The Possible Impact of a Food Crisis in Moldova and      Recommendations for Immediate Reaction for Rural Agriculture Deve...
Main Objectives are:1) Support domestic food production internationally based on social, ecological andeconomic justice an...
• the level of a household’s income and assets, which influences its food security andvulnerability to shocks; and• the ex...
The needed supply response is not just a matter of the farm-level expansion of production, butmust comprise the whole food...
microfinance institutions should consider responding to the price crisis by temporarily looseningrepayment conditions, as ...
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Summary of recommendations on rural agriculture development in moldova nov10 08


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Summary of recommendations on rural agriculture development in moldova nov10 08

  1. 1. The Possible Impact of a Food Crisis in Moldova and Recommendations for Immediate Reaction for Rural Agriculture DevelopmentNovember 10, 2008Prepared by AMThe food crisis is affecting over three billion people—half the world’s population. The triggerfor the present crisis was food price inflation. The World Bank reported that global food pricesrose 83% over the last three years and the FAO cited a 45% increase in their world food priceindex over just nine months. The Economist’s food price index stands at its highest point since it was originally formulated in1845. As of March 2008, average world wheat prices were 130% above their level a year earlier,soy prices were 87% higher, rice had climbed 74%, and maize was up 31%.While grain prices have come down slightly, food prices are still high, and because low-incomeand poor families are faced with higher fuel and housing costs, they are still unable to buysufficient food.The food crisis appeared to explode overnight, reinforcing fears that there are just too manypeople in the world. According to the FAO, there were record grain harvests in 2007. There ismore than enough food in the world to feed everyone. In fact, over the last 20 years, world foodproduction has risen steadily at over 2% a year, while the rate of global population growth hasdropped to 1.14% a year.4 Population is not outstripping food supply. There is food on theshelves but people are priced out of the market.But in the winter of 2007, instead of shortages, food price inflation exploded on world markets—in spite of that year’s record harvests. As a result, the number of hungry people jumpeddramatically to 982 million in just one year. The rebellions that quickly spread across the globetook place not in areas where war or displacement made food unavailable, but where availablefood was too expensive for the poor.While the food crisis sent grain prices on the global market skyrocketing, farmers growing thegrain won’t see much of this windfall for long. Why? The spectacular increase in the price ofcorn (from $2 to as high as $8 a bushel) was quickly followed by an increase in the price of farminputs. Profit margins are rapidly thinning for both conventional and organic farmers. In general,farmers report that their costs are increasing faster than prices for their goods. Farmers receiveless than 20 cents of the food dollar, out of which they must pay for production costs that haveincreased by 45% since 2002. The prices of most fertilizers have tripled over the past 18 months.Urea, the most common nitrogen fertilizer, has risen in price from an average of US $281 per tonin January 2007 to $402 in January 2008, and then to $815 in August–an increase of 300%.Diesel prices to farmers have increased 40% over the last two years.To solve the food crisis we need to fix the food system.This entails re-regulating the market, reducing the oligopolistic power of the agri-foodscorporations, and building agro-ecologically resilient family agriculture. We need to make foodaffordable by turning the food system into an engine for local economic development in bothrural and urban areas. These tasks are not mutually exclusive—we don’t have to wait to fix thefood system before making food affordable, marketing fair or farming viable. In fact, the threeneed to work in concert, complementing each other.
