World Food Prize 2 - a few short summaries

Howard Buffett keynote address:

“We cannot solve other people’s problems, no matter how much we spend.”

I like technology. It is an important solution, but it is not and cannot be the only solution.

Soil is more important than seed. You cannot correct low soil fertility by piling on chemical fertilizers. Our high-tech solutions promote monocropping, which isn’t good. None of the poorest farmers have had a soil test done, so we’re guessing at what their soils need. Dead soil has no biological activity: fertilizer is like putting oxygen mask on a deadman.

Farmers are willing to take risks on seed. They buy unmarked bags and unmarked cans because they are cheaper.

Secretaries of Agriculture panel

Ghana – fertilizer subsidies and mechanization are the future.

Mozambique – 4 pillars to increasing agricultural productivity: extension, markets and information, natural resource management, and public-private partnerships. Discussed comparative advantage of different zones of Moz and the need to support farmers in their comparative advantages. We are developing new exports, like cashews.

Q: Tanz and Moz – how are you going to avoid monocropping in your focus on corridors and comparative advantages?

A Moz: We are using crop rotation. We aren’t subsidizing other crops, but we subsidize fertilizer and encourage farmers to compost as well. “But don’t worry” we’re also building a phosphate factory.

A Tanz: Don’t only grow one crop – grow other crops in the same season as well.

Sheeran (WFP)

Farmers in many poor countries reduced production during food price crisis because input prices rose faster than food prices.

Asked a market trader how he set prices. “It’s easy. I go online every morning and find the price on the Chicago markets and give a 10% discount – we are a poor nation, after all.”

Using an analogy from IT – where you use some of your computer capacity to ensure the stability of the rest – what investments and inefficiencies do we need to make/accept in order to get the rest of our food production more stable? Ex: Could WFP reduce dependence in South Sudan down the line by buying food there, even though it is more expensive than in neighboring countries?

When leaders say “not on my watch” it is powerful. It gives accountability.

Lit in Review: Integrated Soil Fertility in Malawi

Sauer and Tchale (2009), "The Economics of Soil Fertility Management in Malawi," Review of Agricultural Economics, Vol. 31, No. 3, p. 535-560

Integrated Soil Fertility Management (ISFM) uses both organic and inorganic methods to improve soil quality, such as dual cropping complementary crops that can fertilize other and improved following. Sauer and Tchale (2009) review eight studies and produce another one demonstrating that ISFM provides greater productivity, profits, and sustainbility than chemical fertilizers alone for African smallholder farmers.

Maize yields in Malawi -- the subject of three of the case studies for our new Food Policy book: count em, one, two, three -- have been highly dependent on fertilizer prices and government policies. At the turn of the century, government policies had done a great deal to limit the growth of the private fertilizer market. Sauer and Tchale explain that "gertilizer dealers require substantial risk premiums to hold and transport fertilizer in an inflationary economy," and the increasing prices for fertilizer from reduced subsidies, devalued currency, and rising world prices have hurt demand for fertilizer greatly. So Integrated Soil Fertility Management (ISFM) is likely to do substantially better in Malawi relative to inorganic fertilizers only, than it would in other places.

In their study, they find that inorganic fertilizers have a return to scale of 0.5, compared with 2.5 for ISFM; ISFM improved maize yield by 8-9 percent in two areas and 3 percent in a third region. If you include the value of the other crops planted at the same time to fertilize the ground (groundnuts, soy, and pigeon peas), the yield increases. ISFM also significantly increases the marginal value of fertilizer. So supporting ISFM can reduce the government burden of fertilizer subsidies while increasing sustainability, incomes, and food security.

Lit in Review: Biofuels

Review of Agricultural Economics, Vol. 30, No. 4, Winter 2008

Tokgoz, Elobeid, Fabiosa, Hayes, Babcock, Yu, Dong, and Hart, "Bottlenecks, Drought and Oil Price Spikes: Impact on US Ethanol and Agricultural Sectors."
Method: Calibrated model (2006) of supply and demand for temperate ag products, multi-country, partial-eq. Projections 2007 and 2016.
Baseline projections: Ethanol demand is the limiting factor to its growth, selling at a wholesale discount of $0.13/gallon below its energy value relative to gas. Ethanol plants cover their variable costs, but not full costs. Soybean production shifts from US to S. America.
If oil prices are $10/barrel higher than baseline, ethanol production increases 55%, corn price increases 20%, US grain exports decrease between 12% and 30%. Livestock feed costs increase 13.4% so pork prices increase 1.5% at retail, decreasing US pork consumption 0.6% and exports 6.2%. Other livestock markets respond similarly. Worldwide meat consumption decreases, with US pork exports decreasing and beef exports increasing because the price increase affecting all meats lowers the relative price of beef. The effect on total food prices is 1%.
If a major drought occurs in 2012 with given mandates: corn prices rise 44% and soybean 22%; US corn exports decrease more than 60%, offset partially by increases from S. America, China, and other countries. Broiler production decreases 2.7%, egg prices increase 11%, broiler prices increase 10%. Herd sizes adjust only a little because the price shock is expected to be temporary.

Gohin, "Impacts of the European Biofuel Policy on the Farm Sector: A General Equilibrium Assessment" ungated version.
Method: Computable general equilibrium model, simulations, uncertain what data years are used
Findings: Compared to a baseline, the EU governments enact tax and mandate policies to guarantee 13.8 Mote of biofuels in 2015. Biodiesel will be supplied largely by imports and bioethanol by EU production because bioethanol faces high import taxes. The increase in the price of vegetable oils leads to an increased demand for animal fat and other animal byproducts, so livestock production remains relatively constant, meat prices decrease slightly so more is consumed. Farm incomes increase significantly, but less than EC estimates. Rapeseed oil and sunflower sectors expand significantly.




Wilson, Koo, Dahl, and Taylor, "Impacts of Ethanol Expansion on Cropping Patterns and Grain Flows" ungated version.
Method: large-scale (12,979 variables) non-linear spatial partial optimization model, data calibrated to 2000-2004, projected 2010, 2020, 2030, and 2040
Findings: In the case of high ethanol demand: world exports increase from 263mmt to 406; US total grain exports increase until 2020 then decreases to 90% of base; Canada increases 50%, Brazil doubles exports, Argentina and Australia nearly double exports, E. European exports treble.

Petrolia, "An Analysis of the Relationship between Demand for Corn Stover as an Ethanol Feedstock and Soil Erosion."
Corn stover (cobs, stalks, and leaves) provide organic fertilization when left on the farm or can be used as biomass to produce biofuels. In southern Minnesota, replacing the soil nutrients (phosphate and potash) lost from one ton of corn stover would cost $4.76. Different numbers of biomass plants can be supported depending on how efficiently stover is harvested (40-90%). For a given level of efficiency, the price of stover increases slowly until a threshold is reached (8-10 for 40%, 10-12 for 50%, 15-18 for 80+%) at which point the price shoots up. Thus, "even under current tillage practices, there will be little to no incentive to violate erosion constraints" as long as there aren't too many biomass plants competing for the same stover. If farmers move to no-till practice, the threshold number of plants increases to 19. It is found to be unlikely that corn ethanol prices increase high enough to incentivize the threshold levels of biomass plants.