Putting high-value agriculture to work for the poor

Cross-posted from the ifpri.org website written by Pamela Stedman-Edwards

Fruits vendors in Chittor, Andhra Pradesh. Source (Flickr): Pallavi R, IFPRI
Fruits vendors in Chittor, Andhra Pradesh.
Source (Flickr): Pallavi R, IFPRI

IFPRI’s recent 40th anniversary provides an opportunity to take stock of the Institute's policy influence and impact over the years. Has IFPRI been a worthwhile undertaking? What does available evidence tell us about IFPRI’s impact on food policies? How can we increase IFPRI’s influence in the future? This series of posts explores the research gauging the impact of our programs around the world.

High-value agriculture (HVA)—shorthand for production of perishable agricultural commodities, such as fruits and vegetables, that typically yield high returns in the market—has been growing for the past few decades, thanks mostly to expanding large-scale farming operations. But can it benefit smallholders too? This question has been the subject of IFPRI research since the early 1990s. A recent external evaluation by Jonathan Kydd assessed the impact of IFPRI’s HVA work from 1994 to 2010.

Over this period, IFPRI examined global structural changes in high-value markets and what they mean for poverty and sustainability; carried out in-depth studies of growth in livestock production; and did quantitative research on what shapes smallholder participation in HVA.

In India, the research shows HVA has great potential for smallholders, who dominate agriculture. Across the country, there has been a notable shift in consumption from cereals to HVA foods, particularly in rural areas. This helped boost employment, a potential boon for poorer farmers. HVA growth leads to changes across the agricultural value chain, from poor farms to investors in infrastructure to the modern retail sector. IFPRI’s research in India included strong quantitative work, particularly case studies, on salient HVA issues—such as the rapid evolution of potato value chains and contract farming. This work led to a number of published articles. However, policy impacts have apparently been limited; in part because India’s policy makers showed little enthusiasm for the changes, and did little to promote them.

IFPRI’s advice on HVAs shaped thinking about how to help smallholders adapt to new crops with different growing cycles and markets. IFPRI has argued that with the right policies, the HVA model of modernization can be pro-poor—benefiting both poor producers and low-income consumers. In India, IFPRI benefited from a well-established presence and links with policy makers through its local office to share its research; nevertheless, government response to HVA has been largely reactive. The impact evaluation suggests that stronger evidence-based narratives can help policy makers understand and support reforms that would improve participation by the poor.

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International Trade and Food Security: The Future of Indian Agriculture

Flickr, Michael Foley
Flickr, Michael Foley

Cross-posted from the FSP India website written by Bas Paris

As India undergoes rapid demographic, economic, and social changes, it is essential for policymakers and development practitioners to gain a deeper understanding of the current and future trends in the agricultural sector, upon which most Indians directly depend for their livelihoods. International Trade and Food Security: The Future of Indian Agriculture, edited by Floor Brouwer and P.K. Joshi, explores the future of Indian agriculture, specifically the expected structural changes in­ India's agrifood systems over the next ten to twenty years.

Chapter 2 covers the evolution of India’s agricultural and trade policies and highlights key challenges for the agricultural sector and opportunities to overcome the barriers to higher growth. Despite increased liberalization of the entire economy in recent decades and specific growth in the agricultural export sectors, India’s agricultural trade policies continue to be driven mainly by food security concerns. The chapter makes a number of important recommendations, broadly arguing that public investments in irrigation, infrastructure, research, and extension services are key to improving the country’s agricultural sector.

Chapters 3 and 9 examine the nutritional security and income distribution effects of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Chapter 3 finds that MGNREGA has contributed to increasing household food consumption, poverty reduction, dietary diversification, and food and nutritional security for poor rural households. Through an examination of the income distribution effects of MGNREGA, however, Chapter 9 finds that poorer households generally do not benefit from MGNREGA and that the program is likely to have a negative impact on the agricultural sector in the long term.

Chapter 4 makes projections for the demand and supply of key food commodities in India by 2020 and 2030. The chapter shows that based on current supply and demand trends, India will continue to meet the demand for wheat through domestic production by 2030. However, In the case of rice, the author estimates that the country may reach an annual deficit of 3-5 million tons per year. India is also likely to face a supply-demand gap for pulses, oilseeds, meats, fruits, and vegetables. The chapter argues that improvements in agricultural productivity will help mitigate these domestic shortages.

