Agriculture renaissance 2010


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Agriculture renaissance 2010

  1. 1. Agriculture Renaissance Making “Agriculture for Development” Work Prabhu Pingali Deputy Director Agriculture Development April 20th, 2010
  2. 2. Why Agricultural Development? Agriculture is key to reducing Employment in Sub-Saharan Africa hunger and poverty • Most people living on $1 a day rely Farming Other labor on agriculture for food and income • In Sub-Saharan Africa, farming GDP in Sub-Saharan Africa accounts for 2/3 of employment and 1/3 of GDP • In South Asia, the rural poverty rate Farming Other labor is still approximately 40%
  3. 3. The Transformative Power of Agriculture • Agriculture growth is 2–4 times For the poor, agriculture has special poverty-reducing benefits. more effective for the poor than 8 Expenditure gains induced by 1% GDP growth, % non-agricultural growth 6 • Almost no country has Agriculture based 4 managed a rapid rise out of hunger and poverty without 2 increasing its agricultural Non-agriculture 0 productivity • Reducing hunger and -2 Lowest 2 3 4 5 6 7 8 9 Highest poverty on a large scale Expenditure deciles starts with improving agricultural development
  4. 4. The Green Revolution  We know progress is possible. Rural poverty in India From the 1960s to the 1980s, Poverty rate, % 60 crop improvements in Asia and Latin America helped: • Double food production • Save hundreds of millions of lives 50 20% • Lay a foundation for growth in countries like India and China GREEN REVOLUTION PERIOD 40 1965 1970 1975 1980 1985 Nearly 20% reduction in poverty in just two decades.
  5. 5. Green revolution impacts on crop improvement  Production • Cereal output in developing countries has grown 2.8 percent annually for three decades  Productivity • Yields, not area, were responsible for growth • TFP grew along with yields
  6. 6. Long run commodity price decline has had a positive impact on food security and poverty reduction Real prices for commodity group
  7. 7. Investments in agricultural research and development yield high returns.  Agricultural research and development (R&D) yield returns of 40-50 percent.  Returns are high in all regions, including Sub- Saharan Africa.  Traditionally, public research carried out in OECD countries had large spillover effects in developing countries.
  8. 8. Kick Starting Agriculture Productivity Growth: Lessons from Asia  Policy and institutional reforms set the stage for success • These accounted for the largest shares of both agricultural growth and poverty reduction over the six Asian economies agricultural growth boom periods – Household Responsibility System in China and Vietnam’s doi moi reforms • Firming up property rights spurs investment and access to credit for business development • Market-oriented liberalization improves market efficiency and resilience to demand and supply fluctuations through price mechanisms –China and Indonesia developed their ag sectors with careful planning in this area.  Developing and implementing technological improvements essential • The successful Asian economies built up world-class scientific research enterprises in agriculture. These research institutes, universities and private firms developed new cultivars, agri-chemicals and farm machinery and designs adapted to the needs of local farmers. • Much of this research was accomplished through close interaction with key international partners such as the agricultural research centres of the Consultative Group for International Agricultural Research (CGIAR)  Support for public infrastructure must be given a priority • Improved rural roads, irrigation, electricity, rural health care and other public services accounted for nearly 30%, on average, of agricultural output growth in the six Asian economies studied • Government expenditure on agriculture averaged 15% of total government expenditure in Asia during the boom years in the 1980s; African agriculture investment levels average currently around 5%.
