs. Brazil then asked the WTO for permission to retaliate against the U.S. by imposing trade sanctions. The WTO decided that Brazil was entitled to impose 100-percent tariffs on over 100 different goods of U.S. origin. Even more importantly, however, Brazil was entitled to suspend intellectual property rights for U.S. companies, including patent protections on genetically engineered seeds.
In WTO language, Brazil was allowed to suspend its obligations to U.S. companies under the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement. This constituted a major threat to the profits of U.S. agribusiness giants Monsanto and Pioneer, since Brazil is the second largest grower of biotech crops in the world. Fifty percent of Brazil’s corn harvest is engineered to produce the pesticide Bt, and Monsanto’s YieldGard VT Pro is a popular product among Brazilian corn farmers. By targeting the profits of major U.S. corporations, the Brazilian government put the U.S. in a tough spot: either let the subsidies stand and allow Brazilian farmers to plant Monsanto and Pioneer seeds without paying royalties, or substantially reform the cotton program. In essence, Brazil was pitting the interests of Big Agribusiness against those of Big Cotton, and the U.S. government was caught in the middle.
The two governments, however, managed to come up with a creative solution. In a 2009 WTO “framework agreement,” the U.S. created the Commodity Conservation Corporation (CCC), and Brazil created the Brazilian Cotton Institute (BCI). Rather than eliminating or substantially reforming cotton subsidies, the CCC pays the BCI $147 million dollars a year in “technical assistance,” which happens to be the same amount the WTO authorized for trade retaliation specifically for cotton payments. In essence, then, the U.S. government pays a subsidy to Brazilian cotton farmers every year to protect the U.S. cotton program—and the profits of companies like Monsanto and Pioneer.
In 2005, I attended the committee meeting of Brazil’s foreign trade ministry where Pedro Camargo Neto—a Brazilian trade lawyer and then-president of the Brazilian pork producers association—proposed suspension of the TRIPS agreement as retaliation for U.S. non-compliance with the WTO ruling on cotton. It was a brilliant political tactic, and dramatically shows the power of private firms in both countries to influence trade policy in the WTO. When I interviewed him as part of my dissertation, Camargo said the Brazilian cotton case would never have been launched without political pressure and funding from Brazil’s powerful cotton industry. Despite facing substantial resistance from the Brazilian government in launching the case, he said, “the producers were really backing it.”
Today in the U.S., taxpayers are bearing the cost of the cotton subsidies and the cost of failure to reform them. Although major news outlets called the payments yet another insane perversion of already insane U.S. agricultural policy, it clearly wasn’t just about preserving subsidies. In 2006, Steve Suppan anticipated the use—and drawbacks—of TRIPS suspension as a one of few tools of cross-retaliation available to poorer countries. However, because of the size of the market for genetically modified seeds there, TRIPS suspension was Brazil’s trump card. Apparently when the stakes are high enough for American business interests, the government will make sure that American taxpayers subsidize not just agriculture, but intellectual property, too.
Emelie Peine is an assistant professor of international political economy at the University of Puget Sound.
Emelie Kaye Peine
March 02, 2011
Eyes on London for global food aid
Talks are taking place this week on an obscure but important piece of the multilateral system: the Food Aid Convention (FAC). Housed at the International Grains Council in London's architectural homage to financial services, Canary Wharf, the FAC involves just a handful of countries: Argentina, Australia, Canada, the European Union and its member States, Japan, Norway, Switzerland and the United States. These are donors (see this nice graphic from the Globe and Mail, part of a larger story, on who contributes global food aid). The convention is meant to provide a framework for negotiations on what counts as food aid, how much food aid each country will commit to humanitarian responses that year, and how to make sure nobody cheats, for example, by promoting exports under the guise of humanitarian aid.