Chapter 5 argues that India is currently inadequately integrated with world trade but that trade agreements will assume considerable significance in coming decades. Broadly, the chapter predicts that agri-processing will grow and India will become a net exporter of industrial commodities, but that the country’s agricultural imports will also increase significantly. The author also presents economic scenarios under a bilateral Free Trade Agreement (FTA) with the EU and a multilateral trade agreement in the context of the World Trade Organization (WTO). The study finds that trade agreements in general are good for food security in India and are likely to benefit the poor.

Chapter 6 compares the impact of economic growth and income distribution in urban and rural areas, finding that India’s recent high growth rates have been concentrated in the industrial and service sectors. This has mainly benefitted high-income population groups in urban areas, rather than rural populations. The study estimates that the real income of rural households of the lowest 70 percent of income categories will decrease in coming years under a business-as-usual scenario and argues for supplementary socio-economic measures that benefit the rural poor.

Chapter 7 investigates India’s food safety and quality standards, highlighting that food safety concerns are on the rise and that the 2014 implementation of the Food Safety and Standards Act is likely to have profound effects on the Indian food sector. In the long run, the enforcement of food safety standards will benefit domestic consumers. Additionally, these standards are important to sustain and increase agricultural exports as they are crucial determinants of trade with high-income countries, as well as increasingly so for other developing countries.

Chapter 10 analyses the impact of global price spikes on India’s agricultural price policy. The study finds that through its Minimum Support Price (MSP) scheme and Public Distribution System (PDS), India successfully shielded its domestic market from the global food price spikes and volatility seen in 2007–2008 and 2011. However, these policies did not succeed in preventing price increases over the long run. On the other hand, due to India’s ban on exports, farmers could not profit from the higher global prices; this led them to lobby successfully for a higher MSP.

Chapter 11 examines the international trade implications of India’s biofuel commitments, as well as of biofuel policies in other parts of the world, and finds that external biofuel policies will not reduce poverty in India. While the urban poor will face higher food prices due to these policies, the effect for the rural poor will be dampened because they would benefit from increased agricultural wages. The overall welfare effects of the implementation of India’s national biofuel commitment are found to be negative.

Chapter 12 compares the importance of input subsidies and farm technology for agricultural development. The study observes that investments in irrigation, rural literacy, capacity building, research, and agricultural extension are crucial to increasing agricultural supply. Input subsidies have a positive effect on input use, crop supply, and farm income, while technology improvements have a positive and strong influence on commodity supply and a substantial negative effect on farmers’ incomes. The chapter emphasizes that the input subsidy for farmers and the price subsidy for consumers will not be feasible in the long run, as they demand an increasing share of public resources.

According to Chapter 13, India is the world’s largest producer of milk. In addition, livestock provides a source of income and employment for a large number of rural households (70 million in 2002). However, the chapter argues that livestock productivity remains low compared to other major dairy-producing countries. Thus, increasing dairy productivity can act as an engine of pro-poor growth in India. Similarly, c=Chapter 8 analyses India’s price competitiveness in poultry products with Brazil, the USA, Germany, France, and the Netherlands. The study finds that India has a clear comparative advantage in the case of egg exports but not poultry meat and argues that the removal of India’s poultry tariffs would be disastrous for the domestic poultry industry.

Chapter 14 focuses on modern retail in India and analyses whether the growth in supermarkets is associated with greater demand for specific product features, such as food safety standards. The study finds that the demand for such features remains low. However, a small market segment is interested in such attributes and looks for imported products to satisfy its demand.

In Chapter 15, the editors present the way forward for India’s agricultural sector, including policies for changing business-as-usual scenarios focusing on measures for accelerating agricultural growth, reducing poverty, reforming policies for developing markets, and promoting agricultural trade.  Recommendations proposed in this conclusion include increasing public investments, rationalizing subsidies, developing and enforcing food safety standards, expanding the export of high-value commodities, and balancing price support mechanisms.

Options to access the full book can be found here.