  2. 2. Main Objectives are:1) Support domestic food production internationally based on social, ecological andeconomic justice and the human right to healthy food.2) Stabilize and guarantee fair prices to farmers, workers and consumers by re-establishingfloor prices and publicly-owned national grain reserves at home and abroad.3) Halt agrofuels expansion. Suspend international agrofuels trade and investment.4) Re-regulate finance sector investment in food commodities.5) Promote a return to smallholder farming.6) Support Agro-ecological and locally-based approaches to food production and foodsystem management.7) Food Sovereignty: Democratize the Food System! Food sovereignty is the right of allpeople to healthy and culturally appropriate food produced through ecologically sound andsustainable methods, and their right to define their own food and agriculture systems. At theheart of these concepts is the belief that we need to democratize our food system in order toensure equity and sustainability. The democratization of our food systems requires a socialchange in the way we manage food. We must reduce the political influence of the industrial agri-foods complex and strengthen antitrust laws and enforcement. These changes will require bothchanges in practices and in legislation in order to establish a regulatory context for sustainableand equitable food systems. These changes also depend on the degree of political will on the partof business, our legislators, and our communities. Political will results from social pressure frominformed social movements. These movements already exist, and are gaining strength in the faceof the food crisis.Specific Objectives:Food crises, and policies designed to respond to them, have effects at national, household, andindividual levels. First, national decision makers and policy analysts must understand the degreeto which their country and population groups within it are exposed to the negative effects ofrising food prices or could exploit new opportunities offered by the higher prices. Thisunderstanding requires information on• global market developments;• the characteristics of their country with regard to international trade in food;• trends in local wages, food and agricultural prices, and energy prices;• the composition of income and expenditure among different population groups in the country;• and the responses of producers, consumers, and the government to rising food prices.At the national level, the actual effects of a global food crisis depend on• the net trade position (exporter or importer) in agricultural commodities relative to the size ofthe economy;• the degree to which changes in global prices are transmitted to local markets;• the sensitivity of government revenue and expenditures to rising food prices; and• the political and fiscal capacity of the government to respond to the crisis.At more local levels, the effects of a crisis will differ among communities and from householdto household depending on • a household’s net sales (or net purchases) of food relative tohousehold income;
  3. 3. • the level of a household’s income and assets, which influences its food security andvulnerability to shocks; and• the existence and effectiveness of government programs and policies to protect vulnerablehouseholds in a community.Within households, members are likely to be affected by a crisis to varying degrees, with thenutritionally vulnerable members—women of childbearing age and young children— being mostat risk.As policymakers assess the effects of a global food crisis on their country and on variouspopulation groups, the most important sources of data include nationally representativehousehold surveys, food price series from important commodity marketplaces in a country,and trade statistics.Where such data are missing for a country, they must rely on qualitative or indicative, ratherthan representative, data to make short-run assessments. However, a more thoroughassessment of the impact of a global food crisis on a country and its citizens and of the bestcourse of action to follow in response requires detailed data and relatively sophisticatedanalytical capacity for investigating some of the national issues associated with global foodcrises.Recommendations on the short-medium term agriculture resilience package that willinclude1. Scale up investments for sustained community agricultural growth.To transform the crisis into an opportunity for farmers and to build resilience to future foodcrises, a transition to viable long-term investments in support of sustained agricultural growth isurgently needed. Such investments are particularly needed in view of the emerging stress factorsfor agriculture from climate change that threaten to perpetuate the current crisis. Investments forsustained agricultural growth include expanded public spending for rural infrastructure, services,agricultural research, science, and technology.New and innovative crop insurance mechanisms should be introduced and tested at a largerscale.Information technology, improved weather data, and the expected high returns to insurance makeinnovation in this field now much more feasible.