Why is the FAC important? As we enter an era of declining aid dollars, disappearing agriculture surpluses, volatile markets and a rising rate of natural disasters, food aid—or, more properly, food assistance—is a small but vital piece of the web that can prevent death and maldevelopment linked to inadequate nutrition, while contributing to the bigger overall objective of strengthening food security through rural development.
The FAC is the place where a multilateral conversation can take place to make sure food assistance works. But the convention is hardly a perfect forum. For one, the lack of recipient countries as members skews the forum and its debates. Second, historically, member states have used the convention to set a minimum threshold for their food aid donations: actual donations can be far greater. Amounts over and above the food aid convention commitments are not bound by the rules. Third, the convention uses an increasingly obsolete measure to assess contributions: tons of wheat equivalent. Historically, food aid was dealt with by a committee on surplus food disposal—it was about solving an unwanted stock overflow for food exporters, not about responding to the universal human right to food. Today, most countries' food aid programs are more sophisticated and better calibrated to local realities. Most, though not all. The U.S. Congress continues to hold-out against significant reform of its much criticized food aid. (See our 2005 report on U.S. Food Aid).
None of these problems means a multilateral convention is not needed—nor that the FAC cannot be reformed and improved. But it is going to take more political will than has been on display recently. The last iteration of the convention was signed in 1999. The update was scheduled for 2004. Six years later, the convention has still not been renewed. Europe is threatening to walk away. And the U.S. refuses to accept the reforms that every other food aid donor has already made: to make food aid more responsive to need, and more careful not to disrupt food production and trade in the regions to where crisis strikes.
In part, governments say they are waiting for their trade negotiating counterparts to conclude the Doha Round, where some new parameters for what should count as food aid are due to be decided. This never made much sense: Why give a trade forum dedicated to facilitating global commerce the power to set terms for humanitarian responses? In any case, the WTO has had no more success than the FAC in bringing countries to agreement on multilateral treaties.
A group of NGOs monitoring the talks, the TransAtlantic Food Assistance Dialogue, has a background paper that sets out what is at stake and what reforms should be undertaken. Broadly, the need is for transparency, flexibility, a commitment to food volumes to protect capacity to deliver from volatile prices, a wider understanding of just what comprises food aid, and a role for recipient countries and the organizations engaged in food aid delivery in the treaty's governance. One of the pieces that IATP is watching especially closely is the proposal that countries' contributions to regional emergency reserves should count towards FAC commitments, a proposal outlined by Stuart Clark of the Canadian Foodgrains Bank. IATP is convinced that physical reserves of grain are an important tool for protecting food security.
So, all eyes are on London. In the heart of the city that, perhaps as much as Wall Street, epitomizes global finance and global wealth, let's push our governments to take some simple, effective steps to do something for the millions who depend on food aid so they can survive and build for a better day.
February 10, 2011
A festival for social justice: reporting from the World Social Forum
It is now the fourth day of this great festival of ideas, discussions and debates about the key political issues of our times and the struggles taking place at local, national, regional and international levels to achieve social justice. The focus is inevitably on African issues of struggle and the various forces impacting local communities and national and Pan African trajectories. This World Social Forum (WSF) is timely given that the continent has become the focus of one of the biggest resource grabs since colonial times—be it for agrofuel demand of industrialized countries, land bought by other countries for their own food production needs, or land-based investment deals that take away community control of natural resources right before their eyes and in spite of their resistance. A large number of seminars and discussions here have focused on landgrabs and testimonies offered from across the continent and around the world. Groups and communities are discussing how to force companies and governments to uphold and respect human rights—social, cultural, economic and ecological—of communities and people; and how to stop the pillaging of dwindling natural resources through unregulated investment.