Pulses: Current Trends and Outlook

Cross-posted from the FSP India website written by Bas Paris

Pulses; Credit: Adam Jones (Flickr)
Pulses; Credit: Adam Jones (Flickr)

Pulses are an essential source of protein and minerals for much of the Indian and global populations, to reflect this the UN has named 2016 as the ‘’International Year of Pulses.’ A recent IFPRI discussion paper investigates the trends and outlook for both global and regional pulse economies, looking at the supply, demand, trade, prices, and outlook of the pulse sector during the last three decades. The study covers the main pulse producing regions, namely: Europe, North America, Oceania, Africa, Latin America, and Asia using data from the FAOSTAT database complemented by national-level data. The report also provides an in-depth analysis of a selected group of pulse crops including chickpea, lentils, pigeon pea, dry beans, and dry peas.

The average share of pulses in global diets is only 5 percent of total protein consumption, but pulses’ contribution to diets at the country level is significantly higher.  In the case of India, 12.7 percent of proteins in people’s diets come from pulses. Moreover, pulses contain other essential nutrients such as calcium, iron, and lysine that help the body fight vitamin and mineral deficiencies and disease. Thus, pulses can be important in fighting malnutrition. Pulses also contribute to soil fertility due to their nitrogen-fixing ability, which helps reduce the need for chemical fertilizers for crops planted on the same land.

The report provides an overview of changes over the past three decades in total pulse production, area under cultivation, and yields per hectare. Globally, pulse production increased from 44.9 million tons in 1981-1983 to 72.3 million tons in 2011-2013. The area under production increased from 63 million hectares to 80 million hectares over the same time period.

At the country level, India is the world’s largest pulse producer, accounting for 34 percent of area and 24 percent of production in pulses. Production in India increased from 10.4 million tonnes to 17.5 million tonnes from 1981-1983 to 2011-2013, mainly due to increases in the area under production from 22 million hectares to 27 million hectares. However, as population growth has grown faster than growth in pulses, the per capita availability has decreased. In 2013, India’s average yield per hectare also remained low, at 635 kilograms per hectare. One reason that yields remain low in India is because pulses are generally grown on marginal land with little access to irrigation. In total, it is estimated that only 10 to 15 percent of pulses cultivated in India have access to irrigation, while the figure is around 75 to 80 percent for wheat and rice. By comparison, Myanmar’s and Ethiopia’s yield per hectare averages 1345 and 1442 kilograms while Canada achieves the highest global yields at 2146 kilograms per hectare.

Regarding specific crops, India is the world’s largest producer for multiple pulse crops, including chickpeas (67 percent of global production), pigeon pea (63 percent of global production), and dry beans (33 percent of global production). India is also the world’s second largest producer of lentils (22 percent of global production). Simultaneously, India has a high ratio (83.6 percent) of pulses that are used for domestic consumption.  Additional information on pulse developments in India is available here.

The study also analyses the global and regional pulse trade. International trade in pulses has grown significantly, from around 2 million tons of pulses in the 1970s to 12 million tons in 2011. Developed countries are the main exporters, exporting around 52 percent of production. India, by contrast, only exports 167,000 tons due to high levels of domestic consumption (but exports have grown from 1,000 tons in 1981). India is by far the biggest importer, at 3 million tons annually, up from 127,000 tons in 1981.

Global pulse prices stagnated in the 1980s and 1990s but started rising again in 2000 and rose sharply in 2006. Pulse prices are currently around 2 to 2.5 times higher than cereal prices globally.  Given these price changes and the shifts in supply, it is important to better understand these trends and how they may play out in the near future.

The authors make numerous projections regarding future pulse supply and demand using the IMPACT model (International Model for Policy Analysis of Agricultural Commodities and Trade). Supply and demand projections for total pulses were carried out under a business-as-usual scenario in area and yield growth and these projections were carried out to 2020, 2030, and 2050 for the major pulse-growing regions.

The results indicate that Africa and Asia will face large deficits in pulse supply - close to 11 million tons in Africa in 2050 and 5.5 million tons in Asia. These findings can vary within regions, however. For example, within Asia, Eastern Asia will see a surplus, while Southern Asia will see a deficit of 9 million tons by 2050.