  9. 9. Agricultural Transformation: a Global Phenomenon 80 80 Low Low Productivity Agriculture Income High Human Development Lower 70 70 Modernizing Medium Human Development Middle Agriculture Income Low Human Development Upper Middle 60 60 Industrialized Agriculture Income High Income 50 50 Share of Share of Agriculture Agriculture 40 40 (% GDP) (% GDP) 30 30 20 20 10 10 0 0 -1,000 4,000 9,000 14,000 19,000 24,000 29,000 34,000 39,000 44,000 49,000 54, -1,000 4,000 9,000 14,000 19,000 24,000 29,000 34,000 39,000 44,000 49,000 54,000 GDP (US$ per Capita) GDP (US$ per Capita)
  10. 10. Characteristics of Agricultural Transformation Traditional Modernizing Industrialized Agriculture Agriculture Agriculture Share of Ag >30% 10%-30% <10% in GDP Share of Ag >50% 15-50% <15% labor in total Market Subsistence National International Orientation Output Food Staples Highly Food Staples Mix + Export Crops differentiated Scale Not Important Not Important Important Economics
  11. 11. Developing world agriculture is facing increasing divergence  Low Productive Agriculture in the Least Developed Countries  Modernizing Agriculture in the Transforming Economies
  12. 12. Low-Productivity Agricultural Economies  Generally the Least Developed Countries (LDCs)  Ag has a large share of GDP yet productivity is low  Low NARS capacity & low private sector interest  Low prospects for reaching the MDG goals on poverty and hunger & high levels of environmental degradation
  13. 13. Low agricultural productivity in Africa is a multi-faceted problem Low investment in research Very limited access to markets Agricultural research expenditures, 2000 Road access $13.8 billion Metres road/capita SSA 100% = $36 billion per year 1.5 ME and 1.5 21.4 N. Africa 2.6 LATAM 62% 38% Developing countries Asia-Pacific 8.2 1.4 3.0 Although these regions Developed have abundant countries potential (e.g., Nigeria India USA Developing Of the ~$36 billion spent on agricultural countries sunlight, labor, water, research in 2000, only ~$1.5 billion (~4%) knowledge), was spent on SSA productivity is low, which represents both a huge need and opportunity. Poor policy and regulatory environments Low input usage and yield levels Policies, such as trade and investment, towards the developing world often contradict and counteract official Fertilizer use Average cereal yields by development assistance kg/ha arable land, region, 1960-2003 Net ODA and Subsidies to Domestic Agriculture 2002 mt/ha Producers ((Avg. 2003-2005) 101 3.0% 4 ROW Producer subsidies 2.5% for agriculture 2.0% Net ODA % GDP 1.5% 9 SSA 1.0% 0.5% SSA World 0.0% Japan US EU Source: FAOStat; IFDC; World Bank
  14. 14. Implications for Agricultural R&D: back to basics?  Focusing on productivity improvement but with the benefit of modern science and 40 years of lessons learnt on trade-offs.  Dealing with the “Changing Locus of Agricultural Research” -- Public to Private Sector  Going further down the impact pathway than in the past  Building local capacity for R&D
  15. 15. Transforming Economies  Dietary transformation fueled by economic growth and demographic shifts  Organizational changes in retail, wholesale, processing, and procurement  Tremendous heterogeneity observed w/ respect to participation and distribution of benefits
  16. 16. Dietary transition in Asia: an overview  Reduced consumption of rice  Increased consumption of wheat and wheat based products  Rise in high protein and energy dense diets  Increased consumption of temperate zone products  Rising popularity of convenience food and beverages
  17. 17. Rising GDP per capita is associated with a larger share of supermarkets in food retail 100% 80% Share of Supermarkets in Food Retail 60% 40% 20% 0% 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 GDP per Capita, PPP, 2002 Source: data from Traill (2006) and World Bank World Development Indicators (2006)
  18. 18. The Changing Food System Individuals Enterprises Primary Processing Distribution Inputs and retail Consumption production and packaging Transport Services Governed by Institutions: Rules and regulations Markets (Contracts)
  19. 19. Transforming Economies: implications for R&D  Sustaining and enhancing staple crop productivity gains  Making domestic agriculture globally competitive  Diversifying agricultural systems & household incomes  Reducing rural poverty & malnutrition, especially in marginal environments
  20. 20. Industrialized Economies  Low share of agriculture in GDP  Productive agricultural sector  High yet declining protection to agricultural sector  Emergence of markets for non-commodity roles of agriculture
  21. 21. IMPACTS Food Price Crisis of 2007-2008 900 800 700 Real prices 600 (USD per metric 500 ton) 400 300 Rice Wheat 200 Maize 100 0 Source: IMF Commodities database
  22. 22. Determinants of Future Food Prices and Food Security ◊ Demand side determinants ◊ Enabling Policy Environment • Population growth & • Infrastructure development Urbanization • Agricultural R&D • Income elasticity of food • Macroeconomic & trade policy demand • Feed & bio-fuel demand ◊ Climate Change Risks • Long term productivity impacts ◊ Supply responsiveness • Volatility in supplies • Area expansion possibilities • Increased Intensification • Reducing the yield gap • Input price trends
  23. 23. Thank You © 2010 Bill & Melinda Gates Foundation. All Rights Reserved. Bill & Melinda Gates Foundation is a registered trademark in the United States and other countries.