Set on the campus of Cheikh Anta Diop University, 40,000 students are milling amongst stalls, tents and sessions organized by hundreds of organizations; doing street theatre, picking up pamphlets, asking questions. Many of them are volunteers for the WSF and translating during organized events. Their interest and curiosity is inspiring. In fact, just a week before the forum, the new president of the university had decided to suspend the week holiday that was given by the previous president for students to freely attend WSF events. The new president reneged on that commitment and resumed classes, even taking back many classrooms that were assigned to WSF events. The first few days we found ourselves wandering into classrooms where students were patiently trying to sit through classes and shut out the noise and energy emanating throughout the campus due to the social forum. In spite of the logistical hurdles—and not knowing where the next event will be—civil society has rolled right along in making the forum a success.
I have been participating in events and discussions related to climate change, food sovereignty and natural resources. Many of the sessions are trying to make sense of the outcome in Cancún (COP 16) for climate change and what civil society needs to do differently in the run up to Durban, South Africa, who will host the next major climate meeting at the end of this year. Groups from South Africa are here and already organizing themselves to host civil society organizations in order to create a loud and resounding voice condemning the paltry pledges made by governments in Cancún to reduce greenhouse gas emissions. Many groups feel that trying to convince governments inside negotiating halls at the COPs will not create the urgent shift we need to see in the climate talks towards binding and ambitious targets for drastically reducing greenhouse gases. There is an acute realization that social awareness and mobilization needs to take place locally with specific strategies to shift national positions on climate change. For Africa, anything above a one-degree global temperature rise will mean drastically reduced cropping seasons, much greater incidences of severe and unpredictable weather with dire consequences for food production and hence food sovereignty. The Pan African Climate Justice Alliance is trying to influence national processes around the continent moving towards Durban.
The United States and Europe, however, still determine the fate of the climate treaty and the international targets that will be set. Without a sea-change in U.S. public opinion on climate change as a key responsibility it is hard to see how we can keep the United States government from undermining entirely an international regime that must stop and reverse global warming.
Roughly six months after Durban will be the 20th anniversary of the Rio Summit—known as Rio+20—where governments will come together with possibly new proposals on dealing with the major environmental problems of our times. It was at Rio, 20 years ago, that the U.N. Climate Treaty was created, in addition to the Convention on Biological Diversity (CBD). Despite these efforts we have drastically worsened our global situation—on both the climate change and biodiversity front.
Several groups have come together at the WSF to begin organizing toward Rio+20. They see the meeting as a major opportunity to reframe the debate moving forward in this decade and want to link awareness building and social mobilizations in the next 16 months that include COP 17 in Durban and onward to Rio in the middle of 2012.
Finally, numerous discussions are also taking place on the linkages between the food, climate and financial crises, their impact on Africa and impacts on small producers. IATP participated in events organized by the Fellowship of Christian Councils and Churches in West Africa (FECCIWA) on climate change, food sovereignty and the food crisis, as well as an event on “Fighting against price volatility and regulating agricultural markets” organized in conjunction with CCFD-Terre Solidaire, a Catholic French NGO, Mooriben (an organization from Niger engaged on creating food security at the local level, including food reserves), Afrique Vert Mali (Green Africa Mali) and GRET, a French development NGO. In addition, we will be involved in the WSF convergence process today and tomorrow where civil society groups who have been meeting throughout the week will come together to see how we can move forward with our plans on both climate and Rio+20. For IATP, we are interested in seeing how the issues of speculation in carbon and commodity markets, agriculture offsets in the climate negotiations, and their impacts on small producers, can be part of the discussions and strategies to build awareness and counter negative proposals and impacts.
Onward to day five.
IATP's Shefali Sharma is blogging from Dakar, Senagal at the World Social Forum.
February 08, 2011
Have your say on land grabs and food price volatility
Back in October, I blogged on the recently constituted High-level Panel of Experts (HLPE) associated with the U.N.'s recently revamped Committee on Food Security (CFS), which brings together the three U.N. food agencies (the Food and Agriculture Organization (FAO), the International Fund for Agriculture and Development (IFAD), and the World Food Program (WFP)). The HLPE is tasked by the CFS to write reports and more generally to provide the benefit of independent advice and thinking.