The paper suggests that the relatively faster increase in the food demand for pulses in Africa and Asia (Southern Asia in particular) could be attributed to faster-paced increases in their populations compared with other regions. Between 2020 and 2050, Southern Asia’s population is expected to expand by 27 percent. In addition to a growing population, other drivers of pulse demand could include the importance of pulses as a protein source for vegetarian populations, income growth for low-to-medium-income consumers, growth in urban populations and increased demand for processed pulse products, and the realization of the health benefits of pulses. Ananalysis by Kumar, Joshi, and Birthal projects that demand for pulse crops in Southern Asia (comprising India, Pakistan, Bangladesh, Nepal, Sri Lanka, and Bangladesh) will increase from 17.6 million tons in 2005 to 24 million tons by 2025. That rate of growth in demand for pulses is more than the rate projected for any cereal crop (including rice and wheat).

Supply-side constraints are the major obstacles in increasing global pulse supply. These constraints include low yields in developing countries (pulses are mainly grown in marginal areas under low-input conditions), small-scale production, lack of access to improved seeds, low seed replacement rates, weak institutional arrangements, low research priorities, and a lack of government support compared to cereals. In recent months, IFPRI has held a number of dialogues and a roundtable discussion on “Enhancing Opportunities for Increasing Production and Consumption of Pulses.” A number of recommendations for India have been suggested at these events in order to overcome some of these supply-side constraints.  These include the development of area-specific pulse varieties, advancement of transgenic technologies for biotic and abiotic stress resistance, horizontal expansion of pulses in central and southern India, minimum support price policies, and increased government support.

The full discussion paper can be accessed here and a summary of this globally can be accessed he­­­re.

Agricultural Interventions and Nutritional Status

Cross-posted from the FSP India website written by Bas Paris

Photo credit:Flickr, Sowmya's Photography
Photo credit:Flickr, Sowmya's Photography

A paper in Food Policy provides a review of various studies on the impacts of agricultural interventions on the nutritional status in South Asia. Past review exercises and studies have analysed the available evidences to understand the ways in which agriculture can be leveraged to enhance nutritional status, however, very few of them have employed a systematic approach encompassing a significant number of studies. This paper aims to fill this gap through conducting a systematic review assessing the existing evidence in 25 studies for combating food insecurity and malnutrition through agricultural interventions.

The paper analysed studies on the impact of interventions in agriculture and allied sectors (horticulture, livestock, fisheries and forestry) in South Asia (and India) on the nutritional outcomes for adults and children, published since the year 2000. The nutritional outcomes were captured through intermediate outcome indicators such as dietary diversity, calorie intake and nutrient intake, and outcome indicators such as anthropometric factors and DALYs (Disability Adjusted Life Years). The studies selected were not homogenous in terms of a common outcome indicator and the studies used different metrics for examining the linkage. Some studies analysed nutritional outcomes by examining the stunting and wasting of children and adolescents, whereas others analysed the Body Mass Index for determining adult malnutrition or levels of micronutrients such as vitamin A and haemoglobin. Some studies used intermediate outcome indicators, such as changes in consumption patterns, dietary diversity, and intakes of certain foods. Most of the included empirical studies analysed data from secondary datasets and had large sample sizes. Others were primary baseline surveys, with smaller sample sizes.

The paper categorizes the findings of the studies according to six pathways developed by UNICEF, and slightly modified by the paper, through which agriculture can influence nutritional outcomes. These six pathways are: sources of food, source of income of households involved in agriculture, agricultural policy and prices, women in agriculture and their socio-economic status, maternal employment in agriculture, and maternal nutrition and health status.

Regarding the sources of food the study highlights that 22 of the 25 reviewed studies examined the contribution of agriculture as a source of food for nutrition. The studies indicate strong evidence that the dietary intake of agricultural households largely depends on food supplies from their own farm, this is because subsistence farming is common across South Asia. The evidence, however, is not conclusive for the impact of supply of livestock on food consumption. A negative and significant association was also reported in three studies between improvements in agricultural productivity and under-nutrition. Particularly, the interventions for increasing the productivity and production of specific nutritious food crops such as vegetables and pulses, widely grown and consumed in India, showed positive implications for increased intake and child nutrition. However, a number of studies, two of which focused on India, estimated a weak relationship between calorie consumption and nutritional outcomes.

8 out of 25 studies investigated the impact of agricultural incomes on nutrition. In this regard the paper highlights that it is unclear whether agricultural growth leads to improvements in nutrition. Specifically, Heady illustrates that high agricultural growth rates in some states of India, such as Gujarat, Rajasthan and Bihar, were not accompanied by a decrease in under-nutrition. However, a number of studies find that nutritional security was reported to be significantly influenced by per capita agricultural income, one study also reported that increased household wealth also significantly positively affected the diet diversity of children in India.