  4. 4. The needed supply response is not just a matter of the farm-level expansion of production, butmust comprise the whole food value chain, with private sector actors in the food-processing andretail industries playing key roles. New—and much broader—concepts of corporate socialresponsibility are called for.What could be expected from these measures? These investments would have high returns notonly in terms of agricultural growth, but also in terms of poverty reduction in both rural andurban areas through increased production and employment and lower food prices.Who would be the key actors? Donors, UN, regional organizations, foundations, and the privatesector.2. Calm markets with market-oriented regulation of speculation, shared public grainstocks, strengthened food import financing, and reliable food aid.Speculation is mainly a consequence, not a cause, of the price crisis, so overregulation andmarket policing would be inappropriate responses. Surveillance and regulatory measures,however, such as monitoring speculative capital or limiting futures trading, should be taken tocurb excessive speculation in agricultural commodity markets.Under the current tight market conditions, it is infeasible to accumulate a global stock of grainthat would bring the desired calming effect into the markets. The needed incremental supply ismissing.Agreements on joint pooling of fixed portions of national stocks at the regional or global levelwould seem feasible, however. A coordinated set of pledges for a modest grain reserve to bemade by the main grain-producing countries (including coordinated releases from the reserve forregional emergencies when prices increase excessively over what market fundamentals indicate)should be established at global or regional levels. A global intelligence network should informthe management of these international coordinated reserves.The Food Aid Convention should be renegotiated and reformed, while current grain delivery andcash commitments should be expanded. An accompanying option could be a finance facility,provided by the International Monetary Fund (IMF), for imports by countries in foodemergencies.What could be expected from this initiative? The pooling of global or regional public stocks,complemented by an import-financing facility, would allow countries with greater food deficitsin a particular region to gain access to food supplies at reasonable and stable prices in times ofcrisis. It would also help contain the speculative expectations that fuel further price rises duringthe upswing. Its celare that such reserves have costs, depending upon their size, which need to becarefully weighed against potential benefits.Who are the key actors? The UNDP, FAO, WB, sub-regional organizations, and commodityexchanges.3. Invest in rural social protection.Comprehensive rural social protection initiatives are required to address the risks facing the poordue to reduced access to food as a consequence of high prices. A hierarchy of appropriate socialprotection interventions includes both protective actions to mitigate short-term risks andpreventative actions to preclude long-term negative consequences. Introducing or scaling upthese interventions is complex, associated with substantial costs, and dependent on knowledgebase and capacity.At the core of the protective actions are conditional cash transfer programs, pension systems, andemployment programs. However, targeted cash transfer programs should be introduced in theshort term. If food markets function poorly or are absent, however, providing food is a betteroption than providing cash. Microfinance, which includes both credit and savings, is alsoadvisable to permit the poor to avoid drastic actions such as distress sales of productive assetsthat can permanently damage their future earning potential. The large global networks of
  5. 5. microfinance institutions should consider responding to the price crisis by temporarily looseningrepayment conditions, as the poor need access to food consumption credit and debt relief.Preventative health and nutrition programs targeted to vulnerable population groups (such asmothers, young children, and people living with HIV/AIDS) should be strengthened and scaledup to ensure universal coverage. This measure is essential to prevent the long-term consequencesof malnutritionon lifelong health and economic productivity. In addition, school feeding programs can play animportant role in increasing school enrollment, retaining children in school, and enhancing theiracademic achievement.Donors should expand support for such programs in conjunction with sound public expenditurereviews.What could be expected from these measures? These steps can prevent the long-term adverseconsequences of early childhood malnutrition, protect the assets of the poor, and maintain schoolparticipation rates.Who would be the key actors? The UN, national governments, donors, NGOs, and civil societyorganizations.Recommendations on rural agriculture development in Moldova1. A country wanting to develop its rural agriculture sector needs to perform an in-depthintegrated assessment of its general agriculture policies, programmes and plans, to understandhow they affect the competitiveness and the conditions of the value add agriculture sector.2. The objectives for government involvement for the development of the rural agriculture,particularly value add agriculture sector needs to be clarified before actions are undertaken. Allstakeholders should be involved in the policy development and development of plans andprogrammes.3. General and rural agriculture policies should support each other to the greatest extent possibleto promote effective policy coherence, especially if values add agriculture is promoted as amainstream solution.4. An action plan for the rural agriculture sector should be developed based on analysis of thestate of the sector, participatory consultations, a needs assessment and proper sequencing ofactions. The action plan should state measurable targets for the rural agriculture sector to helpagencies and stakeholders focus their efforts.5. One government ministry or agency should be assigned a leading role and rural agriculturedesks should be established in other relevant ministries and agencies.6. Governments should recognize the diverse interests represented in the rural agriculture sectorand ensure that all of them are considered properly as well as direct special attention todisadvantaged groups.7. A permanent body should be established for the consultations between the Government andthe private sector.8. Governments should actively contribute to awareness rising for rural agriculture developmenton all levels.9. Data about value add agriculture production and markets need to be collected over the years,analyzed and made available to the sector and policymakers.