Following a meeting of the HLPE in December, the experts have chosen to focus on two (huge) topics. A process of consultation and writing is underway. The topics are land tenure and international investment in agriculture and price volatility. Comments are open to the public—send your comment to the moderator, or register at the forum and you can post (you will have to be approved by the moderator to proceed). The deadline is February 10.
From there, the HLPE is to develop a draft paper on each topic, which will then be posted for a second round of comments. So go ahead—these are some of the biggest issues of our time. Have your say!
And send us your thoughts on IATP's contribution.
February 07, 2011
Public health cost of global (corn) trade
Last week Mexico paid a U.S.-based corn processor, Corn Products International, Inc. (CPI) $58.4 million in accordance with a 2009 North American Free Trade Agreement (NAFTA) tribunal decision. The case illustrates the important intersection of U.S. trade policy with food and public health.
Corn Products International, Inc. provides corn “ingredients” to the global food, beverage, brewing and pharmaceutical industries. The company brought the 2003 case claiming that the Mexican government—by putting a tax on soft drinks sweetened with high fructose corn syrup instead of sugar—had discriminated against CPI in order to protect Mexican cane sugar producers. Ruling in CPI’s favor, the NAFTA tribunal required Mexico to compensate CPI for its lost revenue.
CPI is only one among many cases brought by corporations under NAFTA’s little known Chapter 11. Chapter 11 enables corporations, or individuals, to sue the three nations signing NAFTA—Canada, the U.S. or Mexico—when they believe an action by those governments adversely affects their present or future profits.
Chapter 11 imparts rights to international investors that go well beyond those present in existing international trade agreements (e.g., the GATT and WTO), and has important ramifications for public health. In one of the most well-known Chapter 11 cases, the Mexican state of San Luis Potosí refused to grant a permit to U.S.-based Metalclad Corporation to operate a hazardous waste treatment facility and landfill in La Pedrera. The Mexican state also created an ecological preserve in the area where the facility was located. Metalclad brought its case and in 2000 the NAFTA tribunal ruled that Mexico’s establishment of the ecological zone and failure to grant Metalclad a permit was “tantamount to expropriation,” requiring Mexico to pay Metalclad $15.5 million in compensation.
These Chapter 11 rulings also illustrate two relatively recent phenomena: 1.) the costs to Mexican farmers and consumers of the NAFTA-led, ever-increasing economic integration between Canada, the U.S. and Mexico [i], and 2.) the increasing legal rights granted to corporations relative to governments. NAFTA Chapter 11 makes it more difficult for governments to protect public health because corporations or individuals may legally challenge regulations they believe are adversely affecting their financial investments.
As costs of chronic disease rise, along with global challenges to public health, the public health community cannot afford to ignore the often subtle, yet powerful, influence of the legal and economic trends of globalization. For more information on such issues, check out the American Public Health Association’s Trade and Health Forum and the Center for Policy Analysis on Trade and Health.
Sarah Clark is a former IATP intern and master's degree candidate in international agriculture and trade policy at Tufts University.
[i] Sarah Clark, Corinna Hawkes, Sophia Murphy, Karen Hansen-Kuhn and David Wallinga, “Exporting Obesity: How U.S. Food and Farm Policy is Transforming the Mexican Consumer Food Environment,” [forthcoming]
January 25, 2011
Will Obama's trade agenda undermine global food security?
During tonight's State of the Union address, President Barack Obama is expected to tout an expanded trade liberalization agenda as part of his plan to generate more U.S. jobs. But does this push to open up markets square with the Administration's plan to address global food security?