Only 5 studies analysed the role of agricultural policies aimed at reducing relative prices or increasing the affordability of food on nutritional status. Based on the representative sample for India, it was demonstrated that policy interventions for affecting food prices played an important role in diet diversification and nutritional outcomes. The policy of improving the affordability of staples by the public distribution system provided food and nutritional security. However, the relative price of staples has a strong and significant association with diet diversity, but not with calorie availability.

8 studies covered the importance of women empowerment in agriculture and its contribution to household food and nutritional security. The nutritional status of the mothers, measured using the BMI, had statistically significant positive effects on height and weight for age scores of their children aged less than three years. Women empowerment influenced the quality of feeding practices for infants and young children, but was weakly associated with child nutrition status.

In conclusion the paper highlights that agricultural interventions (pathways 1-3) have the potential to influence nutritional outcomes in India and South Asia. However, the available evidence linking the agricultural interventions and their impact on the nutritional status of women and children is small (pathways 4-6). Overall, the paper stresses that these findings show that linkages between agriculture and nutrition are complex and require multi-sectoral and multi-dimensional approaches to tackle malnutrition problems. The findings clearly indicate the importance of the home production of nutrient-rich food crops for improving the nutritional outcomes. This suggests that bio-fortification of staples and homestead gardens can influence the intake of a micronutrient-rich diet and consequently nutritional outcomes. This also suggests that the diversification of agriculture towards fruits and vegetables can potentially promote dietary diversity and improve nutritional outcomes.

The full paper can be accessed here

Financing of Dairy Value Chains in India

Dairy Farm in Punjab. Source: Tajuddin Khan
Dairy Farm in Punjab. Source: Tajuddin Khan, IFPRI

Did you know, milk contributes one-fifth to the gross value of agricultural output which is larger than the value of output of rice and wheat put together.  In the past four- five decades, India’s dairy sector have seen a significant grown, despite poor access to markets and institutional credit, this progress was possible by millions of small-scale producers in this sector.

A recent IFPRI discussion paper titled “Formal versus Informal- Efficiency, Inclusiveness, and Financing of Dairy Value Chains in India” examines the efficiency, inclusiveness, and financing of dairy value chains using household-level data from Punjab state. The study finds that, on an average, a dairy household sells 88 percent of the milk it produces. About 62 percent of the dairy farmers representing 69 percent of the total sales are associated with formal sector value chains driven by cooperatives and private processors. Cooperatives however are the most preferred channel in terms of both sales and suppliers. But, smaller dairy farmers are more associated with informal value chains, while larger dairy farmers prefer selling milk to formal value chains, driven by cooperatives, multinationals, and private domestic processors. Small dairy farmers though outweigh large farmers in formal value chains numerically their share in milk sales is not large. Hence, it does not seem that formal buyers do not prefer partnership with small farmers.

Further, while exploring the impact of choice of a value chain on milk yield and farm profits the study does not find any significant difference in them across value chains. However, across farms, larger farmers have been found to realize higher profits perhaps due to their better bargaining power in obtaining price terms.

The study also addresses the issue of financing of value chains, and finds that more than half of the farmers borrow credit for dairying related activities both from formal and informal financial sources. The incidence of borrowing is higher among those who are associated with informal value chains. But, chain-based financing is limited to only one-fourth of the borrowing households. Financing by commercial banks is limited and largely to those having larger holdings of both land and animals. Smallholder farmers depend more on social networks of relatives & friends and moneylenders for their financial requirements. This implies that financing decisions of the commercial banks or other financing institutions are largely driven by creditworthiness. The findings of this study have implications. A value chain with its product market orientation can serve as collateral and financial institutions may think of using contract as collateral. Also financing through a value chain is an important means of reducing the transaction costs and lending risks associated with asymmetric information. Financial institutions in India treat credit to dairy as investment credit while farmers need funds for meeting operational costs.  The study thus argues for provision of short-term credit to dairy farmers on the lines of ‘crop loan’ through innovative financial products, such as ‘dairy credit card’. This would enable farmers adopt yield-enhancing technology and inputs and also to scale up their dairy activity.

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