Agriculture - how much food for a thought?

The world is suddenly aware that food prices are climbing, consumers are feeling it and the number of people who cannot afford to adequately feed themselves and their families is becoming a major concern once again. Why this sudden awareness, where is it going to lead, and what do we need to do to address the core problem?

Agriculture is arguably our most important activity. Try not eating and then see if your friendly GP can provide a pill to fix the problem. Agriculture though is more than the way we produce food, it also produces fibres, fuels and medicines - particularly throughout the developing world.

A broad definition of production from land resources includes grazing industries, forestry and what used to be part of agriculture but are now more recreational pursuits, for example, horses (I am writing this while in Inner Mongolia where this dependence still exists).

All these sectors are competing for common resources. If you then follow through the products of agriculture, their processing, the service industries that support them and final consumption the collective value of these activities would come close to half the economy in developed countries and more in others.

Unfortunately national statistics and often treasurers seek to play down the role of agriculture and claim it is almost a trivial part of the economy and one they don’t have to pay much attention to. They typically get a shock when droughts and, or rising food prices suddenly seem to be affecting more than that supposed trivial sector.

The shocks of rising food prices are only understandable when you appreciate that agriculture and its products are integrated throughout society; it is the core activity. As the costs of critical inputs like fuel rise, exacerbated by climate change, they affect all parts of the chain.

Typically though, of the price rise experienced by end consumers, only a small fraction gets back to farmers. Unfortunately we have been hearing cries about reducing farmer incomes to solve this problem (supermarkets often want to blame farmers) when any analysis shows they are merely responding to their increased costs and, or adverse seasonal conditions and they rarely pocket the main part of price increases.

Some still want agriculture to be a peasant activity. It becomes somewhat odd when consumers complain about rising prices in restaurants and blame farmers, when all those involved in the food chain are increasing their prices, including the restaurateur.

Many input costs for agriculture are on the rise. Australian agriculture requires phosphate, but cheap sources are declining. Fertilisers require energy to produce. With rising energy costs these inputs will only continue to become more expensive. The same applies to chemicals used for pest and disease control.

Water is becoming a scarce resource: better pricing of the cost of water will lead to more rational and efficient use, but also to cost increases.

On more marginal land cost increases can result in the cessation of food production unless farmers can achieve a price increase to cover these costs. This is particularly so when combined with more variable climates, thus reducing the amount of food for markets

Current media attention is being directed to the agricultural products being diverted into biofuels. In China, the USA and some other countries this has had an effect on the price of food for other uses. Most food crops, though, are not being used for biofuels. The Chinese have taken steps to stop the diversion of maize, wheat and other cereals into biofuel, requiring the use of sorghum and other plant species that are more used for animal feed - the effect could then be more on prices for animal than plant products.

There is still competition for land resources which means some effect on general food prices will continue; it is after all a market. In most other places though, the diversion of crops into biofuels is probably having minimal impacts on food prices.

With the approach of peak oil production, biofuels have their place. Current biofuels only reduce the overall net energy consumption, but probably do not yet achieve a positive energy balance when all inputs are considered. When the next generation of biofuels, based on using crop residues and other “waste” products are developed, there is then likely to be positive energy balances and also limited effects on the price of food. Those next generation technologies could in fact make marginal crops viable as more parts of the crop would be saleable.

The human population drives these effects. The current six billion people will soon become nine billion, but with rising affluence in many countries they will probably want to consume at the rate that 13 billion people would today. In 30-40 years we would be looking at doubling in demand for world food production. This demand is expected despite a very real increase in those who cannot afford their food requirements. The UN Food program is obviously very worried about the current trends.

Doubling food production is often seen by economists as simply a market problem. I don’t know how they think that would happen without significant price increases, nor where the food would be grown. Land resources and the inputs for agriculture have some finite limits and, or more and more complex and expensive technologies will be required to feed the world.

At present we do not have the viable technologies to double world food production to feed everyone. More and more people will be unable to adequately feed themselves and the great divide between haves and have-nots is likely to get larger. Much of the good land for agriculture is already used and as agriculture extends onto more and more marginal land the costs of production escalate exponentially. Clearing more forests or grasslands for crops is not attractive to many people and should not be done while existing land resources are used inefficiently.

While many may think that the costs of production are adequately built into food costs, the reality is that all of the true costs are rarely incorporated. Good agriculture requires the provision of inputs to replace all the nutrients removed, to restore the biophysical condition of soils and to restore/maintain the surrounding landscape appropriately.

Current market pressures typically lead to a short-term approach where the only inputs replaced are those that immediately lead to an economic return in current crops. Some resources decline slowly over time and their effects may not be apparent for many years. With finite land resources and probably a lower rainfall in much of Australia resulting from climate change, the pressures for quick returns on investments that cost more, will probably lead to declining yields and a run-down in soil resources, reducing the amount of food produced.

If we are going to feed Australians and other populations, a better incorporation of all costs is needed. This will result in continuing rises in food prices. A further consequence could be reducing the quantities of food exports from Australia: the impact on income may be minimal as prices are likely to increase.

Are there any benefits from higher food prices? Agriculture is a viable activity to be in and rising food prices, no matter how small the amount that gets back to farmers, are needed to help farmers sustain their outputs. This would be particularly helpful in sustaining the resource base upon which production depends. Higher food prices should also help to reduce waste in the whole chain from producer to consumer. Plant and animal parts that may not be used very effectively at present could find uses that improve incomes and resource use.

There would be some irony if rising food prices lead to a better consumer acceptance of incorporating all the costs of production and a dramatic reduction in waste, achieving sustainable outcomes that could ensure food production remains viable into the distant future; a goal Australia has been trying to work towards, but a difficult goal in an era of cheap food.

To solve many of the problems associated with rising food prices and scarce resources we need more than a thought. We need lots of them to seek innovations that maintain the viability of agriculture and provide the absolutely essential amounts of food that the world needs. This has been under-resourced for the last decade or so in Australia and throughout the developed world.

Climate change is going to have a big impact on the world and much of the funding for this problem needs to be directed towards finding ways of feeding the world. The Australian skill shortage in agriculture is as dire as in other industries, particularly in people and skills to resolve these longer-term problems.

How though can Australia contribute to viable solutions for itself and to the wider world?

• Acknowledging the integrated nature of agricultural and related production within the whole economy would help. It is not a fringe activity that stops at the farm gate. Better policies can only be developed though a more honest understanding.
• Consumers accepting that higher food prices are good for the sustainability of Australia.
• Acknowledging the central role of agriculture in human existence and issuing the challenge to young Australians to get involved in developing the solutions required to feed the world.
• Using Australian expertise to help developing countries solve their food production problems to reduce to a minimum the existence of malnourished, poverty stricken communities.