President Obama’s Feed the Future initiative promotes ending global hunger by bolstering food production by small-scale farmers—especially women, through programs led by developing countries. While the U.S. development agenda emphasizes increasing local food production in developing countries, the trade agenda pushes in the opposite direction, aiming to double U.S. exports in the next five years. In a new paper, IATP’s Karen Hansen-Kuhn documents how the Obama Administration’s agricultural trade policy is very much a continuation of past policies—policies that have undermined small-scale farmers and global food security. The paper identifies much needed reforms in U.S. trade policy to recognize current challenges associated with food security and climate disruptions. You can read the full paper here.
January 14, 2011
Who owns a movement?
TransFair USA, the largest fair trade certifier in the U.S., changed its name to Fair Trade USA and is trying to trademark that name. What a shame.
It was only 12 years ago that IATP started TransFair USA. We didn’t hold on to it for long, since at the same time we also started Peace Coffee, a 100 percent fair trade coffee company (later certified by TransFair). To avoid a conflict of interest, IATP transferred all the accounts and assets of TransFair to another legal entity, and hired Paul Rice—who is still TransFair’s president—to run it. During the past 12 years, TransFair has grown from a small project to a globally significant institution, by far the leading fair trade certifying organization in the United States. IATP believes strongly in the principles of fair trade—paying producers a fair price, transparent contracts, independent third party certification. TransFair’s success story should make us proud. It doesn’t. TransFair’s growth has seemed to come at the expense of some of the core values of fair trade, making it increasingly more difficult to defend. But changing its name to Fair Trade USA and then trying to trademark it? This is the last straw. It also does not bode well for TransFair’s future.
Let’s remember this: TransFair didn’t grow in a vacuum. Over this same period the fair trade movement in the U.S. and globally has multiplied beyond all expectation. TransFair developed a business model that aggressively pursued signing up large coffee roasters and retailers to the TransFair label. While not the model IATP had in mind when we started TransFair, it has been very successful. The TransFair label can be seen from Starbucks to Wal-Mart. A downside of this model is that 100 percent fair trade coffee companies, who tend be smaller, more local, and, frankly, more fair trade—not only in percentage of business, but in paying producers more, having more transparency and supporting small producer cooperatives, etc.—have felt disenfranchised and are either migrating to a new label or considering self-certifying—a tremendous step backwards since independent third-party certification is a cornerstone of consumer confidence. At the same time, TransFair has turned its focus to the larger growers to assure the large roasters and retailers adequate supplies of coffee. This has led to small co-operative producers being edged out. TransFair could have done any number of things to differentiate a 100 percent fair trade coffee company like Peace Coffee from a Starbucks, for instance, but didn’t.
By trying to claim exclusive rights over the term Fair Trade USA, TransFair is making claim to a movement that, in large part, it is abandoning. We urge TransFair to reconsider plans to trademark the words fair trade and to focus building a strong fair trade movement that does the best it can by the producers, importers, retailers, and ultimately, the consumers who believe that trade can be fair and just.
November 01, 2010
Fairness in food from farm to [every] plate: November's Radio Sustain
This month's Radio Sustain podcast is all about food security and farmworker justice: Why does exploitation of farmworkers and modern-day slavery still exist in the United States, and why do some (both domestically and internationally) go hungry while others have more than enough?
First, IATP Food and Society Fellow Sean Sellers discusses the shocking modern-day farmworker exploitation that takes place throughout the country. In a new campaign, he and IATP Food and Society Fellow Shalini Kantayya have created a video with the Coalition of Immokalee Workers to ask for One Penny More for farmworkers.
Domestically, hunger remains—unsurprisingly—concentrated in low-income urban areas. Mark Winne, author of Closing the Food Gap, is a veteran food security and anti-hunger advocate. He's founded multiple food security organizations, including the Community Food Security Coaltion (CFSC). Winne talks about his ideas on where the food gap comes from and shares his insights on what steps must be taken to close it.
Finally, IATP's Sophia Murphy discusses the state of international food security, and why food reserves hold promise as a tool for stabilizing volatility in agriculture markets that devastates farmers and poor consumers around the globe.
Listen to the latest Radio Sustain (mp3) and check our archives for past podcasts.
October 15, 2010
Volatile times discussed in Rome
I'm in Rome to talk about volatility (my powerpoint here). More precisely, the volatility in agricultural commodity markets and what can be done to a) mitigate it and b) better cope with its consequences. The topic was part of one of three issues the first meeting of the revamped FAO Committee on World Food Security (CFS) has on its agenda. It will be one of the first topics to be addressed by the High Level Panel of Experts created as part of the revamped CFS structure. It's also an issue close to the French government's heart, as it made clear in the short speech given yesterday by France's Minister for Agriculture. France's President Sarkozy has committed to making agriculture a central part of the agenda for the G20 meeting that France will host next May.
It's great to see that the topic is preoccupying governments. It should be. Of course agriculture prices fluctuate and of course that fluctuation plays a number of very useful purposes in keeping markets on track. Volatility, however, especially unpredictable and extreme volatility, hurts producers, consumers and ultimately undermines investor confidence, starving the sector of much needed capital.
The problem should be tackled both at the source, by limiting the occasion for extreme volatility to occur, and where it hits home, in poor households especially, by providing safety nets and risk management tools. It has to be tackled comprehensively, too. Volatility has several distinct components that need to be considered jointly. There are the futures markets and speculative investors, a problem much discussed by IATP, on this blog and elsewhere. There is the question of grain reserves, the issue I came to Rome to talk about and also a hot topic for IATP writing. Then there is trade - do we have the right rules? What can governments do better?
Climate change is affecting the heart of any food system: the weather. We don't yet know all that it will mean for the future, but for the millions of people coping today with record-setting disasters, from Central America through South Asia with too many stops in between, it is clear that there is a new and particular urgency to addressing volatility quickly and effectively, with as few ideological fights about governments and markets and their respective roles as possible.
This year should see renewed attention from governments on understanding the causes and taking action to at least mitigate volatility. The background paper for the discussion written for the CFS was disappointing: it gave a useful and concise discussion of how climate change was increasing vulnerability to food insecurity but then turned into a very unpersuasive discussion about responses, mostly highlighting the failures of past reserves policies, and not very convincingly. Here's hoping the next iteration serves governments better. Perhaps by CFS 37 (i.e. in one year's time), we could hope to see some binding government decisions on the issues. Fingers crossed.
Times they are a changing at the FAO
I'm writing from Rome, a beautiful city despite the cars. I'm attending the FAO's Committee on World Food Security, a once relatively sleepy piece of the sprawling UN system that last year was given a significant boost by a thorough revamp. Listening to the governments negotiate, agonizing over words (to launch or to discuss? To endorse or to notice? To act by the next session of the committee or at a future session of the committee?) I am mostly pulled back into memories of the days when a UN meeting was a regular part of my life.
But I am also struck by some differences.
There is the technology - someone now has the job of typing amendments into a computer, projected onto huge screens, so that everyone can see the text as it changes. There is the technique - maybe it was just a good day, but the working group report backs were exemplary. Short and on message. Not something I would have expected the system to be good at. But most revolutionary, really, is the presence of civil society organizations - the CSOs. CSOs are a part of the revamped committee, you see. So in the parsing of the sentences that goes into creating a government agreement, you see Via Campesina and FIAN and Oxfam asking for (and getting) the floor, just as the governments do. No governments first rule, no pre-agreed rules about which topics can be addressed. The CSOs spent days in advance discussing the agenda and drafting agreed language themselves.
Now let's see if all this change adds up to a Committee that can fulfill it's promise. This year will be too early to tell, but so far not bad. I'll know more when I get into the building this morning and find out what was decided after I left at 11pm last night.
October 12, 2010
Who benefits from volatility?
By nearly all accounts, agriculture prices worldwide have entered a new era of volatility. Earlier this year, wheat prices shot up an additional $3 a bushel over two months due in large part to concerns around a wheat export ban in Russia. This week, corn prices have risen dramatically due to a USDA report issued Friday, finding a less-than-predicted corn crop this year.
This era of extreme volatility dating back to the 2007-08 global food crisis has contributed to the nearly one billion people worldwide suffering from hunger. This week in Rome, the U.N.'s Food and Agriculture Organization (FAO) is hosting a five-day conference on efforts to address global food security. The meeting comes on the heels of an emergency meeting at the FAO last month focused on increased volatility in grain markets.
Of course, agriculture production has always experienced ups and downs due to a variety of factors—from the weather to pests, economics or war. Traditionally, one of the simplest tools to smooth out agriculture markets is to establish reserves: putting food aside in times of plenty to release in times of scarcity. This week, IATP published a series of short primers on: why we need food reserves, food reserves in practice, what's next on food reserves, and the WTO and food reserves. IATP's Sophia Murphy is attending the FAO meeting in Rome to speak on a panel focusing on volatility, where she'll be making the case for food reserves.
Some kind of food reserve is just common sense, right? Who could be against food reserves and efforts to stabilize agriculture prices? Who profits from volatility in agriculture markets?
Yesterday's press release from Cargill announcing that profits jumped 68 percent this quarter provides a clue. As Cargill CEO Greg Page stated, "Our results were led by the food ingredients and the commodity trading and processing segments, both of which experienced resurgence in volatility across agricultural commodity markets. The change put Cargill's global breadth, trading and risk management skills more acutely into play as we worked with customers to help them manage their price risk and raw material needs."
As agriculture commodity prices remain volatile, agribusiness companies like Cargill and ADM (up $388 million last quarter) with a global reach and diversified holdings throughout the food chain are uniquely positioned to benefit, and so far, they have.
October 08, 2010
Global food funds necessary, but not enough
The Obama administration continues to push for new investments to end global hunger. As part of that effort, Bloomberg news reports that the U.S. will urge other nations attending the upcoming G-20 Finance Ministers meeting and the World Bank/IMF meeting this week to contribute to the Global Agriculture and Food Security Program (GAFSP). GASFP was set up last year to channel funding requests for agricultural development. So far, the U.S., Canada, South Korea and Spain (along with the Gates Foundation) have contributed $880 million.
On the plus side, the fund is driven by host-country requests through partner agencies. Rather than setting up a cumbersome new set of rules and procedures, developing country governments can work with multilateral agencies like the International Fund for Agricultural Development, World Food Program and others, using their existing procedures. Some of those agencies, especially IFAD, have a long history of working with small-scale farmers and including women farmers. GAFSP’s steering committee includes donor and recipient governments, as well as representatives from Southern and Northern civil society organizations.
On the other hand, there is reason to be skeptical of a food security fund housed at the World Bank. Over the last 20 or so years, the bank’s structural adjustment programs required trade liberalization, privatization and cuts in public credit, technical assistance and other support to agriculture. In 2007, the World Bank’s own Internal Evaluation Group recognized that its under-investment in African agriculture, and its over-reliance on the private sector, had been a dismal failure. Since then, the bank has committed to mend its ways, but whether new programs housed at the bank can really contribute to food sovereignty—each country’s right to democratically determine its own path to achieve food security and the right to food—remains to be seen.
Obama is right that substantial new investment in agriculture is needed. But, as always, the devil is in the details. Over the last few years the FAO’s Committee on Food Security (CFS)—which meets next week in Rome (IATP's Sophia Murphy is attending and will report back)—has undergone a thorough reform process. It now includes active involvement by family farmers, urban poor, women, indigenous peoples and development organizations from the Nouth and Sorth. Can GASFP coordinate with the CFS to learn from experiences and priorities around the world? Will it support agro-ecological methods built on local knowledge and priorities or will it advance GMOs and other technological fixes? More money for sustainable agricultural development is necessary, but definitely not sufficient to end hunger.